S. P. C. INFRASTRUCTURE P LTD. ,JAIPUR vs. DCIT, CIRCLE 4, , JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR MkWa- ,l-lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ fu/kZkj.k o"kZ@Assessment Years : 2020-21 cuke S.P.C. Infrastructure Private Limited DCIT, Circle-4,Jaipur. C-74, Amba Bari, Jaipur Vs. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAFCS 8079 K vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Mukesh Khandelwal (C.A.) jktLo dh vksj ls@ Revenue by : Shri A.S. Nehra (Addl. CIT) lquokbZ dh rkjh[k@ Date of Hearing 18/04/2023 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 25 /05/2023 vkns'k@ ORDER PER: DR. S. SEETHALAKSHMI, J.M. This is an appeal filed by the assessee against the order of the ld. CIT(A), National Faceless Appeal Centre, Delhi [hereinafter referred to as “NFAC”], dated 24.01.2023 for the assessment year 2020-21 wherein the assessee has raised the followings grounds:- “1. That the ld. CIT(A) has erred seriously in sustaining the action of the ld. AO in disallowing a sum of Rs. 16,62,178/- on account of delayed deposit of employees contribution to PF/ESI in the respective fund ignoring the binding judgement of the Hon’ble Rajasthan High Court.

S.P. C Infrastructure Pvt. Ltd. vs. DCIT 2. That without prejudice to ground No. 1 the ld. CIT(A) further erred in disallowing even the employers contribution to PF/ESI which is covered u/s 43B of the Income Tax Act, 1961 and which amount was included in the above stated amount of Rs. 16,62,178/-.”

Briefly the facts of the case are that the assessee is a Private 2.1 Limited Company and filed its return of income for the A.Y. 2020-21 on 22.01.2021 declaring total income of Rs. 2,88,42,590/- and claiming refund of Rs. 72,16,160/-. The same was processed at CPC, Bengaluru at an income of Rs.3,05,04,772/- and refund of Rs.67,97,821/- had been calculated. While processing the return of income at CPC, Bengaluru, the following disallowance/ addition was made. Particulars Amount (Rs.) Disallowance under section 36(1)(va) on Rs. 16,62,178/- account of employees contribution to PF/ESI paid beyond the due date specified under relevant Act but before the due date of filing of return of income Total Rs. 16,62,178/- 2.2 Being aggrieved by the order of the AO, the assessee carried the matter before the ld. CIT(A) who in spite of providing various opportunities to the assessee passed the ex-parte order by taking into consideration the materials available on record and also dismissed the appeal of the assessee in view of the decision of Hon’ble Supreme Court

S.P. C Infrastructure Pvt. Ltd. vs. DCIT in the case of Checkmate Services (P) Ltd. (2022), 143 taxmann. Com 178 (SC) with following observations. ‘’5.1.1 Ground of appeal no.1 & 2 are against disallowance of Rs.16,62,178/- on account of delayed deposit of sum received from employees as contribution to any Provident Fund or any fund setup under ESI Act under section 36(1)(va). 5.2.1 Held: I have considered the submissions made by the appellant on the basis of facts and circumstances of the case along with the order of the AO and perused the material available on record. 5.2.2 With reference to the grounds of appeal no. 1 & 2, it is observed that the appellant has collected employees' monthly contributions to EPF/ ESI out of which Rs.16,62,178/- was not paid into the respective employees' accounts maintained under the EPF/ ESI Acts within the due date prescribed under those Acts and as a result, the appellant has violated the provisions of section 36(1)(va) of the Income-tax Act (the Act, for short). While processing the return of income u/s 143(1), the AO(CPC) had made addition of the said amount u/s 36(1)(va) read with section 2(24)(x) of the Act. In the ground of appeal, the appellant has contended that though the impugned amount was not paid within the due date prescribed in section 36(1)(va) of the Act, the section 36(1)(va) must be read in conjunction with the provisions of section 43B of the Act which provides for deduction if the amount is paid on or before the due date for furnishing the return of income u/s 139(1) of the Act and the appellant has already paid the said amounts within the due date for filing the return of income. Upon due consideration of facts of the case and the provisions of section 36(1)(va), it is observed that the appellant's contentions are not tenable.. Section 36(1)(va) operates quite differently from what has been envisaged in section 43B of the Act. Once it is found that employees contribution to EPF/ ESI are not paid within the S.P. C Infrastructure Pvt. Ltd. vs. DCIT due date prescribed/under the respective EPF/ ESI Acts, such delayed payment has to incur disallowance addition to income as per the clear and unambiguous provisions of section 36(1)(va) and it cannot be saved by virtue of provisions of section 43B of the Act. In a recent landmark judgment in the case of Checkmate Services (P.) Ltd. vs. CIT (2022) 143 taxmann.com 178 (SC), the Hon'ble Supreme Court has held that section 43B(b) does not cover employees' contributions to PF, ESI, etc. deducted from salaries of employees and the allowance/ disallowance of the same has to be considered u/s 36(1)(va) read with section 2(24)(x) only. The observations of the Hon'ble Supreme Court may be briefly enumerated as under: •Section 43B(b) does not cover employees' contributions to PF,ESI etc deducted by employer from salaries of employees. •The words "any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of the employees" in section 43B (b) cover only employers' contributions to these funds to be borne and paid by employer out of his income, and not employees' contributions to these funds deducted by employer out of employees' income/salary. The former are sums which are liabilities of the employer to be borne by him out of his own income. The latter are sums deducted from others income and held in trust by him and deemed to be his income under section 2(24)(x) unless deposited with concerned authorities on or before the due date as defined in Explanation (now Explanation 1) below section 36(1)(va) i.e. due dates under the relevant employee welfare legislation like PF Act. ESI Act etc. •The non-obstante clause in section 438 cannot be interpreted as overriding section 36(1)(va) and cannot be interpreted to mean that employer will get deduction in respect of employees' contributions deducted from their

S.P. C Infrastructure Pvt. Ltd. vs. DCIT salaries and deposited by employer after the due date u/s 36(1)(va) but on or before the due date u/s 43B i.e. due date of filing ITR. •The non-obstante clause in section 43B does not override section 36(1)(va) as both provisions operate in different fields. Section 43B(b) applies to employer's contributions while section 36(1)(va) applies to employees' contributions.

5.2.3 In view of the aforesaid, it is amply clear that even prior to insertion of Explanation 2 in section 36(1)(va) and Explanation & th Section 43B by the Finance Act,2021 we.f. 1-4-2021,section 43B will not apply to employees' contributions to PF.ESI etc. as claimed by the appellant. In case contributions collected from the salaries of the employees are not deposited within the due date prescribed under the respective EPF/ ESI Acts, then the addition of the said amount as income of the employer u/s 2(24)(x) read with section 36(1)(va) of the Act is automatic and mandatory. The case law relied upon by the appellant are no longer good law after the afore-cited judgment of the Hon'ble Supreme Court. Therefore, I am of the considered view that the AO(CPC) has rightly disallowed of Rs.16,62,178/- on account of delayed deposit of sum received from employees as contribution to any Provident Fund or any fund setup under ESI Act under section 36(1)(va). Hence, as per discussion above and in view of the judgement of the Hon'ble Supreme Court in the case of Checkmate Services (P) Ltd. vs. CIT (2022) 143 taxmann.com 178 (SC), the action of the AO in this regard is, therefore, confirmed and the ground of appeal No. 1 & 2 are not allowed.’’ 2.3 During the course of hearing, the ld. AR of the assessee prayed that the ld. CIT(A) has confirmed the action of the AO in view of the decision of Hon’ble Supreme Court in the case Checkmate Services (P) Ltd. vs.

S.P. C Infrastructure Pvt. Ltd. vs. DCIT CIT (2022) 143 taxmann.com 178 (SC) but the issue is related to calculation mistake by the AO while making the disallowance which means that the AO has added the amount of employer’s contribution with the employees contribution and it inflated the addition and the same should also be re-looked into and thus decide the actual disallowance to be made in the case of the assessee. The ld. AR thus prayed to restore the issue to file of the AO for afresh calculation of disallowance and relief provided as per law. 2.4 On the other hand, the ld. DR supported the order of the ld.CIT(A). 2.5 We have heard both the parties and perused the materials available on record. The Bench noted from the assessment order that the AO made an addition of Rs.16,62,178/- u/s 36(1)(va) of the Act on account of employees contribution to PF/ESI paid beyond the due date specified under relevant Acts before the due date of filing of return of income which in first appeal has been confirmed by the ld CIT(A) in view of the decision of Hon’ble Supreme Court in the case Checkmate Services (P) Ltd. vs. CIT (2022) 143 taxmann.com 178 (SC). It is also noted from the submissions/ arguments of the ld. AR of the assessee wherein he had prayed that the amount of ESI/PF contribution so disallowed by the AO comprised of the employers contribution as well as employees

S.P. C Infrastructure Pvt. Ltd. vs. DCIT contribution for which the ld. AR filed the detailed bifurcation as to difference of amount in both the contributions by the employers and the employees whose details are placed hereunder.

‘’Provident Fund Month Employers Contribution Employees Contribution Total (1) (2) (3) (4) April 2019 260 240 500 April 2019 3204 2956 6160 April 2019 910 840 1750 April 2019 29870 27546 57416 May 2019 250 240 490 May 2019 3095 2851 5946 May 2019 91 84 175 May 2019 33915 31285 65200 June 2019 442 408 850 June 2019 3225 2975 6200 June 2019 416 384 800 June 2019 10418 9594 20012 June 2019 27164 25070 52234 July 2019 468 432 900 July 2019 5865 5409 11274 July 2019 1932 1782 3714 July 2019 28105 31443 59548 August 2019 3042 2808 5850 August 2019 42126 38860 80986 September 2019 60490 55826 116316 October 2019 41500 38284 79784 November 2019 2643 2443 5086 November 2019 32668 35744 68412 December 2019 41454 38236 79690 January 2020 35378 37275 72653 February 2020 26324 28189 54513 March 2020 32916 30358 63274 TOTAL 468171 451562 919733 ESI Month Employers Contribution Employees Contribution Total April 2019 46771 17232 64003 April 2019 712 264 976 April 2019 285 105 390 April 2019 5852 2156 8008 April 2019 475 175 650 May 2019 55216 20343 75559 May 2019 805 296 1101 May 2019 285 105 390

S.P. C Infrastructure Pvt. Ltd. vs. DCIT May 2019 5650 2082 7732 May 2019 475 175 650 June 2019 44691 16465 61156 June 2019 1188 438 1626 June 2019 17093 6297 23390 June 2019 1049 386 1435 June 2019 1034 381 1415 June 2019 5890 2170 8060 July 2019 40411 9326 49736 July 2019 2547 588 3135 July 2019 649 150 799 July 2019 5575 1286 6861 August 2019 49142 11340 60482 September 2019 47921 11059 58980 October 2019 5992 1383 7375 October 2019 42746 9865 52611 November 2019 488 113 600 November 2019 759 175 934 November 2019 1705 394 2099 November 2019 42507 9809 52316 December 2019 42872 9894 52766 January 2020 43756 10098 53854 February 2020 32910 7595 40505 March 2020 312 72 384 March 2020 34504 7963 42467 TOTAL 582267 160180 742445 Total amount deposited lately = Rs. 9,19,733 + Rs. 7,42,445 = Rs. 16,62,178/-‘’ It is a peculiar case wherein such mistake has been substantiated by the ld. AR of the assessee. In order to provide justice to the assessee and to ameliorate the calculation mistake made by the Department, the appeal of the assessee is restored to the file of the AO to decide it afresh in view of the submissions of the ld. AR only relating so as to arrive at the correct amount of disallowance to be made. Thus the appeal of the assessee is allowed for statistical purposes.

S.P. C Infrastructure Pvt. Ltd. vs. DCIT 3.0 In the result, the appeal of the assessee is allowed for statistical purposes.