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Income Tax Appellate Tribunal, JAIPUR BENCHES,”SMC” JAIPUR
Before: Hon’ble SHRI SANDEEP GOSAINvk;dj vihy la-@ITA No. 377/JP/2022
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ds le{k BEFORE: Hon’ble SHRI SANDEEP GOSAIN, JUDICIAL MEMBER vk;dj vihy la-@ITA No. 377/JP/2022 fu/kZkj.k o"kZ@Assessment Year : 2020-21 M/s. G.S. Build Estate Pvt. Ltd cuke The ITO Vs. Plot No. D-88, Ist Floor, Janpath Ward -6(2) Near Lazeer Reataurent, Shyam Nagar Jaipur Jaipur 302 019 LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAFCG 0715 Q vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Shri Surendra Shah, CA jktLo dh vksj ls@Revenue by: Smt. Monish Choudhary, JCIT-DR lquokbZ dh rkjh[k@Date of Hearing : 17/11/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 24/01/2023 vkns'k@ORDER PER: SANDEEP GOSAIN, JM This appeal filed by the assessee is directed against order of the ld. CIT(A) dated 26-08-2022, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2020-21 wherein the assessee has raised the following ground of appeal. ‘’1. That the ld. CIT(A) has erred in law in sustaining the addition made by CPC Bangalore u/s 2(24)(x) read with section 2. ITA 377/JP/2022 M/S. G.S. BUILD ESTATE PVT LTD. VS ITO, WARD 6(2), JAIPUR 36(1)(va) of the I.T. Act of Rs.1,40,541/- on account of late deposit of Employees Contribution to PF without appreciating the fact that the same was deposited before due date of filing of return and by not following the binding decision of Jurisdictional High Court of Rajasthan that if the employees contribution is deposited before due date, no disallowance could be made u/s 36(1)(va) of the Act.
2. That without prejudice to the ground No. (1), the ld. CIT(A) is further wrong and has erred in law in holding that explanation 2 to Section 36(1)(va) introduced by Finance Act, 2021 is prospective in nature and therefore disallowance confirmed by ld. CIT(A) on this account is wrong and bad in law.’’ 2.1 Brief facts of the case are that the assessee firm filed the return of income for the A.Y. 2020-21 on 23-09-2018, admitting total income of Rs. Nil (claimed refund of Rs.11,67,466). The return of income was processed u/s 143(1) of the Act by the CPC who disallowed an amount of Rs.1,40,541/- u/s 36(1)(va) r.w.s. 24(x) towards delayed remittance of employees contribution towards EPF and ESI. 2.2 In first appeal, the ld. CIT(A) has elaborately discussed the issue in question and confirmed the action of the AO vide para 4.5 of his order as under:- ‘’4.5 In view of the above, the disallowance made by the AO of Rs.1,40,541/- is confirmed. The appeal on this ground is dismissed.’’ 3 ITA 377/JP/2022 M/S. G.S. BUILD ESTATE PVT LTD. VS ITO, WARD 6(2), JAIPUR 2.3 During the course of hearing, the ld. AR of the assessee has prayed that the ld. CIT(A) has erred in confirming the disallowance made by the AO of Rs.1,40,541/- as to the late deposition of employees contribution towards PF and ESI Act, however, the same has been deposited before filing the return of income. Thus the same should not be disallowed by the lower authorities. 2.4 On the other hand, the ld. DR relied upon the orders of the lower authorities. 2.5 The Bench has heard both the parties and perused the materials available on record including the case laws cited by both the parties. In this case, it is noted that the AO disallowed the amount of Rs.1,40,541/- u/s 36(1)(va) of the Act on the ground that payments of employees contribution towards PF and ESI had not been made on or before the due date by the employer as per respective Acts which has been confirmed by the ld. CIT(A). It is not imperative to repeat the facts of the case and the case laws cited by both the parties. The Bench has observed that the recently the Hon’ble Supreme has opined in the case of Checkmate Services Pvt. Ltd. vs CIT-1, 143 Taxmann.com 178 (SC)/Civil Appeal No. 2833 of 2016 held that the provision of Section 43B of the Act shall not apply to employee’s contribution to PF/ESI and the due date specified u/s 36(1)(va) of the Act shall apply for determination of deductibility of employee’s contribution to PF/ESI. The relevant portion of the Judgement of Hon’ble Supreme in the case of Checkmate Services Pvt. Ltd. vs CIT-1 (supra) is reproduced as under:-
4 ITA 377/JP/2022 M/S. G.S. BUILD ESTATE PVT LTD. VS ITO, WARD 6(2), JAIPUR ‘’53. The distinction between an employer’s contribution which is its primary liability under law – in terms of Section 36(1)(iv), and its liability to deposit amounts received by it or deducted by it (Section 36(1)(va)) is, thus crucial. The former forms part of the employers’ income, and the later retains its character as an income (albeit deemed), by virtue of Section 2(24)(x) - unless the conditions spelt by Explanation to Section 36(1)(va) are satisfied i.e., depositing such amount received or deducted from the employee on or before the due date. In other words, there is a marked distinction between the nature and character of the two amounts – the employer’s liability is to be paid out of its income whereas the second is deemed an income, by definition, since it is the deduction from the employees’ income and held in trust by the employer. This marked distinction has to be borne while interpreting the obligation of every assessee under Section 43B.
In the opinion of this Court, the reasoning in the impugned judgment that the non-obstante clause would not in any manner dilute or override the employer’s obligation to deposit the amounts retained by it or deducted by it from the employee’s income, unless the condition that it is deposited on or before the due date, is correct and justified. The non- obstante clause has to be understood in the context of the entire provision of Section 43B which is to ensure timely payment before the returns are filed, of certain liabilities which are to be borne by the assessee in the form of tax, interest payment and other statutory liability. In the case of these liabilities, what constitutes the due date is defined by the statute. Nevertheless, the assessees are given some leeway in that as long as deposits are made beyond the due date, but before the date of filing the return, the deduction is allowed. That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees’ contributions- which are deducted from their income. They are not part of the assessee employer’s 5 ITA 377/JP/2022 M/S. G.S. BUILD ESTATE PVT LTD. VS ITO, WARD 6(2), JAIPUR income, nor are they heads of deduction per se in the form of statutory pay out. They are others’ income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. If such interpretation were to be adopted, the non-obstante clause under Section 43B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee’s contribution on or before the due date as a condition for deduction.
In the light of the above reasoning, this court is of the opinion that there is no infirmity in the approach of the impugned judgment. The decisions of the other High Courts, holding to the contrary, do not lay down the correct law. For these reasons, this court does not find any reason to interfere with the impugned judgment. The appeals are accordingly dismissed.’’ In view of the above deliberations and the decision taken by the Hon’ble Supreme Court in the case of Checkmate Services (P) Ltd. vs CIT-1(supra), the Bench sustains the addition confirmed by the ld. CIT(A) and the appeal of the assessee is dismissed.
6 ITA 377/JP/2022 M/S. G.S. BUILD ESTATE PVT LTD. VS ITO, WARD 6(2), JAIPUR 3.0 In the result, the appeal of the assessee is dismissed.. Order pronounced in the open court on 24 /01/2023