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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri George George K. & Shri Laxmi Prasad Sahu
Per: L.P. Sahu, A.M.
This is an appeal filed by the assessee against the order of the learned CIT(A), NFAC, Delhi dated 02.12.2021 for AY 2019-20on the following grounds of appeal:-
“The appellant is LAKSHMI HOSPITAL, Diwans Road, Ernakulam, Kochi-682 016 and in respect of Assessment Year 2019-20, the ADIT-CPC, Bangaluru, completed the assessment after making an addition of RS.31,61,827/- towards provident Fund and Rs.2,98,080/- towards ESI, in total Rs.34,59,917/-, which is not in accordance with law and facts of the case. 2. In regard to PF contribution, the appellant paid Rs.10,81,607/- on 16.06.2018, which was due for payment on 15.06.2018, which was a bank holiday on account of Eid UI- Fitr. Further, an amount of Rs.10,75,283/- which was due to be paid on 15.07.2018 was paid on 16.07.2018, since 15.07.2018, which was a bank holiday, being Sunday. 3. In regard to ESI contribution, Rs.89,849/- due on 15.05.2018 could not be paid on that day being Sunday, a bank holiday, and paid on 16.05.2018, the following working day.
ITA No. 279/Coch/2021 2 M/s. Lakshmi Hospital 4. The Assessing Officer has gone wrong in making addition of Rs.10,81,607/- and Rs.10,75,283/- towards provident Fund and Rs.89,849/- towards ESI contribution, which could not be paid on the due dates on account of holidays and which were paid immediately on the next working day itself. 5. The appellant claimed before the CIT(Appeals) that the amount of Rs.10,04,937/- towards Provident Fund and Rs.2,08,231/- towards ESI contribution collected from the employees and paid outside the due dates of the respective statutes, but during the previous year 2018-19 itself, should be allowed as revenue expenditure u/s.37(1) of the Act and the CIT(A) has not considered this claim at all.” 2. During the course of hearing none appeared on behalf of the assessee. Therefore we proceeded to hear the appeal ex-parte qua the assessee.
The brief facts of the case are that the assessee filed ITR 5 on 29.10.2019 which was processed by the CPC, Bengalore on 06.05.2020 determining the total income at Rs.84,84,201/- and deduction under Chapter VIA of the Income Tax Act, 1961 (hereinafter "the Act") of Rs.1,74,600/- was made resulting in taxable income of Rs.83,09,600/- and Assessing Officer levied tax accordingly. During the course of processing of the return under Section 143(1)(a) of the Act, the CPC disallowed the deduction claimed under Section 36(1)(va) of the Act of Rs.34,509,917/-. The assessee challenged the order passed under Section 143(1)(a) of the Act before the learned CIT(A). The learned CIT(A) confirmed the addition made by the Assessing Officer on account of delayed payment of employees’ contribution to PF/ESI of Rs.34,59,917/-. Aggrieved bythe order of the CIT(A) assessee is in appeal before the Tribunal.
During the course of appellate proceedings before the CIT(A) the assessee had submitted a written submission which is as under: -
“In connection with the above appeal proceedings, we may submit the following: 1. The appeal is against intimation u/s.143(1) of the Act dt.06.05.2020. As per this intimation Rs.34,59,917/- is disallowed u/s.36(1)(va) of the Act. This amount is consisting of PF contribution collected from the employees Rs.31,61,827/- and Rs.2,98,090/- being the employees contribution towards ESI,
ITA No. 279/Coch/2021 3 M/s. Lakshmi Hospital totaling to Rs.34,59,917/-
The appellant pays the PF Contribution of Rs.10,81,607/- on 16.06.2018, which was due for payment on 15.06.2018. The amount could not be paid on 15.06.2018, since that date was a bank holiday on account of Eid UI-Fitr. 3. The amount of Rs.10,75,283/- which was due to be paid on 15.07.2018 was paid on 16.07.2018, since 15.07.2018 is Sunday, the bank holiday. The next working day, on 16.07.2018, this amount is paid. 4. The remaining amount of Rs.10,04,937/- which was due on 15.11.2018 was paid on 28.11.2018 and the delay is due to time for financial arrangements. 5. The amounts of Rs.10,81,607/- and the amount of Rs.10,75,283/- could not be paid on the due dates under the respective statute for the reason that the due dates under the respective statutes are public holidays and banks are not working. The appellant paid the above amounts on the immediately following working day and hence the amounts are not to be disallowed u/s.36(1)(va) of the Act. 6. In respect of ESI contribution Rs.89,849/- was due for payment on 15.05.2018. But the amount could not be paid on that date, since 15.05.2018 is Sunday and a bank holiday. This amount is paid on 16.05.2018t the next following bank working day. 7. Out of the remaining amount of Rs.2,08,241/- Rs.1,03,619/- which was due on 15.06.2018 is paid on 18.06.2018 and Rs.1,04,622/- due on 15.07.2018 was paid on 26.07.2018, after the relevant due dates. 8. Since the amount of Rs.89,849/- is paid on 16.05.2018, immediately after the due date, which is a bank holiday, disallowance of this amount is not justified. 9. For the above reasons. the amount under PF of Rs.10,81,607/- and Rs.10,75,283/- are paid on the immediately next day after the due date being bank holiday, those payments should be considered as paid on the due dates. Total amount Rs.2l56t890/- disallowed u/s. 36(1)(va) may be cancelled. 10. In respect of ESI contribution Rs.89,849/- is paid on 16.05.2018, the immediately next working day of the bank, since 15.05.2018 was a bank holiday, being Sunday, the disallowance of this amount u/s.36(1)(va) is also not justified. 11. For the above reasons the total amount of PF Rs.2l,56,890/- and ESI Rs.89,849/- should not be disallowed u/s.36(1)(va) of the Act. Application of Section 37(1) of the Act: 1. In respect of PF contribution Rs.10,04,937/-, which was due on
ITA No. 279/Coch/2021 4 M/s. Lakshmi Hospital 15.11.2018 was paid on 28.11.2018, paid before the end of the financial year on 31.03.2019. 2. Similar to the above, out of the ESI contribution of Rs.2,08,241/- , Rs.1,03,619/- which was due on 15.06.2018 is paid on 18.06.2018 and Rs.1,04,622/- due on 15.07.2018 was paid on 26.07.2018, after the relevant due dates, but before 31.03.2019, before the end of the financial year. 3. The above two payments under PF Rs.10,04,937/- and under ESI Rs.2,08,241/- are paid after the due date under the respective statutes. 4. The above payments are made before 31.03.2019, during the financial year itself and hence the payments may be treated as expenditure for the purpose of carrying on the business. This expenditure is not covered u/s.36(1)(va) of the Act, since the amounts are paid after the due dates under the respective statutes and only for that reason the entire amounts are disallowed. The payments are neither personal nor capital expenditure and not covered u/s.30 to 36 of the Act. The payments of these amounts during the financial year itself may be considered as expenditure for the purpose and incidental to the carrying on of the business and may be considered as an expenditure allowable u/s.37(1) of the Act. As a result the amount considered as deemed income u/s.2(24)(x) since it is paid during the financial year itself may be considered as an expenditure u/s.37(1) and there will not be any addition to the total income. What is the amount treated as income u/s.2(24)(x) should be considered as expenditure u/s.37(1) and as a result of the payment during the year itself, there will not be any addition, which are mutually nullified. 5. Hence, the appellant may request, the payments since paid during the financial year itself may be considered as an expenditure allowable u/s. 37(1) of the Act.” 5. The assessee also filed a written submission before the Tribunal, which reads as under: -
“The appeal filed before the Hon. Bench is regarding the assessment of Rs.31,61,827/-: being PF contribution collected from the employees and Rs.2,89,090 /- being ESI contribution collected from the employees, totaling to Rs.34,59,917 /-, u/s.36(1)(va) of the Act. 2. PF Contribution: The PF contribution collected from the employees Rs.10,81,607/- the payment due date was 15.06.2018. 15.06.2018 was a bank holiday on account of Eid Ul-Fitr and the amount was paid on 16.06.2018, the next working day. Similar to the above Rs.10,75,283/- which was due on 15.07.2018 was paid on 16.07.2018, since 15.07.2018 was a bank holiday being Sunday.
ITA No. 279/Coch/2021 5 M/s. Lakshmi Hospital 3. ESI Contribution:Rs.89,849/- due on 15.05.2018 was paid on 16.05.2018, since 15.05.2018 was Sunday and bank holiday. 4. The appellant could not pay the amounts on the due dates for the reason that the due dates are bank holidays and the payments are made on the immediately next working day. The appellant may submit that the disallowance of the above amounts is unsustainable and the additions may be cancelled. 5. Ground No.3 of the Grounds of appeal is not pressed and may be treated as withdrawn. 6. Ground No.5 of the Grounds of appeal is not pressed and may be treated as withdrawn. 7. The due date for the payment of collection from the employees in respect of Provident Fund and ESI and application of Section 36(i)(va) & 43B of the Act are amended from 01.04.2021. The assessment under appeal is for AY 2019-20 and hence, the meaning of due date u/s.36(i)(va) and 43B should not be considered for this assessment year and the payments may be allowed as deduction. Kindly refer to the ITR Tribunal Reports - Pages 21 & 27 of Vol. 94 - [Decision of the Hon.ITAT, Bangaluru in the case of Vishal Enterprises v. Deputy CIT and Marappa Shivakumar v. Deputy CIT]” 6. On the other hand, the learned D.R. relied on the order of the CIT(A) and vehemently argued the case.
After hearing the learned D.R. we observed from the document submitted before the lower authorities, facts as well as statement filed before us, the assessee paid PF contribution of Rs.10,81,607/- on 16.07.2018 whereas it has been observed that it was a bank holiday and Rs.10,75,283/- was paid on 16th July, 2018 as 15.07.2018 was a bank holiday and the remaining amount of Rs.14,03,027/- was paid after the due date and in the case of ESI also the assessee paid the contribution as stated above. Before us the assessee filed no documentary evidence to prove the payment on a particular date. The assessee has raised same grounds before the CIT(A). The CIT(A) has not considered the issue of bank holidays. Accordingly we think it fit to restore the matter back to the file of he AO for verification of the exact date of payment of the disputed amounts. If the AO finds that the assessee was unable to pay the amount on account of bank holiday and it is paid immediately on the next working day the amount shall be treated as paid on the due date as per the
ITA No. 279/Coch/2021 6 M/s. Lakshmi Hospital respective Act. The assessee is directed to produce necessary documents for substantiating his case. Assessee is also directed to not seek unnecessary adjournments for immediate disposal of the appeal. Needless to say that the assessee should be provided adequate opportunity of hearing.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Dictated and pronounced in the open Court on 30th June, 2022.
Sd/- Sd/- (George George K.) (Laxmi Prasad Sahu) Judicial Member Accountant Member
Cochin, Dated: 30th June, 2022
Copy to:
The Appellant 2. The Respondent 3. The CIT(A) -NFAC 4. The CIT - 5. The DR, ITAT, Cochin 6. Guard File By Order
//True Copy// Assistant Registrar ITAT, Cochin n.p.