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Income Tax Appellate Tribunal, AHMEDABAD “SMC” BENCH
Before: Ms. Suchitra Kamble
आदेश/ORDER
This is an appeal filed against the order dated 26-11- 2018 passed by the CIT(A)-9, Ahmedabad for assessment year 2015-16.
The grounds of appeal are as under:-
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“The learned ITO & CIT (Appeal-9) erred in law and on facts in passing the order under section 143(3) of IT Act, 1961 which is requested to be quashed.
Ground no 1 Regarding addition of Rs. 1423479/-being PF & ESIC
1.1 With reference to the caption subject the appellant is herewith want to give clarification regarding the due date of employee provident fund, the appellant has complied with the due date scrupulously without delay.
The appellant wants to draw attention towards the provision of the EPF as under "due date" for payment of Provident Fund contributions, clause (1) of Paragraph 38 of Employees Provident Fund Scheme, 1952 in relevant it reads as follows:-
“The employer shall before paying the member his wages in respect of any period or part of period for which contribution are payable, deduct the employee's contribution from his wages which together with his own contribution as well as an administrative charge of such percentage [of the pay (basic wages, dearness allowance retaining allowance, if any, and cash value of food concessions admissible thereon) for the time being payable to the employees other than an excluded employee and in respect of which provident fund contributions are payable, as the Central Government may fix] he shall within fifteen days of the close of every month pay the same to the Fund by separate Bank drafts or cheques on account of contributions and administrative charge,"
1.2 Further, the appellant relied upon the following judgements
(a) Fluid Air (India) Ltd Vs. DCIT (1997) 63 ITD 182 (Mumbai) And
(b) Madras Radiators & Pressings Ltd Vs. DCIT (1996) 59 ITD 515 (Mad)/(1996) 56 TTJ (Mad) 662
Wherein it has been held that the term "month" has not been defined in the scheme, there is ambiguity regarding interpretation of the words "fifteen days from the close of month appearing in Paragraph 38 of Employees Provident Fund Scheme as to whether it should be reckoned from the month in which such contributions are received by the assessee from its employees or from the month in respect of which such contributions are received by the assessee in cases where wages are paid in subsequent month(s) and this ambiguity should be resolved in favour of assessee i.e. fifteen days are to be reckoned from close of the month in which employees contributions are recovered i.e. the month of payment of wages.
So the appellant has discharged the EPF as per due to month of salary actually paid. There was no default to the payment of the EPF.
1.3 The Ld Assessing officer erred in law while making the aforesaid disallowance due to the below mentioned reasons: Firstly, the appellant wants to reiterate the extracts of section 2(24) section 36(1)(va) and section 438 as below: Section 2 (24) "income" includes- [(x) any sum received by the assessee from his employees as contributions to any Provident fund or superannuation fund or any fund set up under the provisions of the Employees' State Insurance Act, 1948 (34 of 1945) or any other fund for the welfare of such employees]
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Further, as per Section 36(1)
The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28-
[(va) any sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date
Explanation-For the purposes of this clause "due date" means the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued thereunder or under any standing
[order award contract of service or otherwise)
Again as per Section 43 B
Certain deductions to be only on actual payment.
43B Notwithstanding anything contained in any other provision of the Act, a deduction otherwise allowable under this Act in respect of-
(b) 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 employees, 12[or]
shall be allowed (respective of the previous year in which the liability to pay such sum was incurred by the assesses according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him: [Provided that nothing contained in this section shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return.
Explanation (1) For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (a) or clause (b) of this section is allowed in computing the income referred to in section 28 of the previous year (being a previous year relevant to the assessment year commencing on the 1 day of April, 1983, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee the assessee shall not be entitled to any deduction under this section in respect of such sum in Computing the income of the previous year in which the sum is actually paid by him) (2) On combine reading of aforesaid section 2(24)(x) section 36(1)(va) and section 43B Your Honour would observe that primarily any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the provisions of the Employees' State Insurance Act
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1943 (34 of 1948), or any other fund for the welfare of such employees would be treated as income of the employer Now coming to section 43B which starts with non-abstante clause “Notwithstanding anything contained in this act and therefore this section overrides other sections of the act including section 36(1)(va). Further, action 43B states “that 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 shall be allowed as deduction in that previous year in which such sum is actually paid by the assessee. Thus, section 43B connotes that payment which the employer is able to pay including the payment collected by the employer towards employee's contribution towards PF Contribution or ESIC contribution etc and therefore if the total amount has been paid by the employer within the due date of filing of return of income then it should be allowed as deduction under this act.
Further, the word 'contribution has not been defined under the Income Tax Act, therefore a resort has to be made to the Employee's Provident Fund and Miscellaneous Provisions Act 1952 which state that,
Section 6 of the PF Act provides for contributions and matters which may be provided for in the schemes.
Paragraph-29 of the PF scheme states what contribution is. The expression contribution is also defined under the PF Act by section 2(c) of the PF Act, which means a contribution payable in respect of a member under the scheme of the contribution payable in respect of an employee to whom the Insurance Scheme apples. If this definition is read with sub-para (1) of paragraph 29 in Chapter V of the PF Scheme it would mean that the contributions payable by the employer under the scheme shall be at a particular rate and the contribution payable by the assessee shall be equal to the contribution payable by the employer.
Paragraph 30 of the PF scheme provides for payment of contributions Sub-para (1) of paragraph 30 states that the employer shall in the first stance, pay both the contribution payable by himself (in this scheme referred to as the employer's contribution) and also, on behalf of the member employed by him directly or by or through a contractor the contribution payable by such member (in this scheme referred to as the member's contribution).
From bare perusal of sub-para (1) of paragraph 30 it is clear that the word contribution is used not only to mean contribution of the employer but also contribution to be made on behalf of the member employed by the employer directly.
Paragraph 35 of the PF schema provides for Mode of payment of contribution. As provided in sub-para (1), the employer shall before paying the member, his wages. deduct his contribution from his wages and deposit the same together with his own contribution and other charges as stipulated therein with the provident fund or the fund under the ESI Act within fifteen days of the closure of every month pay it is clear that the word 'contribution used in clause (b) of section 43B means the contribution of the employer and the employee That being so, if the contribution is made on or before the due date for furnishing the return of income under sub- section (1) of section 139 is made the employer is entitled for deduction.”
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Now, coming to ESIC Act, wherein contribution is defined under section 2(4) of the ESIC ACT 1948 as the sum of money payable to the Corporation by the principal employer in respect of an employee and includes any amount payable by or on behalf of the employee in accordance with the provisions of this act.
Further Section 39 of the Act deals with contributions which expressly states that the contribution a able under this act in messed of an employee shall comprise of contribution payable by the employer (herein after referred to as employee's contribution) and shall be paid to the corporation. Also section 40 of the ESIC Act which deals with the provisions of principal employer to pay contributions in the first instance also prescribes that the principal employer shall pay in respect of every employee, whether directly employed by him or by or through an immediate employer, both the employer's contribution and the employee's contribution Thus. ESIC Act, 1948 is very clear to include employer's share as well as employee's share under the term contribution and therefore employers as well as employee's share of contributions are allowable as deduction as per section 43B of the Income Tax Act.
1.4 In view of above, the appellant relied upon the following judgements
(A) CIT v Rajasthan State Beverages Corporation Ltd (2017) 84 taxmann com 173 SLP filled by the Revenue department before Supreme Court has been rejected/dismissed in (2017) 250 Taxman 16 (SC)
(B)Essae Teraoka (P) Ltd v. Dy. CIT(2014) 266 CTR 246/366 ITR 408 (Kar) (C) CIT v. Rajasthan State Ganganagar Sugar Mills Ltd (2017) 393 ITR 421 (D) Bihar State Warehousing Corporation Ltd v CIT (2017) 393 ITR 385 (Pat)
1.5 Further notwithstanding anything above, there is hardly a day or two's delay on several occasions except for the month of March 15 wherein the PF & ESIC dues were deposited on 27.04.2015. The appellant also had on several occasions made the payment of statutory dues in time i.e. except for the months above tabulated the payments of remaining months were within the due date. Thus, the intention of the appellant is not to delay the payment of statutory dues but perhaps there might be several hardships to the appellant due to which the payments were delayed.
Ground no. 2 Regarding addition of Rs.7800/- being disallowance of depreciation:-
The appellant could not submit the proof for addition of assets of Rs 43500/- during the impugned period and thereby the depreciation amount thereon amounting to Rs 7800/- was disallowed by DCIT and added in total income of the appellant. The appellant is having all such necessary documentary evidences and ready to submit the same as and when asked
So, the appellant request you to drop the addition of Rs. 7800/-
Ground no.2 Regarding addition of Rs.41649/- being difference between income shown in P&L and in 26AS:-
The appellant wants to state that the difference was due to rounding off of service tax. So as such there was no difference. The appellant has totally disclosed all the
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receipts as stated in 26AS properly. This is only rounding off difference of service tax and not Income portion. So the appellant hereby request you to drop the addition of Rs 41649/- in the interest of law and justice. 4. (i) Drop the addition of Rs 1472928/-under IT Act. 1961 (ii) To set aside the assessment order and appellate order passed u/s 143(3) of IT Act. 1961. Your honour appellant prays for leave to add to alter and/or to amend all or any of the grounds before the final hearing of the appeal Appellant may be heard in person before taking any decision in this matter.”
The return of income was filed on 28-10-2015 declaring total income at Rs. 29,76,740/-. The case was selected for limited scrutiny and notice u/s. 143(2) of the Act dated 20-09- 2016 was issued and served upon the assessee. Notice u/s. 142(1) of the Act with detailed questionnaire were issued on 17-01-2017 and 24-07-2017 and served upon the assessee. During the assessment proceedings, the Assessing Officer observed that assessee had not deposited the amounts exceeding Rs. 10,00,000/- received from employee’s contribution towards Provident Fund and ESIC in relevant fund on or before due date. So, there was always escapement of income exceeding Rs. 10,00,000/-. After taking cognizance of the assessee’s reply, the Assessing Officer made addition of Rs. 14,73,079/- in respect of delayed payment of employee’s contribution towards ESI and Provident Fund as per section 36(1)(va). The Assessing Officer also made addition of Rs. 41,649/- towards excess payments/receipts appearing in form 26AS. The Assessing Officer also made addition of Rs. 7800/-
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towards depreciation and addition of Rs. 330/- in respect of TDS interest. The Assessing Officer also made addition of Rs. 18,560/- towards interest free advances for non-business purpose.
Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The ld. CIT(A) partly allowed the appeal of the assessee.
As regards ground no. 1 relating to addition in respect of delayed payment of employee’s contribution to Provident Fund and ESIC, the ld. A.R. submitted that the assessee had collected various contributions which the assessee paid in June, 2014 as salary provision on 30-06-2014 and the actual payment of salary had been done in the month of July, 2014 thereby the due date of depositing such contribution was in August, 2014. The ld. A.R. submitted that the assessee has decided the Provident Fund and ESIC as per due month of salary actually paid.
The ld. D.R. relied upon the assessment order and the order of the CIT(A).
Heard both the sides and perused all the relevant materials available on record. It is pertinent to note in fact
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the assessee is part of the due salary within the prescribed payment of salary alone and in fact which are not in payment of salary which is due on the end of the month cannot be taken that delayed payment of salary on a gap month should be taken into account while making the payment belatedly with the statutory fund of Provident Fund as well as ESIC. After decision of Hon’ble Apex Court’s decision in case of Checkmate Services Pvt. Ltd. vs. CIT order dated 12-10-2022, Civil Appeal No. 2833 of 2016 the employer has to pay the Provident Fund and ESI dues within the statutory period and delay not have of the monthly salary cannot be the excuse to the assessee. Hence, ground no. 2 is dismissed. As regards to ground no.3 related to disallowance of depreciation to the extent of 7800/-, the assessee is having all the necessary documents/evidences as per the submissions of the ld. A.R. and therefore the same is remanded back to the file of Assessing Officer for proper adjudication and the same may be taken into account and decided as per the Income Tax Act. Needless to say, the assessee be given opportunity of hearing by following the principles of natural justice.
7.1 As regards ground no. 4 relating to addition of Rs. 41,649/- being difference between income shown in profit and loss and in 26AS, the assessee has disclosed all the receipts as stated in 26AS properly and the same should have been taken
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into account by the Assessing Officer. Therefore, this issue is also remanded back to the file of the Assessing Officer for proper adjudication as per Income Tax Act. Needless to say, the assessee be given opportunity of hearing by following the principles of natural justice.
In the result, the appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 03-01-2024
Sd/- (SUCHITRA KAMBLE) JUDICIAL MEMBER Ahmedabad : Dated 03/01/2024 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद