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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM
आदेश / O R D E R PER DR. A. L. SAINI, AM: Captioned two appeals filed by the assessee, pertaining to Assessment Years (AYs) 2017-18 and 2018-19, are directed against the separate orders passed by the Learned Commissioner of Income Tax (Appeals), [in short “the ld. CIT(A)”], National Faceless Appeal Centre [in short “the NFAC”], Delhi, which in turn arise out of separate assessment orders passed by Assessing Officer, Central Processing Centre (CPC), Bengaluru, under section 143(1) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). 2. At the outset, Ld. Counsel for the assessee fairly agreed that the issue of employees’ contribution to PF and ESI is squarely covered against the assessee by the judgment of Hon'ble Supreme Court in the case of Checkmate Services, Pvt. Ltd., in Civil Appeal No. 2833 of 2016, dated 12.10.2022.
The Ld. Counsel submitted in respect of ITA No.12/SRT/2022 for AY.2017-18 as follows:
ITA 12/SRT/2022/AY.2017-18 & 2018-19 Syama Dynamic Engineering P. Ltd.
“(i) the actual amount of employee contribution to PF and ESIC under Section 36(1)(va) is Rs.63,74,140 instead of Rs.1,90,40,117 as the balance amount of Rs.1,26,65,977 pertain to the PF and ESIC contribution of the employees of the subcontractor. (ii) out of Rs.63,74,140, Rs.4,76,405 is paid on or before the due date prescribed under the respective labour law.” 4. In respect of ITA No.13/SRT/2022 for AY.2018-19, Ld. Counsel submits as follows: “(i) the actual amount of employee contribution to PF and ESIC under Section 36(1)(va) is Rs.53,34,113 instead of Rs.1,58,58,515 as the balance amount of Rs,1,02,25,179 pertain to the PF and ESIC contribution of the employees of the subcontractor. (ii) out of Rs.56,34,113, Rs.2,15,952 is paid on or before the due date prescribed under the respective labour law.” 5. Therefore, in respect of both the appeals, the Ld. Counsel stated that due to mistake committed by Chartered Accountant of the assessee, the assessing officer made addition. As Chartered Accountant (CA) has wrongly mentioned in Form No.3CD, the amount of PF and ESIC pertaining to subcontractor as if it belongs to assessee. In fact, the amount belongs to subcontractor and on that assessee need not to deduct the PF and ESIC, therefore the amount which is pertaining to subcontractor should be excluded. Apart from this, Ld. Counsel also submitted that out of Rs.63,74,140, the amount for Rs.4,76,405 was paid on or before the due date prescribed under the respective labour law in AY.2017-18. For AY.2018-19 out of Rs.56,34,113, an amount of Rs.2,15,592 was paid on or before the due date prescribed under the respective law. Therefore, Ld. Counsel prays that the matter may be remitted back to the file of the Assessing Officer to examine these facts and adjudicate issue in accordance with law. 6. The Ld. Counsel for the assessee also submitted the written submissions in respect of both these appeals, which are reproduced below: “With reference to above, I beg to state as under:
ITA 12/SRT/2022/AY.2017-18 & 2018-19 Syama Dynamic Engineering P. Ltd.
The hearing in the matter took place today i.e. on 20.12.2022. The issue is regarding disallowance of PF ESI contribution of Rs.1,73,96,729 for A.Y. 2017- 2018 and Rs.1,58,58,515 for A.Y.2018-2019. Assessment Year: 2017-2018: 02. The break-up of PF ESI Contribution: Employees contribution received by the assessee Rs.63,74,140 Employees contribution received by sub-contractor Rs.1,26,65,977 Total: Rs.1,90,40,117 Out of the above, the learned ACIT CPC has made the addition on account of delay in making the payment of PF & ESI of Rs.1,73,96,729 under Section 36(1)(va) stated on the basis of Clause No.20(b) of Form No.3CD. In fact, out of Rs.1,73,96,729 the assessee employees contribution is Rs.63,74,140 and balance amount includes the employees contribution received by sub-contractor. This is clarified by the CA by Certificate which was submitted to the learned CIT(A). The same is accepted by the learned CIT(A) by his Order dated 07.12.2021 and stated in Para No. 5.6 that "The sums stated to be amounts paid to sub-contractors' workers of Rs.1,26,65,977/- needs verification." The responsibility to make the payment is with sub-contractor. 03. Now there is no any dispute, but the dispute is regarding the further direction is given by the learned CIT(A) that "The AO is directed to verify this claim of the assessee and disallow sums which have not been remitted within the due dates as per Section 36(1)(va) r.w.s 43B. The balance amount to be allowed as per law, if there is no further disallowance thereon, such as TDS obligations, etc.” 04. The AR prayed during the hearing that as regard, PF ESI contribution received by the sub-contractor, the disallowance should be made, if any, in case of sub-contractor after going through Para No. 5.5 and 5.6 of the learned CIT(A) order. 05. Therefore, the amount of Rs.1,26,65,977 should be added in case of sub- contractor and not in the case of the assessee. The direction of learned CIT(A) should be modified to this extent. 06. The facts for AY.2018-19 are identical.” 7. On the other hand, Learned Departmental Representative (Ld. DR) for the Revenue fairly agreed with the submissions of the Ld. Counsel and stated that let the matter should be examined by the Assessing Officer, pertaining to PF and ESIC which belongs to subcontractor and the amount paid on or before the due date prescribed under the Act, and adjudicate the issue in accordance with law.
ITA 12/SRT/2022/AY.2017-18 & 2018-19 Syama Dynamic Engineering P. Ltd.
We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld. CIT(A) and other materials brought on record. We note that in assessment year 2017-18, vide ITA No. 12/SRT/2022, the Ld. Counsel submitted that the employees’ contribution to PF and ESIC under section 36(1)(va) is the amount of Rs.63,74,140/- instead of Rs.1,90,40,117/-. Therefore, the balance amount of Rs.1,26,65,977 (Rs.1,90,40,117 – Rs.63,74,140) belongs to subcontractor on which the subcontractor is liable to pay PF and ESIC. Further, in AY.2017-18, the employees’ contribution to PF and ESIC was disallowed under section 36(1)(va) to the tune of Rs.63,74,140 out of this amount Rs.4,76,405 is paid on or before due date prescribed under the respective labour law.We note that if the amount belongs to sub-contractor, the responsibility to make the payment of PF and ESIC is with sub-contractor. Therefore, we direct the Assessing Officer to examine the amount belongs to subcontractor and amount belongs to assessee which was paid on or before the due date prescribed under the respective law and adjudicate the issue in accordance with law. 9. In respect of AY.2018-19, vide ITA No.13/SRT/2022, we note that as per assessee, the total PF and ESIC is Rs.1,58,58,515 out of which Rs.56,34,113 belongs to assessee and the balance amount of Rs.1,02,25,179 belongs to subcontractor. The assessee also submitted that out of total contribution of Rs.56,34,113 an amount of Rs.2,15,952 was paid on or before the due date prescribed under labour law. We note that if the amount belongs to sub-contractor, the responsibility to make the payment of PF and ESIC is with sub-contractor. Therefore, we direct the Assessing Officer to examine the amount pertaining to subcontractor and the amount which was paid by the assessee on or before due date prescribed under the respective labour law and adjudicate the issue in accordance with law. For the statistical purposes, these two appeals of the assessee are allowed.
ITA 12/SRT/2022/AY.2017-18 & 2018-19 Syama Dynamic Engineering P. Ltd.
In the result, both the appeals filed by assessees are allowed for statistical purposes.
Registry is directed to place one copy of this order in all appeals folder / case files. Order pronounced on 30/12/2022 by placing the result on the Notice Board.
Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER lwjr /Surat �दनांक/ Date: 30/12/2022 SAMANTA** Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat