BISWAJIT NAYAK,RAJGANGPUR vs. ITO WARD-2, ROURKELA

S/Shri S.K.Agarwalla S.K.Agarwalla, CA and S.K.Hota, AR appeared on behalf of the appeared on behalf of the assessee and Shri S.C.Mohanty, ld SR DR appeared on behalf of the assessee and Shri S.C.Mohanty, ld SR DR appeared on behalf of the assessee and Shri S.C.Mohanty, ld SR DR appeared on behalf of the revenue.

It was submitted by ld AR that the return filed by the assessee came to be processed u/s.143(1) of the Act and subsequently, rectification order u/s. 154 of the Act was passed on 30.6.2019, wherein, the employees contribution to PF & ESI paid beyond the due date under the P.F.Act but before the due date of filing of the return had been disallowed as also the employer’s contribution in respect of PF & ESI paid beyond the due date of the PF Act but before the due date of filing of the return had been disallowed. Similarly, CGST & SGST paid beyond the due date but before the due date of filing the return of income had been disallowed. It was the submission that admittedly in respect of employees contribution, the Hon’ble Supreme Court in the case of Checkmate Services Pvt Ltd vs CIT in Civil Appeal No.2833 of 2016 dated 12.10.2022 has categorically held that if the employees contribution to PF and ESI has been paid beyond the time prescribed under the relevant PF Act, then same is not allowable under section 36(1)(va) and 43B even though the payment has been made before the due date of filing of return under the Income tax Act. It was the submission that the allowance of the same under the provisions of section 37(1) of the Act has not been considered. It was the submission that he had no objection if the issue is restored to the file of the AO for examination in the light of the decision of the Co-ordinate Bench of this Tribunal in the case of Nirakar Security & Consultancy Services Pvt Ltd vs ITO in for Assessment Year 2016-17, order dated

P a g e 2 | 6 17.10.2022. In respect of issue of employer’s contribution to PF and ESI paid beyond the due date under the PF Act but before the due date of filing of return of income, the same was covered by the decision of the Hon’ble Supreme Court in the case of CIT v. Alom Extrusions Ltd., (2009) 319 ITR 306 (SC), wherein, it has been held that deletion of second proviso to section 43B by Finance Act, 2003 is retrospective and it would operate with effect from 1.4.1988. Accordingly, the amount paid before the date of filing of the return under the Act, the deduction is allowable. It was the submission that the disallowance was not called for.

In regard to CGST & SGST, it was the submission that in view of the provisions of section 43B, as the taxes has been paid in respect of the relevant assessment year before the due date of filing of return, same was allowable.

In reply, ld Sr DR submitted that the rectification u/s.154 of the Act has been specifically made and the reasons have been mentioned in page 4 of the rectification order, which reads as follows:

It was the submission that as the defects had not been rectified, the disallowance has been made. It was the submission that the defects are yet to be cured and the disallowance as made is liable to be sustained.

We have considered the rival submissions. In respect of the issue of employees contribution to PF and ESI, admittedly, the issue is squarely covered by the decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt Ltd (supra), wherein, it has been categorically held that if the employees contribution to PF and ESI has been paid beyond the time prescribed under the relevant PF Act, then same is not allowable under section36(1)((va) and 43B even though the payment has been made before the due date of filing of return under the Income tax Act. However, as regards the claim of allowance u/s.37(1) of the Act, the issue is covered by the decision of this Co-ordinate Bench in the case of Nirakar Security & Consultancy Services Pvt Ltd(supra), wherein, the issue is restored to the file of the Assessing officer with the following directions:

In regard to the issue of employer’s contribution to PF and ESI, as it is noticed that the issue is covered by the decision of Hon’ble Supreme Court in the case of Alom Extrusions Ltd(supra), the disallowance is directed to be deleted. However, for the purpose of verification as to whether the amounts have been paid before the due date of filing of return, the issue is restored to the file of the AO. If the payments have been made before the due date of filing of the return, then no disallowance is to be made.

Similarly, in respect of CGST and SGST, the issue is restored to the file of the AO for examination as to whether same had been paid before the due date of filing of return under the Income tax Act. If the same has been paid before the due date of filing of return, then in view of the provisions of section 43B, no disallowance is called for.

The argument of ld Sr DR is that the assessee has not rectified the defects. As the issue is restored to the file of the AO for readjudication, in the course of re-adjudication, defects would automatically stands cured.

In the result, appeal of the assessee is partly allowed for statistical purposes.