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Income Tax Appellate Tribunal, [ DELHI BENCH “A” : DELHI ]
Before: SHRI G. S. PANNU, HON’BLE VICE-SHRI CHALLA NAGENDRA PRASAD
आदेश / O R D E R PER C. N. PRASAD, J. M. :
This appeal is filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-26 [hereinafter 1 referred to CIT (Appeals)] New Delhi, dated 20.07.2022 for assessment year 2018-19.
The assessee has raised the following substantive grounds:-
“1. Because the order passed by the CIT (Appeals) is grossly illegal, arbitrary and against the authority of law and principles of natural justice. 2. Because the CIT (Appeals) has erred on law and facts in dismissing the appeal in limine rejecting the delay condonation of 250 days, filed against the intimation dt 17.10.19 u/s 143(1) of the Act making adjustments beyond the scope and authority of sec 143(1) of the Act.
3. Because the CIT (A) has arbitrarily rejected the explanation that the delay in filing appeal was due to pursuing the remedy u/s 154 of the Act and otherwise the appeal was filed immediately after the order u/s 154 of the Act and thus deserved to be condoned as per law and the facts of the case.
4. Because the intimation u/s 143(1) was grossly illegal in as much as the adjustments made therein pertaining to disallowance of exemption u/s 10(34) as well as payments of employees contribution of PF/ESI could not have been made invoking jurisdiction u/s 143(1) of the Act, more so when the same was deposited with in time as per several held cases.”
The ld. Counsel for the assessee, at the outset, submits that in so far as the employees contribution towards PF/ESI for the months of July and September, 2017 and March, 2018 the contributions were remitted on 16.08.2017, 16.10.2017 and 16.04.2018 as the due date being 15.08.2017, 15.10.2017 and 15.04.2018 being National 2 holidays/Sunday. The ld. Counsel placing reliance on the decision of the co-ordinate bench in the case of G. D. Foods Manufacturing (India) Pvt. Ltd. Vs. ADIT [152 taxmann.com 323] submits that where assessee makes payment towards contributions to PF/ESI with one day delay as due date for payment of PF/ESI contributions prescribed in respective Acts falls on Sunday or Gazetted holiday such payments are to be allowed as deduction.
In so far as the remaining contributions other than for the months of July, September, 2017 and March, 2018 the Ld. Counsel for the assessee submits that for computing the period of delay “month” to be taken should be the month in which salary/wages are disbursed by the assessee and not calendar month. Reliance is placed on the decisions of Kolkata Bench of the Tribunal in the case of Kanoi Paper Industries Ltd. Vs. ACIT (75 TTJ 448) and the Delhi Benches in the cases of Vigilant Security Placement & Detective Services Pvt. Ltd. Vs. DCIT in dated 13.06.2023, Dignus Services Vs. ITO in ITA. Nos. 116 & 117/Del/2023 dated 26.09.2023, Sentinel Consultants Pvt. Ltd. Vs. ACIT in ITA. Nos. 7 & 8/Del/2023 dated 12.06.2023, B. L. Kashyap & Sons Ltd. in ITA. No. 2622/Del/2022 dated 18.07.2023 and VVDN Technologies Pvt. Ltd. in ITA. No. 164/Del/2023 dated 4.07.2023, Fluid Air (India) Ltd. Vs. DCIT 63 ITD 182 (Bom). 5. Heard rival submissions, perused the orders of the authorities below. We find merit in the submissions of the ld. Counsel that the contributions towards PF/ESI made for the months of July and September, 2017 and March, 2018 which were paid on 16.08.2017, 16.10.2017 and 16.04.2018 with a delay of one day have to be 3 allowed as deduction as due date for remittance of the contributions being 15.08.2017, 15.10.2017 and 15.04.2018 fell on National holiday/Sunday in view of the decision of the co-ordinate bench in the case of G. D. Foods Manufacturing (India) Pvt. Ltd. Vs. ADIT (supra). Thus, we direct the Assessing Officer to delete the disallowance made towards PF/ESI in so far as the employees contributions towards PF/ESI in respect of July, 2017, September, 2017 and March, 2018 are concerned.
In so far as the remaining employees contributions towards PF/ESI other than the contributions for the months of July and September, 2017 and March, 2018 are concerned it is noticed that the issue as to whether the due date under PF/ESI Acts should be as per the calendar month for which the salary is payable or from the month in which the salary is paid to the employee by the employer came up for adjudication in the case of Sentinel Consultants Pvt. Ltd. Vs. ACIT (supra) and the Tribunal restored the issue to the file of the AO with the following observations:- “9. We have carefully considered the rival submissions and perused the material available on record. The disallowance of employees’ contribution to PF/ESIC for breach of condition under Section 36(1)(va) is in controversy. 9.1 We notice at the outset that an opportunity was given via electronic platform of the deptt. for the proposed adjustments and in the absence of e-response, the adjustments were carried out the CPC-Bangluru and intimation was issued enhancing the assessed income in the captioned assessment years. The CIT(A) in the first appeal has sustained the adjustments towards belated deposits of employees’ contribution to PF/ESIC in the light of the judgment rendered by the Hon’ble Supreme Court 4
in Checkmate Pvt. Ltd. vs. CIT (2022) 143 taxmann.com 178 (SC). The contention of the Assessee that such additions cannot be made under the umbrella of S. 143(1) is covered against the assessee the decision of the co-ordinate bench in the case of Weather Comfort Engineers Private Limited vs. ACIT-CPC order dated 15/02/2023. The action of CPC and CIT(A) thus cannot be faulted where some opportunity was admittedly given for e- response.
9.2 We now turn to alternate plea on behalf of the assessee for grant of deduction under general provisions for deduction of expenditure under S. 37 of the Act. We do not see any merit in such plea that the belated deposit of employees contributions to PF/ESIC governed under Section 36(1)(va) is also simultaneously amenable to deduction under Section 37(1) of the Act. In terms of the provision, Section 37(1) permits deduction of expenditure which is not in the nature of expenditure prescribed in Sections 30 to 36 of the Act and also not being in the nature of capital expenditure or personal expenses of the assessee. Thus, in view of such mandate of law, the deduction of expenditure under the general clause of Section 37(1) would not extend to expenditure specially covered within the ambit of Section 36(1)(va) of the Act. The Hon’ble Supreme Court in the case of Checkmate Pvt. Ltd. (supra) itself explains this position in Para 32 of the Judgment. Such view also draws support from the observations made in recent judgment of the Hon’ble Supreme Court in the case of Pr.CIT vs. Khyati Realtors (P) Ltd. (2022) 141 taxmann.com 461 (SC). The alternate plea is thus without any merit.
9.3 We also take note of yet another plea made out on behalf the assessee towards methodology of calculation of default under the relevant PF/ESIC Act. The Ld. Counsel contends that the month during which the disbursement of salary is actually made would be relevant for the purposes of determination of due date of deposit under the respective statute. 5
The accrual of liability towards payment of salary without actual disbursement would not fasten obligation for deposits of employees contribution in the labour Acts per se. as observed by the co-ordinate bench in Kanoi Paper and Industries Ltd. vs. ACIT (2002) 75 TTJ 448 (Cal). This aspect has not been found to be examined by the Assessing Officer or CIT (A). Hence without expressing any opinion on merits on this aspect, we deem it expedient to restore the matter to the file of designated AO. It shall be open to the assessee to place factual matrix before the AO and take such plea for evaluation of the AO. The AO shall examine this aspect and fresh order in accordance with law after giving proper opportunity.”
We find similar view has been taken by the co-ordinate benches in the cases of B. L. Kashyap & Sons Ltd. (supra) and VVDN Technologies Pvt. Ltd. (supra). The ld. Counsel submits that in view of these decisions the matter may be restored to the Assessing Officer to ascertain the due date for remittance of the PF/ESI contributions of employees. Considering the decisions of the co- ordinate benches referred to above we restore this issue to the file of the Assessing Officer to decide in the light of the observations made by the Tribunal in the case of Kanoi Paper & Industries Ltd. Vs. ACIT (supra). Needless to say that the Assessing Officer shall provide adequate opportunity of being heard to the assessee and the assessee is at liberty to provide all the necessary information in support of its contention.
In the result, appeal of the assessee is partly allowed for statistical purpose.
Order pronounced in the open court on : 29/11/2023.