AMAR UDYOG,FARIDABAD vs. ITO, WARD-1(1), FARIDABAD

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘A’, NEW DELHI Before Sh. C. M. Garg, Judicial Member Dr. B. R. R. Kumar, Accountant Member Asstt. Year : 2018-19 Amar Udyog, Vs Income Tax Officer, Plot No. 76, Sector-25, Ward-1(1), Faridabad, Haryana-121001 Faridabad (APPELLANT) (RESPONDENT) PAN No. AAFFA0542C Assessee by : Sh. Aman Garg, CA Revenue by : Sh. Kanv Bali, Sr. DR Date of Hearing: 17.08.2023 Date of Pronouncement: 31.08.2023 ORDER Per Dr. B. R. R. Kumar, Accountant Member:

The present appeal has been filed by the assessee against the order of National Faceless Appeal Centre (NFAC), Delhi dated 12.08.2021.

“1. That having regard to the facts and circumstances of the case, Ld. CIT, National Faceless Appeal Centre (NFAC) has erred in law and on facts in confirming the action of Ld. AO in making aggregate addition of Rs.47,98,663/- on account of employee's contribution to ESI and EPF and without observing the principles of natural justice and without appreciating the facts and circumstances of the case and latest law in this regard.

2. That in any case and in any view of the matter, action of Ld. CIT, NFAC in confirming the action of Ld. AO in making aggregate addition of Rs.47,98,663/- on account of employee's contribution to ESI and EPF, is bad in law and against the facts and circumstances of 2 Amar Udyog the case and the same is not sustainable on various legal and factual ground.

3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in charging interest u/s 234B and 234C of Income Tax Act, 1961.”

3 Amar Udyog distinction between the nature and character of the two amounts viz., the employers’ contribution and employees’ contribution required to be deposited by the employer. The first one is the employer’s liability is to be paid out of its income whereas the second is deemed an income, by definition, since it is the deduction from the employees’ income and held in trust by the employer. The Hon’ble Apex Court held as under:

In the opinion of this Court, the reasoning in the impugned judgment that the non-obstante clause would not in any manner dilute or override the employer's obligation to deposit the amounts retained by it or deducted by it from the employee's income, unless the condition that it is deposited on or before the due date, is correct and justified. The non-obstante clause has to be understood in the context of the entire provision of Section 43 B which is to ensure timely payment before the returns are filed, of certain liabilities which are to be borne by the assessee in the form of tax, interest payment and other statutory liability. In the case of these liabilities, what constitutes the due date is defined by the statute. Nevertheless, the assessees are given some leeway in that as long as deposits are made beyond the due date, but before the date of filing the return, the deduction is allowed. That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees' contributions- which are deducted from their income. They are not part of the assessee employer's income, nor are they heads of deduction per se in the form of statutory pay out. They are others' income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. If such interpretation were to be adopted, the non- obstante clause under Section 43 B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee's contribution on or before the due date as a condition for deduction.

4 Amar Udyog 5. Since, the assessee has argued that the deposit has been made within the prescribed “due date”, we remand the matter to the file of the Assessing Officer to examine the issue for the relevant period and take a decision in accordance with the judgment of Hon’ble Supreme Court in the case of Checkmate Services P. Ltd. vs. Commissioner Of Income Tax-I (supra).