OMAXE WORLD STREET PRIVATE LIMITED,FARIDABAD vs. ACIT,CIRCLE-2(1), DELHI

The captioned appeal relates to Assessment Years 2017-18 involving issue of disallowance of expenditure towards employees contribution to ESIC/PF under Section 36(1)(va) of the Act.

When the matter was called for hearing, none appeared for the assessee. Under the circumstances, we proceed ex-parte in the absence of the assessee.

Ld. Sr.DR for the Revenue, on its part, contended that Assessing Officer has rightly made addition of Rs.1,65,347/- to the returned income of the assessee on account of late deposits of employees’ contribution to PF/ESIC while processing the return of income under Section 143(3) of the Act. The appeal of the assessee has been rightly rejected and confirmed by the CIT(A) in the light of the judgment rendered in the case of Checkmate Services Pvt. Ltd. vs. CIT (2022) 143 taxmann.com 178 (SC). The ld. Sr.DR for the Revenue submitted that even for the Assessment Year 2017-18 in question, belated deposit of employees’ contribution held in trust by the employer assessee are to be reckoned as taxable income under Section 2(24)(X) r.w. Section 43B and deduction under Section 36(1)(va) of the Act would not be permissible.

The issue towards taxability of belated employees’ contribution to PF/ESIC is no longer res integra in the light of the judgment of Hon’ble Supreme Court in the case of Checkmate Services (supra). The Hon’ble Supreme Court in this case observed that Income Tax Act differentiates between the employees’ contribution and employer contribution to the PF/ESIC Act. While in respect of employer’s contribution, Section 43B is applicable but however with respect of employees’ contribution, the conditions specified in Section 36(1)(va) is applicable and Section 43B(b) does not cover employees’ contribution deducted by employer from salary of the employees. In parity with the view taken by Co-ordinate Benches on the issue, on first principles, we do not see any merit in the case of the assessee for impermissibility of such disallowances under Section 143(3) of the Act. The assessee has not brought any material contrary to facts noted by the revenue authorities.

In the result, the appeal of the assessee is dismissed. Order was pronounced in the open Court on 23/08/2023