AKRITI JEWELCRAFTZ (P) LTD.,DELHI vs. DCIT, CIRCLE-1(1), NEW DELHI

ORDER

Per Dr. B. R. R. Kumar, Accountant Member:

“1. On the facts, in the circumstances of the case and in law, the impugned Order under section 154/250 of the Act is bad in law. 2. That the Hon'ble CIT(Appeals) erred on facts and in law a) In disallowing INR 5,32,812/- u/s 36(1)(va) of the Act on account of delayed payment of Employees contribution to PF and ESI without appreciating the Akriti Jewelcaftz (P) Ltd. fact that the payments have been made before the due date of filing the return u/s 139(1) of the Act. b) In not appreciating the decision of Hon'ble Supreme court in case of CIT vs. Vinay Cement Ltd. [2007] (213 CTR 268) (SC) and Hon'ble High Court of Delhi in the case of CIT Vs. AIMIL Limited (321 ITR 508) wherein the similar issue of delay in deposit of employee contribution to PF/ESI etc. has been decided in favour of the assessee.

3. The Hon'ble CIT(Appeal) erred in not appreciating the facts and law that amendments in section 36(1)(va) as well as Section 43B of the Act vide Finance Act, 2021 is applicable from 01-04-2021 onwards i.e., prospectively.

4. The Hon'ble CIT(Appeal) erred in law by not appreciating the fact that when adjustment of a debatable issue (disallowance of delayed payments of employees' contribution to PF and ESI) can be done u/s 143(1) then the same issue is also rectifiable u/s 154 of the Act.”

Akriti Jewelcaftz (P) Ltd. Court dismissed the challenge against this order of AO. In appeal, the court noted that the Hon’ble Kerala High Court has also ruled in favour of revenue on this issue whereas the Hon’ble High Courts of Bombay, Himachal Pradesh, Calcutta, Guwahati and Delhi have favoured the interpretation beneficial to the assessee. The Hon’ble Apex Bench effectively reversed the judgment in Commissioner of Income Tax vs. Alom Extrusions Ltd. (1 SCC 489) relied upon by the assessee.

"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 Akriti Jewelcaftz (P) Ltd. 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."