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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’, NEW DELHI
Before: Sh. Kul BharatDr. B. R. R. Kumar
ORDER Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by assessee against the order of ld. CIT(A)-26, New Delhi dated 06.12.2021.
Following grounds have been raised by the assessee:
“1. That ld. CIT(A) is erred under the law while confirming the order as framed by CPC u/s 143(1) of the Act after making adjustment of impugned prima facie adjustments u/s 143(1) (a) of the Act in the returned income of the appellant.
2. That the ld. CIT(A) is not justified in law and facts while confirming the adjustment of Rs.12,08,174/- u/s 36(1)(va) of the Act as made by CPC without appreciating the fact that the appellant has duly deposited all employee contribution to PF/ESI before due date of filing of ITR u/s Dhanya Promoters Pvt. Ltd. 139(1) and the amendment as made in the section by Finance Bill 2020 is effective from A.Y. 2020-21. 3. That the ld. CIT(A) is not justified in law and facts while confirming the adjustment of Rs.3,79,606/- u/s 37 of the Act as made by CPC without appreciating the fact that the interest as paid by the assessee on late deposit of TDS is allowable business expenditure u/s 37(1) of the Act.” PF & ESI Payment:
The matter has attained finality by the order of the Hon’ble Supreme Court wherein it was observed that employers have to deposit the employee's contribution towards EPF/ESI on or before the due date for availing deduction. In the cases before the Hon’ble Apex Court, the employers had belatedly deposited their employees' contribution towards the EPF and ESI, considering the due dates under the relevant provisions of the Act. The Assessing Officer ruled that by virtue of Section 36(1)(va) read with Section 2(24)(x) of the IT Act, such sums received by the appellants constituted "income". It was held that those amounts could not have been allowed as deductions under Section 36(1)(va) of the IT Act when the payment was made beyond the relevant due date under the respective acts. The Income Tax Appellate Tribunal and later the Gujarat High 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.
The Hon’ble Apex Court in the case of Checkmate Services P. Ltd. vs. Commissioner Of Income Tax-I in CA No. 2833/2016 vide order dated 12.10.2022 observed that there is a marked 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 Dhanya Promoters Pvt. Ltd. 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."
As the issue of payment of employees contribution towards the PF has been ruled against the assessee by the Hon’ble Supreme Court. Hence, the appeal of the assessee on this ground is liable to be dismissed.
Ground No.3 Late Deposit of TDS:
This issue stands covered by the order of the Tribunal in the case of M/s Hebe Infrastructure Pvt. Ltd. Vs. ACIT in vide order dated 23.08.2022. The relevant part of the said order is as under:
“8. Heard the parties perused the orders of the authorities below. On perusal of the order of the ld. CIT (Appeals) it is noticed that the disallowance made by the CPC, Bangalore in respect of interest paid by the assessee on delayed remittance of TDS placing reliance on the decision of the Jaipur Bench in the case of M/s. Govindam Clearing Agencies Pvt. Ltd. Vs. DCIT in dated 1.09.2020. On the other hand, we observe that the assessee placed reliance on the decision of the Kolkata Bench in the case of DCIT Vs. M/s. Narayani Ispat Pvt. Ltd., Kolkata (supra). On perusal of both the decisions of the Tribunal, we observe that there are divergent views on the issue. In our opinion, whether interest paid by the assessee on delayed remittances of TDS is allowable expenditure or not is certainly a debatable issue and, therefore, is outside the scope of purview of the provisions of section 143(1) of the Act. Thus, the Dhanya Promoters Pvt. Ltd. CPC, Bangalore/Assessing Officer is directed to delete the disallowance made in respect of interest paid on delayed remittances of TDS while passing the return under section 143(1) of the Act. Grounds raised by the assessee are allowed.”
In the absence of any change in the factual matrix and legal preposition, the appeal of the assessee on this ground is allowed.
In the result, the appeal of the assessee is partly allowed. Order Pronounced in the Open Court on 19/06/2023.