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March 30, 2023

Only if the employer deposits the employees’ part prior to the due date is a deduction under Section 36(1)(va) available

Only if the employer deposits the employees’ part prior to the due date is a deduction under Section 36(1)(va) available

Fact and issue of the case

This appeal filed by the assessee is directed against the order dated 13.08.2021 passed by the Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi relating to Assessment Year 2019-20.

Brief facts of the case as culled out from the material on record are as under :-

Assessee is a financial institution stated to be engaged in the business of providing long term finance for construction or purchase of houses in India for residential purposes. Assessee filed its original return of income on 31.10.2019 for A.Y. 2019-20 declaring total income of Rs.11,42,86,93,010/-. In the intimation issued u/s 143(1) of the Act by CPC, Bangalore vide Identification No. CPC/1920/A6/2000151348 dated 06.07.2020, the total income was determined at Rs.11,43,03,92,370/-. Aggrieved by the intimation issued u/s 143(1) of the Act, assessee carried the matter before CIT(A) who vide order dated 13.08.2021 in Appeal No.CIT(A), Delhi-2/10100/2020-21 dismissed the appeal of the assessee. Aggrieved by the order of CIT(A), assessee is now in appeal and has raised the following grounds:

That the learned Commissioner of Income Tax (Appeals) has further erred both in law and on facts in disposing of the appeal ex-parte without granting any fair opportunity of being heard to the appellant.

On facts and in the circumstance of the matter Ld. CIT(A) National Faceless Appeal Centre (NFAC) has grossly erred in confirming the disallowance of Rs. 16,99,358/- made u/s 36(va) r.ws 2(24)(x) of the Income Tax Act, 1961 (the Act) for delayed deposit of employees’ contribution towards PF. Appellant prays that such delayed contribution being covered within the provisions of sec 438 of the Act are allowable if paid before the due date of filing of the return, and thus addition made deserve to be deleted;

That Ld. CIT(A) has further erred in confirming the disallowance, based on the amendments made in Sec 36(1) and sec 43B of the Act by The Finance bill 2020-­21, when the said amendments are prospective and applicable wef 01.04.2021. Appellant prays such reliance placed being unjustified; addition made deserves to be deleted;

That Ld. CIT(A) has also erred in not following the decisions of Hon’ble Supreme Court and jurisdictional High courts on the matter that are binding on him. Appellant prays that such disallowance being unwarranted, the addition made deserves to be deleted.

That the appellant craves, leave to add, alter, modify, change, amend or delete, any of the grounds of appeal before or at the time of hearing of appeal.”

Observation of the court

We have heard the rival submissions and perused the material available on record. The issue in the present ground is with respect to the disallowance of delayed deposit of employee’s contribution of PF & ESI in the intimation passed u/s 143(1) of the Act. We find that Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. (supra) has held that the contribution by the employees to the relevant funds is the employer’s income u/s 2(24)(x) of the Act and the deduction for the same can be allowed only if such amount is deposited in the employee’s account in the relevant fund before the date stipulated under the respective Acts. Thus the deduction u/s 36(1)(va) of the Act can be allowed only if the employees’ share in the relevant funds is deposited by the employer before the due date stipulated in respective Acts. Further the Co-ordinate Bench of Tribunal of ITAT, Delhi Bench on identical issue decided the issue. We find that identical issue of disallowance of delayed deposit of PF/ESI dues in the intimation issued u/s 143(1) of the Act arose before the Pune Bench of Tribunal in the case of Cemetile Industries vs. ITO in ITA No.693/PUN/2022 and others. The Co-ordinate Bench of Tribunal vide order dated 23.11.2022 has observed as under:

We have heard………….. It is undisputed that the audit report filed by the assessee indicated the due dates of payment to the relevant funds under the respective Acts relating to employee’s share and the said amounts were deposited by the assessee beyond such due dates but before the filing of the return u/s 139(1) of the Act. The case of the assessee before the authorities below has been that such payments before the due date as per section 139(1) of the Act amounts to sufficient compliance of the provisions in terms of section 43B of the Act, not calling for any disallowance. Per contra, the Department has set up a case that the disallowance is called for because of the per se late deposit of the employees’ share beyond the due date under the respective Act and section 43B is of no assistance.

Before us, Learned AR has not pointed to any contrary binding decision on the issue nor has placed on record to demonstrate that the order of Pune Bench of Tribunal in the case of Cemetile Industries (supra) has been set aside, stayed or overruled by higher judicial forum. In such a situation, we following the reasoning given by the ITAT of Pune Benches and for similar reasons find no reason to interfere with the order of CIT(A) and thus the grounds of assessee are dismissed.

In the result, appeal of assessee is dismissed.

Order pronounced in the open court on 16.03.2023

Read the full order from here



In the result, appeal of the assessee is allowed and ruled in favour of the assessee

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