TaxTMI 
TaxTMI 
TaxTMI 
Some of earlier articles on the same subject by the same author on this website are as follows:
Section 2(24) (x) deeming contributions of employees as income appears to be ultravirse the Constitution of India (COI) and purposes of the Income-Tax Act (ITA). Dated:- July 27, 2013
By: - CA DEV KUMAR KOTHARI
The article is still available on the above link. Readers can refer the same. For this reason contents of the article are not repeated.
In the above article published more than 13 years ago author discussed various provisions of the Constitution of India (COI) and also aspects related with statutory and other liabilities, liabilities as per accounts and auditing and liability recognized under specific enactments relating to EPF, ESI and other such funds.
Why this was not challenged?
A question arises that why this provision was not challenged as being unconstitutional.
The answer to this question can be found in the following ground realities:
Most of such payments are made by employers within due date because a delay can be very costly due to levy of interest, penalty and due to provisions for imprisonment etc. under respective laws.
Even if delay occurred, it was understood that the same will be allowed if paid within due date to file Return of Income and such deductions were allowed by Assessing Officers and in case of disputes by appellate authority or courts.
In fact, in most of cases delayed payment was allowed on payment as per self-assessment in ITR and in intimation and also in many scrutiny assessments.
Disputes arose only in cases where sum was large and in scrutiny assessments high-pitched assessments were made or thee were audit objections in this regard.
Some assesses where sum disallowed is small and such disallowance is rare, assesses choose to disallow in self-assessment or if disallowed by the AO, they used to pay tax instead of indulging into costly litigation.
Why now it is desired to challenge the provision?:
A. Ruling of the Supreme Court leading to various actions by department
Honorable Supreme Court has held that payments for employees contributions if not paid within due date as per respective provisions of relevant laws, the same will not be allowable. Vide
The department is now exploring possibilities and taking steps for rectification, reassessment, revision etc. to disallow/ seek disallowance ( in case of settled matters in appeal) on the basis that law as declared by the Supreme Court is in operation since inception. Therefore, many proceedings are possible and assesses who claimed deduction based on view that payments made within due date to file ITR is allowable are not facing contingencies and litigation on this issue.
As discussed in several articles by the author, the judgment in case of Checkmate deserve a reconsideration for several reasons.
B. In appeal legality cannot be considered by Courts:
It is well settled that unless a provision is challenged on ground of being unconstitutional, even honorable Supreme Court cannot consider its validity in appeal. Even the Supreme Court has to decide appeals as per law as exist, on presumption that the law as written is valid.
For example, in the following case we find ruling in this regard:
Union of India and Others Versus S. Muthyam Reddy - 1999 (10) TMI 2 - Supreme Court
In this case appeal related to provisions of section 2(1A), inserted with effect from April 1, 1970 which clearly declares that the revenue derived from land shall not include and shall be deemed never to have included any income arising from the transfer of any land referred to in section 2(14)(iii)(a) or (b).
The upshot of the same is that income derived from sale of such agricultural lands cannot be treated as 'agricultural income' .
On the aspect of validity of amendment, honorable Supreme Court observed and held as follows:
“ Inasmuch as there is no challenge to the validity of the Explanation to section 2(1A) inserted into the Act by the Finance Act, 1989, we are afraid, we cannot examine the correctness of the said submission. We leave open this question to be raised for consideration in an appropriate proceeding.”
Therefore, to avoid contingencies and also hardship due to apparently invalid provision, it is desirable to challenge provisions of S.. 2.24.(x) of Income –tax Act, 1961 as being beyond power to impose income tax of belated payment of employees contributions which have to be paid and is not income at all but has wrongly been deemed income.