Can a deduction for delayed deposit of employees contribution to PF/ESI be claimed as a deduction after Checkmate Services Decision

The Supreme Court in CHECKMATE SERVICES P. LTD. Versus COMMISSIONER OF INCOME TAX-1 - 2022 (10) TMI 617 - Supreme Court (LB) has categorically held that employees' contribution to PF/ESI is governed by section 36(1)(va) read with section 2(24)(x) of the Act, and such contribution shall be treated as income of the employer if not deposited within the due date prescribed under the relevant Acts. Section 43B applies only to employer's contribution, and not to employees' contribution. Thus, the law as settled by the Supreme Court is that delayed remittance of employees' contribution, even if deposited before filing of return under section 139(1), is not allowable as deduction. ITAT after ITAT and High Court after High Courts have ruled accordingly. A chance was taken again with the argument that the issue was debatable at the time of processing and, therefore, could not be adjusted under section 143(1)(a) in the case of M/s. SRC Projects Pvt. Ltd. Versus The ACIT, Circle- (1), Salem - 2025 (12) TMI 870 - ITAT CHENNAI. However, this too was held not tenable in view of the decisions of the co-ordinate Benches of the Tribunal, which held that such adjustment can be made under section 143(1)(a) based on information available in the tax audit report.

A little ray of Hope as a writ has been filed with The Delhi HC to examine the constitutional validity of Section 2(24)(x) r.w. Section 36(1)(va). The Delhi HC has issued notice in the Writ Petition preferred by the Assessee (Aroon Aviation Services Pvt Ltd) challenging the constitutional validity of the provisions of section 2(24)(x) read with Section 36(1)(va); Section 2(24)(x) seeks to treat the employee’s contribution deducted by the employer relating to PF and ESI etc. as income of the employer and no deduction is permissible under section 36(1)(va) to the employer if such contributions are deposited with the Government after the due date prescribed under the relevant enactment dealing with such social contributions;

Assessee has contended that in view of the SC judgment in Checkmate Services, the employers are being exposed to mandatory disallowance even in genuine/bonafide cases even if the delay is of a single day and for reasons beyond the control of the employer; The matter is listed on April 7, 2026. Till such time… Fingers crossed!