Employees' PF/ESIC contribution disallowed by ITAT under section 36(1)(va) for AY 2018-19. CIT(A)'s decision affirmed.

The ITAT upheld the disallowance of employees' contribution to PF/ESIC under section 36(1)(va) for the assessment year 2018-19. The ITAT deemed the disallowance justified based on the interpretation of relevant provisions and a Supreme Court ruling, affirming the CIT(A)'s decision.

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Issues involved:
The appeal concerns the disallowance of employees' contribution to PF/ESIC under section 36(1)(va) of the Income Tax Act, 1961 for the assessment year 2018-19.

Summary:

Issue 1 - Disallowance of employees' contribution to PF/ESIC:
The assessee, engaged in providing security services, filed an original return of income for the assessment year 2018-19, declaring total income. The Assessing Officer proposed an addition of employees' contribution to provident fund/ESI not credited to employees' accounts on time. The assessee cited judgments requesting the disallowance to be dropped. The Assessing Officer made the adjustment and raised a demand. The CIT(A) dismissed the appeal, relying on a Supreme Court decision. The ITAT heard arguments from both sides, with the AR emphasizing timely crediting to the Government account. The DR supported the CIT(A)'s decision, citing relevant case law. The ITAT referred to previous Tribunal decisions and held that the disallowance was unjustified, directing the deletion of the addition.

Issue 2 - Interpretation of relevant provisions:
The ITAT analyzed the provisions of section 36(1)(va) and the distinction between employer's contribution and employees' contribution to PF/ESIC. The ITAT referred to a Supreme Court decision emphasizing the obligation to deposit such amounts on time for deduction. The ITAT clarified that the law under section 36(1)(va) would have retrospective effect, as declared by the Supreme Court. The ITAT also discussed the processing of returns under section 143 of the Act, highlighting the scope for adjustments based on incorrect claims apparent from the return. In light of the Supreme Court ruling, the ITAT deemed the disallowance justified and upheld the CIT(A)'s decision, dismissing the appeal.

In conclusion, the ITAT upheld the disallowance of employees' contribution to PF/ESIC under section 36(1)(va) for the assessment year 2018-19, based on the interpretation of relevant provisions and the Supreme Court ruling, affirming the decision of the CIT(A).

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