Employee PF and ESIC contributions paid after statutory due dates but before IT return filing are not deductible

ITAT Indore upheld disallowance of PF and ESIC contributions paid after statutory due dates but before income tax return filing deadline. Following SC precedent in Checkmate Services and coordinate bench decision in Prashanti Engineering Works, the tribunal ruled that employee contributions to PF/ESI paid beyond statutory due dates are not allowable deductions for computing business taxable income. Revenue authorities correctly disallowed these late payments despite being made before IT return due date. Appeal dismissed against assessee.

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Issues involved: Late payment of PF and ESIC contribution by the assessee but deposited before the due date of filing of the Income Tax Return and its disallowance in the intimation passed u/s. 143(1).

Summary of Judgment:

Issue 1: Disallowance of PF and ESIC contribution in the intimation u/s. 143(1)

The appeal was filed against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, regarding the late payment of PF and ESIC contribution by the assessee. The main contention was whether the disallowance made under section 36(1)(va) in the intimation u/s. 143(1) was justified, even though the payments were made before the due date of filing the Income Tax Return for the Assessment Year 2018-19.

Details:
- The assessee, an ex-army person and Proprietor of Security Agency Services, declared total income of Rs. 43,80,110/- for A.Y. 2018-19, with a disallowance of Rs. 36,76,118/- for late payment of PF and ESIC.
- The NFAC confirmed the disallowance made under section 36(1)(va) and dismissed the appeal.
- The assessee contended that the disallowance was unjustified and debatable, citing a Co-ordinate Bench Decision and Supreme Court judgment in a similar case.
- The Revenue supported the order passed by the Lower Authorities.

Judgment:
- The ITAT, after considering various judicial rulings and the legal provision of section 143(1) of the Act, upheld the disallowance of employees' contributions to PF / ESI paid after the due date under PF / ESI laws.
- The ITAT referred to the decision of the Hon'ble Supreme Court in Checkmate Services Private Ltd and Harrisons Malayalam Ltd, among others, to support the disallowance.
- The ITAT dismissed the assessee's appeal, concluding that the revenue authorities were correct in disallowing the late payments of PF and ESIC contributions.

Conclusion:
The appeal filed by the Assessee was dismissed, and the action of the lower authorities in disallowing the late payments of PF and ESIC contributions was upheld.

Separate Judgment by the Co-ordinate Bench of ITAT, Indore:
The Co-ordinate Bench of ITAT, Indore, in a similar case involving M/s Prashanti Engineering Works (P) Ltd. Vs. ADIT, CPC, Bangalore, held that the disallowance of contributions under section 36(1)(va) in the intimation u/s. 143(1) was justified. The decision was based on the latest Supreme Court judgment in Checkmate Services Private Ltd and other relevant legal provisions.

Note: The judgment highlighted the importance of timely payment of PF and ESIC contributions and the implications of late payments on the allowable deductions for businesses.

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