2023 (4) TMI 1281 - AT - Income Tax

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 ... Late payment of PF and ESIC contribution but deposited before the due date of filing of the Income Tax Return - intimation passed u/s. 143(1) - HELD THAT:- We note that identical issue is recently decided against assessee by the Co-ordinate Bench in M/s Prashanti Engineering Works (P) Ltd. [2023 (3) TMI 729 - ITAT INDORE] after taking into account the latest decision of Hon’ble Supreme Court in Checkmate Services (P.) Ltd. [2022 (10) TMI 617 - SUPREME COURT] employees’ contributions to PF / ESI paid after due date under PF / ESI laws is not an allowable deduction in computing taxable income of business and the revenue-authorities have rightly disallowed the same. Therefore, we uphold the action of lower-authorities in making/confirming the impugned disallowance. Decided against assessee. 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.