2020 (3) TMI 123 - HC - Income Tax

Tribunal Upholds Disallowance of Late Provident Fund Deduction, Rejects Appeal

Sequel Logostics Private Limited Versus Chief Commissioner of Income Tax

The Tribunal upheld the disallowance of the appellant's claimed deduction for employees' contribution to Provident Fund and Employees State Insurance due ... Delay in deposit of employee’s contribution to Provident Fund and ESI u/s 2(24)(x) r.w.s. 36(1)(va) - HELD THAT:- The aforesaid issue is squarely covered against the assessee by Hon’ble jurisdictional High Court’s judgment in the case of CIT vs. Gujarat State Road Transport Corporation [2014 (1) TMI 502 - GUJARAT HIGH COURT] wherein it is categorically held that in the case of delayed deposit of employees’ contribution to PF, the same will not be deductable in computing income under section 28 of the Act. The law so laid down by the Hon’ble jurisdictional High Court is binding on us. The mere fact that an appeal against the said decision is pending before the Hon’ble Supreme Court does not dilute binding nature of this judicial precedent. Also in the case of Ask Me Lab Con Services Ltd V/s. Income Tax Officer Ward [2019 (6) TMI 759 - GUJARAT HIGH COURT] by following the decision given in the case of M/s Checkmate Facility and Electronic Solutions Pvt. Ltd. [2018 (10) TMI 994 - GUJARAT HIGH COURT] held that due date of deposit of PF and ESI contribution is to be considered from close of the month, for which charges is required to be paid by the employer. - Decided against assessee Issues:1. Disallowance under Section 36(a)(va) read with Section 2(24)(x) of the Income Tax Act, 1961 for employees' contribution to Provident Fund and Employees State Insurance.2. Interpretation of due date for payment of contribution to Provident Fund and Employees State Insurance Scheme.Analysis:1. The appellant-assessee claimed a deduction of &8377; 15,86,762/- for employees' contribution to Provident Fund and Employees State Insurance under Section 36(1)(va) read with Section 2(24)(x) of the Act, 1961. However, the Assessing Officer disallowed this amount as it was not paid within the due date specified.2. The CIT(A) partly allowed the appeal, stating that the due date for payment should be considered from the date of disbursement of wages, not the month to which the wages pertain. This decision was based on a previous court ruling and resulted in a reduced disallowance of &8377; 8,03,104/-.3. The appellant, still aggrieved by the partial disallowance, appealed to the Tribunal. However, the Tribunal rejected the appeal, citing a precedent where delayed deposition of employees' contribution to PF and ESI was deemed non-deductible in income computation under Section 28 of the Act.4. The appellant's advocate highlighted a pending Supreme Court case related to a similar issue and argued for the appeal to be considered despite a delay. Referring to other court decisions, it was emphasized that the due date for deposition to PF and ESI should be interpreted in relation to the month for which wages are to be paid.5. The Court noted that the appellant's reliance on certain past decisions was not applicable to the current case, as the provisions of Section 36(i)(v)(a) of the Act were relevant here. Consequently, none of the proposed questions of law were deemed substantial, leading to the dismissal of the appeal.