ITAT directs Assessing Officer to allow disallowed amount, emphasizes importance of cheque deposit date

The ITAT allowed the Assessee's appeal, directing the Assessing Officer to allow the disallowed amount of Rs. 5,76,522. The decision emphasized the significance of the date of deposit of cheques for determining the payment date under section 36(1)(va) of the IT Act, aligning with established legal principles and precedents.

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Issues:
1. Disallowance of Employees' Contribution to PF and ESI.
2. Interpretation of Section 36(1)(va) of the Income Tax Act, 1961 regarding the date of payment.

Analysis:
Issue 1: The Assessee appealed against the disallowance of Rs. 5,76,522 on account of delayed deposit of Employees' Contribution to PF and ESI. The Assessing Officer disallowed the amount as the deposits were made after the due date specified in section 36(1)(va) of the Income Tax Act. The Assessee argued that the delay was due to the clearance of cheques, not the actual deposit date. The CIT(A) upheld the disallowance. The ITAT considered the issue and analyzed whether the date of deposit or clearance of cheques is relevant for section 36(1)(va) of the IT Act. The ITAT referred to legal precedents and held that the date of deposit of cheques in the bank should be considered as the date of payment, not the date of clearance. Consequently, the disallowed amount was allowed under section 36(1)(va) of the IT Act.

Issue 2: The core issue was the interpretation of Section 36(1)(va) of the IT Act regarding the relevant date for payment. The ITAT examined legal precedents, including the decision of the Madras High Court in a similar case. The Madras High Court ruled that the date of payment relates back to the date of receipt of cheques once they are encashed, not the date of clearance. The Supreme Court's decision further supported this view. The ITAT applied this interpretation to the present case and concluded that the date of deposit of cheques in the bank should be considered for section 36(1)(va) of the IT Act, leading to the allowance of the disputed amount.

In conclusion, the ITAT allowed the Assessee's appeal, directing the Assessing Officer to allow the disallowed amount of Rs. 5,76,522. The decision emphasized the significance of the date of deposit of cheques for determining the payment date under section 36(1)(va) of the IT Act, aligning with established legal principles and precedents.

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