Tribunal allows appeal on PF & ESI contributions, remands for review under Income Tax Act provisions.

The Tribunal partly allowed the appeal for statistical purposes, directing a reexamination of the issue concerning delayed payment of Provident Fund (PF) and Employee State Insurance (ESI) contributions. The Tribunal acknowledged the Supreme Court's ruling that such contributions not paid within the due date were not allowable under relevant provisions of the Income Tax Act, but granted the appellant the opportunity to argue on the allowability of the disallowed contributions under other provisions. The matter was remanded to the Assessing Officer for further review, with the appellant permitted to present additional arguments before the lower authorities.

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Issues:
Delayed payment of PF and ESI in respect of employees' contribution.

Analysis:
The appeal was filed against the order of the ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, pertaining to the assessment year 2016-17. The issue raised in the appeal was the delayed payment of Provident Fund (PF) and Employee State Insurance (ESI) in relation to employees' contributions. The appellant contended that payments were made within the grace period of 5 days in some instances, while in others, delays occurred due to late salary payments affecting the PF and ESI contributions. The appellant requested the matter to be sent back to the Assessing Officer for verification and re-adjudication.

The respondent argued that the matter was settled by the Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs CIT, where it was held that if the employees' contributions to PF and ESI were paid beyond the prescribed time under the PF Act, they would not be allowable under section 43B of the Income Tax Act. The Supreme Court ruled that such contributions not paid within the due date were not allowable under section 36(1)(va) of the Act. The provisions of section 43B were deemed inapplicable to employees' contributions to PF and ESI according to the Supreme Court.

Considering the submissions, the Tribunal acknowledged the Supreme Court's decision and directed the issue to be reexamined by the Assessing Officer. The Tribunal noted that while the Supreme Court's ruling was clear, the appellant's assertion of payments made within the grace period and delays due to late salary payments warranted further review. The appellant was granted the opportunity to present arguments on the allowability of the disallowed contributions under other relevant provisions. The Tribunal refrained from expressing an opinion on the appellant's arguments, as they had not been assessed by the lower authorities. The appellant was also given liberty to raise any necessary arguments before the lower authorities.

Consequently, the appeal was partly allowed for statistical purposes, with the direction to reexamine the issue and provide the appellant with a fair hearing. The order was pronounced in open court on 17/10/2022.

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