2023 (2) TMI 163 - AT - Income Tax

Employer's Delayed Provident Fund Contribution Disallowed, Tribunal Upholds Ruling

The Tribunal upheld the CIT(A)'s decision to disallow the delayed deposit of employees' contributions to Provident Fund and Employee State Insurance, ... Delayed deposit of employee’s contribution of PF & ESI - HELD THAT:- We find that Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. [2022 (10) TMI 617 - SUPREME COURT] has held that the contribution by the employees to the relevant funds is the employer’s income u/s 2(24)(x) of the Act and the deduction for the same can be allowed only if such amount is deposited in the employee’s account in the relevant fund before the date stipulated under the respective Acts. Thus the deduction u/s 36(1)(va) of the Act can be allowed only if the employees’ share in the relevant funds is deposited by the employer before the due date stipulated in respective Acts. In the present case, the fact that the employees contribution has been deposited by the assessee after the due date stipulated for respective months is not in dispute. In such a situation we are of the view that the decision of Hon’ble Apex Court in the case of Checkmate Services (Supra) is squarely applicable. Appeal of the assessee is dismissed. Issues: Disallowance of employees' contribution to Provident Fund/Employee State Insurance Funds.Analysis:The appeal pertains to the disallowance of delayed deposit of employees' contribution to Provident Fund (PF) and Employee State Insurance (ESI) by the Assessing Officer (AO). The assessee, a company engaged in infrastructure development, filed its return for A.Y. 2016-17, declaring total income of Rs. 94,99,600/-. Subsequently, the assessment was framed under section 143(3) determining the total income at Rs. 1,05,57,730/-. The AO disallowed Rs. 4,70,491/- under section 36(1)(va) r.w.s 2(24)(x) due to delays in depositing employees' contributions to PF & ESI. The assessee appealed to the Ld. CIT(A), who upheld the AO's decision. The assessee then approached the Tribunal challenging the CIT(A)'s order.During the Tribunal hearing, the assessee's counsel sought an adjournment, which was rejected considering the issue's coverage by a decision of the Hon'ble Apex Court. The Tribunal proceeded to hear the case. The Tribunal noted that the Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. clarified that the deduction under section 36(1)(va) can only be allowed if the employees' share in the relevant funds is deposited by the employer before the due date stipulated in the Acts. As the employees' contributions were deposited after the due date in the present case, the Tribunal found the decision of the Hon'ble Apex Court applicable. Consequently, the Tribunal upheld the CIT(A)'s order, dismissing the assessee's appeal.In conclusion, the Tribunal dismissed the appeal of the assessee, emphasizing that the deduction under section 36(1)(va) for employees' contributions to PF & ESI can only be allowed if deposited before the due date stipulated in the Acts. The Tribunal's decision was based on the interpretation of relevant legal provisions and the precedent set by the Hon'ble Supreme Court, as highlighted in the case of Checkmate Services Pvt. Ltd.