Employer's liability for late PF and ESIC remittance clarified by Supreme Court.

The appeal of the assessee against the addition made by the Assessing Officer on account of late remittance of employees' contribution to PF and ESIC was dismissed. The Supreme Court clarified the distinction between employer's and employee's contributions, holding that non-compliance with statutory requirements regarding employees' contributions does not absolve the employer from liability. Citing previous decisions, including Checkmate Services (P.) Ltd. and Harrisons Malayalam Ltd., the court upheld the disallowance of deductions for late payments of employees' contributions. The dismissal of the appeal was in line with Supreme Court rulings and precedents.

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Issues Involved:
The appeal against the order of the Commissioner of Income Tax (Appeals)-2, Ahmedabad, regarding addition on account of late remittance of employees' contribution to P.P. & E.S.I.C. u/s. 36(1)(va) r.w.s. 2(24)(x) for the assessment year 2016-17.

Summary:
The assessee appealed against the addition made by the Assessing Officer on account of late remittance of employees' contribution to PF and ESIC u/s 36(1)(va) of the Act, which was confirmed by the Ld. CIT(Appeals). The issue was clarified by the Supreme Court in the case of Checkmate Services (P.) Ltd. for assessment years prior to AY 2021-22, emphasizing the distinction between the nature of employer's and employee's contributions. The Supreme Court held that the non obstante clause under section 43B could not apply to employee's contributions held in trust, and failure to deposit such contributions on time would not absolve the employer from liability. The decision was further supported by the case of Harrisons Malayalam Ltd. where deduction under section 36(1)(va) was disallowed for late payment of employees' contributions. The ITAT also upheld the disallowance in a recent case involving belated payments of ESI and PF contributions. Previous decisions by the Gujarat High Court and other tribunals were cited to support the dismissal of the appeal based on non-compliance with the statutory requirements regarding employees' contributions.

Decision:
In line with the Supreme Court rulings and precedents, the appeal of the assessee was dismissed, affirming the addition on account of late remittance of employees' contribution to PF and ESIC.

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