Appeal dismissed for delayed PF/ESI deposits. Employers must adhere to contribution timelines despite wage payment.

The appeal was dismissed, and the disallowance made under Section 36(1)(va) read with Section 2(24)(x) for delayed deposit of employees' contribution to PF/ESI was upheld. The Tribunal emphasized the retrospective application of the Supreme Court's decision, ruling that the employer must deposit contributions within the specified time frame as per welfare enactments, regardless of the actual payment of wages.

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Issues Involved:

1. Disallowance made under Section 36(1)(va) read with Section 2(24)(x) of the Income Tax Act for delayed deposit of employees' contribution to PF/ESI.

Summary:

Issue 1: Disallowance under Section 36(1)(va) read with Section 2(24)(x) of the Income Tax Act

The sole issue in this appeal concerns the disallowance made by the Assessing Officer/Central Processing Centre (CPC) under Section 36(1)(va) read with Section 2(24)(x) of the Income Tax Act due to the delayed deposit of employees' contribution to PF/ESI beyond the due date specified under the respective welfare enactments.

The Hon'ble Supreme Court in Checkmate Services Pvt. Ltd. Vs. CIT (2022) 143 taxmann.com 178 (SC) clarified that the deduction under Section 36(1)(va) for delayed deposit of employees' contribution to PF cannot be claimed even if deposited within the due date of filing the return as per Section 43B. The amounts received or deducted by an employer under Section 36(1)(va) are deemed income by virtue of Section 2(24)(x) unless deposited by the due date specified under the respective enactments.

Issue 2: Retrospective Application of Supreme Court Decisions

The law declared by the Supreme Court has retrospective effect unless stated otherwise. Previous decisions of High Courts favoring the assessee are considered non-existent or wiped out by the Supreme Court's latest decision. This principle is supported by various Supreme Court rulings, including Ramdas Bhikaji vs. Sadananda, Manoj Parihar vs. State of Jammu & Kashmir, PV George vs. State of Kerala, and Assistant Commissioner vs. Saurashtra Kutch Stock Exchange Ltd.

Issue 3: Determination of Due Date for Deposit of Employees' Contribution

The assessee argued that the due date for depositing employees' contribution to PF should be calculated from the date of actual disbursement of salary. The assessee contended that the due date should be the 15th of the month following the month in which the salary is disbursed, not the month in which the salary is due. The assessee's counsel submitted that if the salary is disbursed on the 7th of the subsequent month, the due date for PF contribution should be the 15th of the following month.

Issue 4: Legal Provisions and Interpretation

The relevant provisions of the Employees Provident Funds Miscellaneous Provisions Act, 1952, and the Employees' Provident Fund Scheme, 1952, were examined. The employer is required to deduct the employee's contribution from wages and deposit it along with the employer's contribution within 15 days of the close of every month. This interpretation aligns with the purpose of the welfare statute, which aims to provide social security to employees.

Issue 5: Judicial Precedents and Tribunal Decisions

The Tribunal referred to various judicial precedents, including the Supreme Court's decision in Organo Chemical Industries vs. Union of India and the Madras High Court's decision in Presidency Kid Leathers (P) Ltd. vs. Regional Provident Fund. These decisions emphasized the employer's responsibility to deposit contributions within the specified time frame, irrespective of the actual payment of wages.

The Tribunal concluded that the assessee's contention regarding the due date for PF contribution lacks merit. The issue is squarely covered against the assessee by the decisions of the Supreme Court and various High Courts. Accordingly, the appeal of the assessee was dismissed.

Conclusion:

The appeal was dismissed, and the disallowance made under Section 36(1)(va) read with Section 2(24)(x) for delayed deposit of employees' contribution to PF/ESI was upheld. The Tribunal emphasized the retrospective application of the Supreme Court's decision and the employer's obligation to deposit contributions within the specified time frame.

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