2023 (10) TMI 1425 - AT - Income Tax

Employee PF and ESIC contributions deposited after statutory due dates not allowable as deductions under section 36(1)(va)

ITAT Mumbai dismissed the assessee's appeal regarding disallowance of employees' contributions to PF and ESIC under section 36(1)(va). Following the SC ... Disallowance on account of delayed payment of employees’ contribution to Provident Fund (P.F) and Employees State Insurance Corporation (E.S.I.C) u/s 36(1)(va) - HELD THAT:- We find that the Hon'ble Supreme Court in Checkmate Services Pvt. Ltd [2022 (10) TMI 617 - SUPREME COURT] held that the payment towards employees’ contribution to P.F. and E.S.I.C., after the due date prescribed under the relevant statute is not allowable as a deduction u/s 36(1)(va) of the Act. In the present case, from the record, it is evident that the employees’ contributions to P.F. and E.S.I.C. were deposited after the due date prescribed under the relevant statute. Thus, in Checkmate Services Pvt. Ltd the grounds raised by the assessee are dismissed. Issues:Challenge to the order dated 24/09/2021 under section 250 of the Income Tax Act, 1961 for the assessment year 2018-19.Analysis:The appeal was filed by the assessee against the impugned order dated 24/09/2021 passed by the Commissioner of Income Tax (Appeals) for the assessment year 2018-19. The appeal was listed for hearing following a previous order by the Tribunal. Despite no appearance by the assessee, the appeal was disposed of ex-parte after hearing the Departmental Representative and reviewing the available material.The assessee raised grounds against the disallowance of Rs. 19,57,906 under section 36(1)(va) of the Income Tax Act, related to delayed payment of employees' contribution to PF & ESIC. The only grievance of the assessee was against this disallowance.The Hon'ble Supreme Court's decision in Checkmate Services Pvt. Ltd. v/s CIT was cited by the Revenue, stating that payments after the due date for employees' contributions are not allowable as deductions under section 36(1)(va) of the Act. The Court emphasized the distinction between employer's contributions and amounts held in trust from employees' income, highlighting the obligation to deposit such amounts on or before the due date for deduction.The record showed that the employees' contributions to PF & ESIC were indeed deposited after the prescribed due date. Therefore, following the Supreme Court's decision, the grounds raised by the assessee were dismissed, and the appeal was ultimately dismissed by the Tribunal.In conclusion, the Tribunal upheld the disallowance of Rs. 19,57,906 on account of delayed payment of employees' contribution to PF & ESIC, in line with the Supreme Court's interpretation of the relevant provisions. The appeal by the assessee was dismissed accordingly.