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of <h1>Employee PF/ESI contributions paid after due date not deductible under Section 36(1)(va) following Supreme Court precedent</h1> ITAT Jaipur dismissed the assessee's appeal regarding disallowance of delayed employee PF/ESI contributions. Following SC precedent in Checkmate Services ... Intimation u/s 143(1)(a) - delay in deposit of employees PF/ ESI contributions - HELD THAT:- The Bench has observed that the recently the Hon’ble Supreme Court has opined in the case of Checkmate Services Pvt. Ltd. [2022 (10) TMI 617 - SUPREME COURT] held that the provision of Section 43B shall not apply to employee’s contribution to PF/ESI and the due date specified u/s 36(1)(va) of the Act shall apply for determination of deductibility of employee’s contribution to PF/ESI. As decision taken by the Hon’ble Supreme Court in the case of Checkmate Services (P) Ltd. [2022 (10) TMI 617 - SUPREME COURT], Strides Arcolab Ltd [2023 (1) TMI 729 - SC ORDER] and in the case of Savleen Kaur [2023 (2) TMI 51 - ITAT DELHI] the Bench sustains the addition confirmed by the ld. CIT(A) and the appeal of the assessee is dismissed so far as to disallowance of payment made after the due date but as regards the arguments of the ld. AR for the payment disallowed which in fact is paid within the time allowed under the respective Act of PF/ESI the Bench directs the ld. AO to look into the payments of the employees contribution made by the assessee timely in respect of ESI/PF and give relief accordingly whose details are submitted by the ld. AR of the assessee after necessary verification. Issues Involved:1. Jurisdiction of CPC under Section 143(1) for making adjustments.2. Disallowance of Employees' Contribution towards PF/ESI under Section 36(1)(va) read with Section 43B.3. Timeliness of deposits of Employees' Contribution to PF/ESI.Detailed Analysis:1. Jurisdiction of CPC under Section 143(1) for Making Adjustments:The appellant argued that the CPC's assumption of jurisdiction under Section 143(1) was erroneous as the adjustments were made on a highly debatable issue, which was beyond the powers of the said section. The appellant contended that the disallowance of employee contributions to PF/ESI should not have been made by the CPC under Section 143(1)(a) as it was a debatable issue.Upon review, the tribunal noted that the Hon'ble Supreme Court's decision in Checkmate Services Pvt. Ltd. vs CIT clarified that the provisions of Section 43B do not apply to employees' contributions to PF/ESI, and the due date specified under Section 36(1)(va) must be adhered to for deductibility. The tribunal observed that the CPC's adjustment under Section 143(1) was within its jurisdiction and not beyond its powers, as it was based on the clear legal position established by the Supreme Court. Therefore, the tribunal upheld the CPC's jurisdiction to make the adjustments.2. Disallowance of Employees' Contribution towards PF/ESI under Section 36(1)(va) read with Section 43B:The core issue was the disallowance of Rs. 2,53,000/- for delayed deposits of employees' contributions to PF/ESI. The CIT(A) confirmed the AO's disallowance based on Section 43B read with Section 36(1)(va). The CIT(A) relied on the Supreme Court's decision in Checkmate Services Pvt. Ltd. vs CIT, which held that the non-obstante clause under Section 43B does not apply to employees' contributions to PF/ESI. The due date specified under Section 36(1)(va) is crucial for determining the deductibility of these contributions.The tribunal reiterated the Supreme Court's findings that there is a marked distinction between an employer's primary liability under Section 36(1)(iv) and the liability to deposit amounts received or deducted from employees under Section 36(1)(va). The latter is deemed income unless deposited on or before the due date specified in the respective Acts. The tribunal concluded that the disallowance made by the AO and confirmed by the CIT(A) was in line with the Supreme Court's judgment and upheld the disallowance.3. Timeliness of Deposits of Employees' Contribution to PF/ESI:The appellant argued that some contributions were timely deposited but were still considered late by the AO. The tribunal reviewed the detailed payment dates provided by the appellant:- Provident Fund contributions for various months of 2018 and 2019.- ESI contributions for various months of 2018 and 2019.The tribunal directed the AO to verify the actual payment dates against the due dates under the relevant laws. If any contributions were indeed deposited within the stipulated time, the AO was instructed to provide relief accordingly. The tribunal emphasized the need for accurate verification to ensure that only genuinely late deposits were disallowed.Conclusion:The appeal was disposed of with the following directions:- The disallowance of Rs. 2,53,000/- for delayed deposits of employees' contributions to PF/ESI was upheld based on the Supreme Court's decision in Checkmate Services Pvt. Ltd. vs CIT.- The AO was directed to verify the payment dates of contributions and provide relief for any timely deposits as per the relevant laws.The order was pronounced in the open court on 13/09/2023.
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