Delayed provident fund and ESI contributions remained disallowable despite payment before the income-tax return deadline.
Employees' contributions to provident fund and ESI deposited after the statutory due date under the welfare laws were treated as liable to disallowance under section 36(1)(va), even if paid before the return-filing deadline. The Tribunal read section 38 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 to require deduction from wages before payment and deposit within fifteen days of the close of the relevant month. Relying on Checkmate Services Ltd. and its own coordinate Bench view, it rejected the contention that the due date should run from actual salary disbursement and sustained the disallowance.
Issues: Whether the employees' contribution to provident fund and ESI, though deposited after the due date under the relevant labour laws, could be disallowed under section 36(1)(va) of the Income-tax Act, 1961 notwithstanding deposit before the due date for filing the return and the assessee's reliance on clause 38 of the Employees Provident Funds Scheme, 1952 and section 38 of the Employees Provident Funds and Miscellaneous Provisions Act, 1952.
Analysis: The amount in dispute represented employees' contributions to PF and ESI which were not deposited within the statutory due dates under the relevant welfare enactments. The plea that the time for deposit should be computed from the month in which salary was actually disbursed was rejected by reading section 38 of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 to mean that the employer must deduct the employees' contribution before paying wages and deposit it within fifteen days of the close of the relevant month. The Tribunal also relied on the binding effect of the Supreme Court decision in Checkmate Services Ltd. and followed its earlier coordinate Bench view that delayed deposit of employees' contribution attracts disallowance under section 36(1)(va), and that return-filing timelines do not cure the default.
Conclusion: The disallowance of employees' contribution to PF and ESI was upheld and the assessee's contention regarding computation of the due date from salary disbursement was rejected.
Final Conclusion: The appeal failed on the only substantive issue and the addition made on account of employees' contribution to PF and ESI remained sustained.
Ratio Decidendi: Employees' contributions to PF and ESI must be deposited within the statutory due date under the respective welfare law, and delay is not cured merely because payment was made before the due date for filing the income-tax return.
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AI Drafter ✕
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