2025 (2) TMI 1508 - AT - Income Tax

Timely deposit requirement: late deposit of employee statutory contributions bars deduction; other issues remitted for fresh adjudication.

The note addresses three issues: whether employee contributions to provident fund and ESI deposited after the statutory due date are deductible - applying ... Disallowance of provident fund Contribution - payment of which, there was a purported delay - employees contribution towards PF & ESI, deposited the same beyond the due date - HELD THAT:- CIT(A) in dismissing the appeal of the assessee on this ground has discussed the judgment passed in the case of Checkmate Services Pvt. Ltd. [2022 (10) TMI 617 - SUPREME COURT (LB)] - It is not in dispute that the assessee has deposited a sum received from the employee’s contribution towards PF & ESI beyond the due date. Decided against assessee. Remuneration to its director as calculated by way of commission on its sale - submission of the A.R. is that in the present case is that assessee paid remuneration to its directors and the recipient Directors returned the same as their income under head salary. He filed computation of income of two Directors. His submission is that one of the Director Mya Das has died - HELD THAT:- Keeping in view the admitted fact that the paper which has been filed by the Ld. A.R before us had not been filed before the lower authorities, we are in this view to restore the appeal of the assessee before the Ld. A.O to pass a fresh order after going over the paper filed by the assessee. Issues: (i) Whether the employer's contribution amounting to Rs. 2,68,887 received from employees towards PF & ESI and deposited beyond the due date is allowable as deduction; (ii) Whether the disallowance of Rs. 2,54,37,984 paid to directors as commission/salary is sustainable; (iii) Whether the disallowance of Rs. 18,07,384 for failure to deduct tax at source under relevant provisions is sustainable.Issue (i): Whether the employer's contribution received from employees towards provident fund and ESI deposited beyond the due date is deductible in computing business income.Analysis: The Tribunal examined the record of dates of receipt and dates of deposit and noted that the contributions were deposited beyond the statutory due dates. The Tribunal considered the reasoning of the lower authorities and the apex court judgment referred to by the parties in relation to timing of deposit and the permissibility of deduction.Conclusion: The addition of Rs. 2,68,887 on account of employee contributions to PF & ESI deposited beyond the due date is upheld (against the assessee).Issue (ii): Whether the disallowance of Rs. 2,54,37,984 in respect of amounts paid to directors as commission/remuneration is sustainable.Analysis: The Tribunal noted that material (audited accounts, Articles of Association, tax computations of directors and other documents) was placed before it but had not been filed before the assessing officer or the CIT(A). In view of the new documents not previously available to the lower authorities, the Tribunal considered it appropriate to remit the matter for fresh adjudication by the assessing officer so that the placed documents can be examined afresh.Conclusion: The disallowance of Rs. 2,54,37,984 is set aside and the matter is restored to the assessing officer for fresh adjudication (in favour of the assessee for adjudicatory reconsideration).Issue (iii): Whether the disallowance of Rs. 18,07,384 for failure to deduct tax at source under the relevant provisions is sustainable.Analysis: The Tribunal found that documents relevant to the TDS issue were filed before the Tribunal but were not before the lower authorities; accordingly, on the ground of fresh material and in the interests of fair adjudication, the Tribunal restored the matter to the assessing officer for reconsideration.Conclusion: The disallowance of Rs. 18,07,384 is set aside and the matter is restored to the assessing officer for fresh adjudication (in favour of the assessee for adjudicatory reconsideration).Final Conclusion: The appeal is partly allowed - the Tribunal upheld the disallowance relating to delayed deposit of employee PF/ESI contributions but set aside the disallowances relating to payments to directors and TDS non-deduction, restoring those issues to the assessing officer for fresh adjudication; the appeal is disposed of accordingly.Ratio Decidendi: Where deductions depend on timely deposit of employee-related statutory contributions, deposit beyond the statutory due date precludes deduction; however, where new material is placed before the appellate forum that was not before the lower authorities, the proper course is restoration to the assessing officer for fresh adjudication.