Delayed employee PF and ESI contributions are not deductible under section 36(1)(va); AO to reassess on alternative grounds.

Delayed payment of employees' provident fund and ESI contributions paid after the statutory due date is not deductible under the Income-tax Act provision governing employee contributions, because the Supreme Court in Checkmate Services held such late payments fall outside the deductible head and payment-timing exemption provisions do not apply; accordingly, the Tribunal directed restoration to the Assessing Officer for fresh adjudication on alternative grounds (including possible treatment as general business expenditure) and allowed the appeal partly for procedural restoration.

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Issues: Whether delayed payment of employees' contribution to Provident Fund and ESI (paid after the due date prescribed under the relevant PF/ESI enactments but before the due date for filing return under section 139(1)) is allowable as a deduction under the Income-tax Act.

Analysis: The Tribunal considered the binding decision of the Hon'ble Supreme Court in Checkmate Services Pvt Ltd which held that employees' contribution to PF and ESI not paid within the time prescribed under the relevant PF/ESI laws is not allowable under section 36(1)(va) of the Income-tax Act, and that the provisions of section 43B do not apply to employees' contribution. The Tribunal observed that a coordinate bench in Nirakar Security & Consultancy Services Pvt Ltd restored an identical issue to the file of the Assessing Officer with liberty to the assessee to advance alternative contentions (including treatment under section 2(24)(x) and claim under section 37(1)) for fresh adjudication. Relying on the Supreme Court's ruling and the coordinate bench's approach, the Tribunal followed the Supreme Court's holding on non-allowability and directed restoration for fresh consideration on alternative grounds where appropriate.

Conclusion: The delayed payment of employees' contribution to PF and ESI is not allowable under section 36(1)(va) of the Income-tax Act; the matter is restored to the file of the Assessing Officer for re-adjudication and the appeal is partly allowed for statistical purposes (in favour of the assessee on the procedural restoration directed).

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