2024 (6) TMI 1272 - AT - Income Tax

ITAT denies section 36(1)(va) deduction for delayed PF ESI deposits despite timely return filing

The ITAT Ranchi ruled against the assessee regarding delayed deposit of employees' contribution to PF and ESI. The tribunal held that deduction under ... Delay in deposit of Employees’ Contribution of Provident Fund and Employees State Insurance (PF & ESI) - addition u/s. 36(1)(va) and 43B - HELD THAT:- The issue relating to grounds taken by the assessee have come to rest by the recent verdict of Chekmate Services Pvt. Ltd. [2022 (10) TMI 617 - SUPREME COURT] wherein it has been held that “deduction u/s. 36(1)(va) in respect of delayed deposit of amount collected towards employees’ contribution to PF cannot be claimed when deposited within the due date of filing of return even when read with Section 43B of the Income-tax Act, 1961.” - Decided against assessee. Issues:Confirmation of addition u/s. 36(1)(va) and 43B for delayed PF deposit.Analysis:The appeals by the assessee were against orders of Ld. CIT(A), NFAC, Delhi for AY 2017-18 to 2019-20, arising from assessment orders passed by DCIT/ACIT, Circle-2, DHN. The primary issue was confirming the addition u/s. 36(1)(va) and 43B for delayed PF deposit. The disallowances made in the appeals ranged from Rs. 1,10,364 to Rs. 14,42,806. The issue related to disallowance made towards the delay in PF fund contribution, citing a decision of the Hon'ble Supreme Court.The assessee raised six grounds of appeal in each assessment year, focusing on the disallowance u/s. 36(1)(va) for delay in PF and ESI deposit. The recent Supreme Court verdict in Chekmate Services Pvt. Ltd. Vs. CIT clarified that deductions for delayed PF contributions cannot be claimed if deposited before the due date of filing the return, even when considering Section 43B. The judgment highlighted the distinction between employer's and employee's contributions, emphasizing the due date requirement for employee's contributions under Section 36(1)(va).The judgment discussed the legislative intent behind Sections 36(1)(va) and 36(1)(iv), emphasizing the separate treatment of employer's and employee's contributions. It noted that the due date requirement for employee's contributions was crucial, and the non-obstante clause in Section 43B did not dilute the obligation to deposit employee's contributions before the due date. The judgment emphasized that employee's contributions, being deemed income, must be deposited by the due date to qualify for deduction.In line with the Supreme Court decision, the Tribunal dismissed the assessee's appeals, as the grounds raised were covered by the precedent. The judgment reiterated the importance of depositing employee's contributions before the due date for claiming deductions. Consequently, all appeals of the assessee were dismissed, aligning with the Supreme Court's interpretation of the relevant provisions.In conclusion, the Tribunal upheld the disallowances made for delayed PF contributions, in accordance with the Supreme Court's ruling. The judgment emphasized the distinction between employer's and employee's contributions, highlighting the significance of timely deposit of employee's contributions to qualify for deductions. The dismissal of the appeals reflected the consistent application of the legal principles established by the Supreme Court.