TaxTMI 
TaxTMI 
2025 (5) TMI 1863
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..... On the facts and circumstances of the case and in law, the Hon'ble JCIT(A) erred in confirming the disallowance u/s 36(1)(va) amounting to Rs. 9,44,99,290/- (out of Rs. 9,75,96,266/-) made by the Ld. Centralized Processing Centre ("CPC") in the intimation passed u/s 143(1). 2. The Hon'ble JCIT(A) failed to appreciate and ought to have held that employees' contribution to provident fund, paid after the statutory due date owing to the moratorium imposed by the Reserve Bank of India in accordance with the Banking Regulation Act, 1949, could not be disallowed. 3. The Appellant prays that the disallowance u/s 36(1)(va) of the Act amounting to Rs. 9,44,99,290/- be deleted. GROUND NO. GROUND II. LEVY OF INTEREST U/S 234C OF THE ACT: 1. On the facts and circumstances of the case and in law, the Hon'ble JCIT(A) erred in confirming the additional levy of interest u/s 234C of the Act amounting Rs. 17,37,64,891/- as consequential in nature. 2. The Hon'ble JCIT(A) failed to appreciate and ought to have held that interest u/s 234C is chargeable on returned income. 3. The Appellant prays that the interest u/s 234C of the Act be computed at Rs. 7,38,54,250/ which was declared by the ....
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....laced on record. It was first contended that the return of income was processed under Section 143(1) of the Act on 26.12.2021, at which point the prevailing legal position-based on the judgment of the Hon'ble Bombay High Court-was in favour of the assessee, allowing deduction of employees' contributions to PF and ESI even if deposited after the statutory due dates but before the due date for filing the return of income under Section 139(1).The Ld. AR acknowledged the subsequent judgment of the Hon'ble Supreme Court in Checkmate Services Pvt. Ltd. vs CIT-1, (2022) 143 taxmann.com 178 (SC), dated 12.10.2022, which conclusively held that employee contributions deposited beyond the statutory due date are not eligible for deduction under Section 36(1)(va), even if paid before the return-filing due date. However, it was contended that the said ruling was not applicable at the time the disallowance was made under Section 143(1), and that the CPC, Bengaluru, was bound by the binding decision of the Hon'ble Jurisdictional High Court, which supported the assessee's claim at that time. Hence, the disallowance was argued to be bad in law. In support of this position, reliance was placed on the....
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....75,96,266/- being deduction claimed, to tax. The Appellant submits that the claim was not made with a malafide intention, and it is being offered for tax purely to avoid litigation and to buy peace. 5.7 Therefore, in view of the appellant's reply as mentioned above and respectfully following the view endorsed by the Hon'ble Supreme Court in the case of Checkmate Services P. Ltd. supra in which the Hon'ble Court has dealt with various rulings and the relevant provisions of law since their introduction in the Statute, finally concluded the matter in favour of Revenue, the disallowance of Rs. 9,75,96,266/- made under section 36(1(va) of the Act on account of delayed payment of Employees Contribution to EPF/ESI u/s 143(1) is confirmed. Therefore, this ground of appeal taken by the appellant is dismissed" The Ld. AR also placed on record a chronological statement substantiating the factual constraints due to the moratorium, as under: Sr No. Particulars Date 1 Moratorium imposed Mar 05, 2020 2 Reconstruction scheme introduced Mar 13,2020 3 Due date for payment of PF (Feb 2020) Mar 15,2020 4 Moratorium lifted Mar 18,2020 5 Payment of PF Mar 19,2020 6 Filing of Tax....
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.... difficulties faced by the assessee during the RBI-imposed moratorium in March 2020. Nevertheless, the disallowance under Section 36(1)(va) of the Income Tax Act is mandated by the statute and has been unequivocally upheld by the highest court. The legal position is as follows: * Statutory Scheme: Section 2(24)(x) of the Act includes within the definition of an employer's "income" any sum received from employees as their contribution to PF/ESI or other welfare funds. Section 36(1)(va) then allows a deduction for such sum, if and only if it is deposited in the designated fund "on or before the due date" prescribed under the relevant provident fund or ESI law. By virtue of the pre-existing Explanation to Section 36(1)(va), the "due date" means the date by which the employer is required to credit the employees' contribution to the employees' account under the relevant fund statute. In the present case, the due date for PF contributions was the 15th of the following month (for ESI, the 15th of next month) as per the respective Acts. Any employee-share contribution paid after that date does not qualify for deduction. Unlike employer contributions (which are governed by Sec....
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.... due dates of such contributions reinforcing that even prior to AY 2021-22 the law always required timely deposit toclaim the deduction. In sum, after Checkmate Services(SC), there remains no room for the earlier liberal view; any payment beyond the statutory due date results in forfeiture of the deduction under Section 36(1)(va). * Application to Facts: It is an admitted fact that a substantial portion of the employees PF/ESI contributions collected by the assessee in FY 2019-20 were remitted after the respective due dates (despite being remitted before the ROI due date). The quantum in dispute (29.44 crore) pertains to those remittances made beyond the grace period allowed by the welfare laws. Even if the delay was only a matter of days and occurred under stress of the bank's temporary moratorium, the law provides no latitude to allow the deduction. The CIT(A) has rightly upheld the disallowance in principle, explicitly relying on the Supreme Court's decision. The assessee itself, in the appellate proceedings, acknowledged the Supreme Court ruling and "offered" the amount for taxation, albeit "to buy peace". Thus, both on facts and in law, the disallowance is warranted.....
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....tory due date, as prescribed under the relevant Acts, are not allowable as deduction under Section 36(1)(va), even if such payment is made before the due date for filing the return under Section 139(1).Applicability of ruling of Checkmate Services Pvt Ltd (supra) the assessee rightly points out that the ruling was delivered after the return was processed, the subsequent authoritative interpretation by the Hon'ble Apex Court has retrospective effect, being a declaration of what the law always was. Therefore, the disallowance under Section 143(1) cannot be held to be bad in law merely because a contrary High Court view existed at the time of processing. Related to impact of moratorium, we find that the moratorium imposed on the assessee bank, though factually established and genuinely constraining, cannot override the statutory requirement under Section 36(1)(va). No exemption or extension was granted by the EPF/ESI authorities; hence, the delay, though minimal and caused by compelling circumstances, results in forfeiture of the deduction. In light of the binding precedent of the Hon'ble Supreme Court, the disallowance of Rs. 9,75,96,266/- under Section 36(1)(va) of the Act is legall....