TaxTMI 
TaxTMI 
2026 (7) TMI 1482
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.... to EPF etc. even though the case was selected for scrutiny on the limited issue of 'contract receipt or fees'. 2. The CIT(A) has erred on facts and in law in confirming the disallowance made by the AO on account of Sales Tax/VAT etc. debited to P & L account of Rs. 44,90,343/- on the ground that the sale tax/VAT etc. is not credited to P & L account on the ground that the proof of its payment is not filed, in gross violation of principle of natural justice, even though the appellant had filed sufficient evidence of its payment and the Ld. AO never asked to file further evidence if required. 3. The Ld. CIT(A) has erred on facts and in law in confirming the disallowance made by the AO on account of late payment of employee's contribution to EPF and ESI amounting to Rs. 97,915/- in view of provisions of section 36(1)(va) of the I.T. Act ignoring the biding decision of Hon'ble Jurisdictional High Court in the case of AIMIL Ltd. and also misinterpreting the decision of Hon'ble Supreme Court in the case of Rajasthan State Beverages Corporation Ltd. cited by the appellant even though the Hon'ble Supreme Court had laid down law on this issue. ....
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....AT Refunds-not received : Rs. 11,04,677 Total : Rs. 44,90,343 (i) WCT of Rs. 33,85,666/-: It is submitted that Works Contract Tax (WCT) is a tax levied on the transfer of property in goods involved in the execution of a works contract. Prior to the introduction of the Goods and Services Tax (GST) on 01.07.2017, works contracts were subject to a dual levy - VAT (on the goods component) under respective State VAT Acts, and Service Tax (on the service component) under the Finance Act, 1994. Since works contracts inherently involve both a supply of goods and a provision of services, determining the exact value of goods transferred was complex and often disputed. To ease this compliance burden, Department of Trade & Taxes, Govt. of NCT of Delhi under the Delhi Value Added Tax Act, 2004 introduced a Composition Scheme, enabling contractors to pay tax at a flat concessional rate of 3% on gross contract receipts, without the need to maintain detailed item-wise accounts of goods used. The salient features of the Scheme are summarized as under: ● Tax is payable by the Contractor, not collected from the Contractee : Under the Composition Sch....
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....of carrying on his business of civil contracting. Accordingly, WCT liability at 3% amounted to Rs. 33,85,666/- debited to the Profit & Loss Account and duly paid was an allowable deduction as expenditure incurred wholly and exclusively for the purpose of business. Copies of VAT returns and relevant challans were furnished before the lower authorities. It is humbly submitted that the disallowance has been made primarily on the ground that turnover was shown net of indirect taxes and that supporting evidence was allegedly not furnished. It is respectfully submitted that these findings are factually incorrect and contrary to material placed on record. As mentioned above, under the Composition Scheme, Works Contract Tax is payable by the Contractor, not collected from the Contractee. Hence, it is not charged in the invoice for contact revenue and could not be included in the turnover. Further, the appellant has furnished VAT returns and relevant challans before the lower authorities evidencing the payment of WCT of Rs. 33,85,666/-. The WCT paid under the Composition Scheme constituted a statutory business expenditure incurred wholly and exclusively for the purposes of business and was,....
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....debited to Profit & Loss Account treating the same as irrecoverable. It is humbly submitted that the Ld. CIT(A)'s characterization of earlier years' VAT as "prior period expenditure" is erroneous. This reasoning ignores the established principle that a loss or write-off is recognized in the year in which the amount becomes irrecoverable. The refunds/advances from earlier years continued to be reflected as assets in the Balance Sheet in anticipation of recovery. It was only in A.Y. 2018-19-the first assessment year after the GST transition that recovery became impossible. The deduction, therefore, crystallized in A.Y. 2018-19 and is not a "prior period" item. It is respectfully submitted that the write-off of Rs. 11,04,677/-, representing irrecoverable VAT refund claims that were earlier shown as receivable assets in the balance sheet, is allowable as deduction either as a bad debt u/s 36(1)(vii) of the Act or as a business loss/expenditure u/s 37(1) of the Act. The write-off was genuine, bona fide, and incurred in course of business. Thus, the amount bonafide written off in the books of account represents a genuine loss in the business. The Hon'ble Supreme Court in the ....
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....o be deleted. Ground No.2 is allowed. 10. The second issue is with regard to the disallowance of employees' contribution to EPF and ESI amounting to Rs. 97,915/- u/s 36(1)(va) of the I.T. Act 1961. In the course of assessment proceedings, the Ld. Assessing Officer noted from TAR that the assessee had deposited employees' contribution towards PF/ESI to the extent of Rs. 97,915/- after the due date prescribed under the respective welfare enactments but before the due date of filing return under Section 139(1) of Income Tax Act 1961. The Ld. Assessing Officer disallowed the said amount under section 2(24)(x) r.w.s. 36(1) (va) of the Act. 11. Aggrieved assessee was in appeal before the CIT(A) who sustained the disallowance by relying upon the decision of Hon'ble Supreme Court in the case of Checkmate Services P. Ltd. vs. CIT [2022] 143 taxmann.com 178 (SC). Aggrieved, assessee is now in appeal before us. 12. At the outset, learned Counsel for the assessee argued that the Hon'ble jurisdictional Delhi High Court in the case of CIT v. AIMIL Ltd. [2010] 188 Taxman 265 (Delhi) categorically held that employees' contribution towards PF and ESI qualifies for deduc....
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....tribution and administrative charges. In terms of this provision, thus, after deducting the employee's contribution towards the funds, the same has to be deposited with the Government within fifteen days of the close of every month. Reference to fifteen days of the close of the month must be in relation to the month during which the payment of wages is made and corresponding liability to deduct employee's contribution to the fund arises. The expression "within fifteen days of the close of every month" therefore must be interpreted as having reference to the close of the month, in which the wages are paid with corresponding duty to deduct employee's contribution and to deposit the same in the fund. 16. In view of the above, it is submitted that the deposit of employees' contribution should be reckoned from the month in which the salary has been actually disbursed rather than the month for which the salary relates. For instance, the salary for the month of April, 2017 has been paid in the month of May 2017 and, therefore, due date for deposit of employees' contribution to PF/ESIC should be reckoned from May 2017 and consequently the due date should be recorded ....
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....kmate Services P. Ltd. vs. CIT (supra). Moreover, the hon'ble Delhi High Court in the case of Woodland (Aero Club) Private Limited vs ACIT [2025] 178 taxmann.com 207 (Delhi)[08-09-2025] wherein relying on the decision of Checkmate Services P. Ltd. vs. CIT, held that for assessment year 2019-20, disallowance u/s 36(1)(va) for employee's contribution to ESI/PF that was deposited by assessee-employer after due date prescribed in PF/ESCI Acts but before due date of filing return under section 139(1), is valid. The hon'ble Delhi High Court also observed that the Supreme Court in Checkmate Services (P) Ltd. v. CIT had also considered Alom Extrusions Ltd (2009) 185 Taxman 416(SC) and distinguished the same by observing that the judgment had not considered sections 2(24)(x) and 36(1)(va), and also the separate provisions for employers' and employees' contributions under section 36(1). The hon'ble Delhi High Court also dispelled the assessee's argument that the Assessing Officer under section 143(1) could not have passed the order dated 28-5-2020, by holding that at the time when the Assessing Officer proposed the deductions, the judgment of the Gujarat High Cour....
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....count of contributions and administrative charge]: "Provided that the Central Provident Fund Commissioner may for reasons to be recorded in writing, allow any employer or class of employer to deposit the contributions by any other mode other than internet banking". Reading the above provision and specially the condition "within fifteen days of the close of every month" to our mind, would mean fifteen days from the month in which the wages/salary is liable to be disbursed to the employees. For instance, the salary for the month of April, 2017 becomes due on 1st May, 2017. The assessee has to disburse the wages/salary and deduct employees' contribution of PF/ESI in May 2017. Thereafter, within 15 days of the end of month of May, in which the deduction of PF/ESI has to take place, the employer has to deposit the employees' contribution of PF/ESI with the respective fund. Accordingly, therefore, the due date for deposit of employees' contribution to PF/ESIC should be reckoned 15 days from end of May 2017 and consequently the due date should be recorded as 15.05.2017 and not 15.06.2017 as suggested by the assessee. To our mind, the provision of "due date" in PF/E....