Alaknanda Associates Vs ITO (ITAT Delhi)
Employees’ PF/ESI Disallowance u/s 36(1)(va) Remanded: ITAT Delhi Directs AO to Examine ‘Month of Salary Disbursement’ Test
The Delhi Bench ‘F’ of the Income Tax Appellate Tribunal, Delhi Bench allowed the assessee’s appeal for AY 2018-19 for statistical purposes and remanded the issue of disallowance of employees’ contribution to PF and ESI to the Assessing Officer for fresh examination.
The assessee’s return was processed under section 143(1), wherein the CPC disallowed ₹85.57 lakh under section 36(1)(va) on account of alleged delayed deposit of employees’ contribution to PF and ESI. The CIT(A) upheld the disallowance, following the Supreme Court judgment in Checkmate Services Pvt. Ltd.
Before the Tribunal, the assessee relied on a coordinate Bench decision in its own case for AY 2019-20, contending that although the contribution may appear delayed if reckoned with reference to the salary month, the deposits were actually made within 15 days of the month in which salaries were disbursed, which is the relevant trigger under the PF/ESI laws. It was argued that this factual aspect was never examined either by the AO or the CIT(A).
The ITAT accepted this limited contention and noted that several coordinate Benches (including Benson Movers Pvt. Ltd., Sentinel Consultants Pvt. Ltd., and Kanoi Paper & Industries Ltd.) have held that the due date for employees’ contribution should be reckoned from the month of actual salary payment, not merely accrual. Since this factual matrix had not been verified, the Tribunal held that the matter required reconsideration.
Accordingly, the orders of the AO and CIT(A) were set aside, and the issue was restored to the file of the AO with a direction to examine the assessee’s alternative plea afresh, after granting due opportunity of hearing. Other legal positions, including the applicability of Checkmate Services, were left open. The appeal was allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT DELHI
