Benson Movers Pvt. Ltd. Vs ACIT (ITAT Delhi)
The assessee appealed against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre dated 20.10.2022 for Assessment Year 2019-20. The appeal challenged the adjustment made while processing the return under Section 143(1), whereby an addition of Rs. 1,18,48,520 was made on account of employees’ contribution to EPF and ESI, along with the levy of interest under Sections 234A, 234B and 234C.
Material Facts
The Central Processing Centre (CPC) made an adjustment under Section 143(1) by disallowing employees’ contribution to EPF and ESI amounting to Rs. 1,18,48,520. The CIT(A)/NFAC upheld the adjustment.
The assessee appealed before the Tribunal challenging the validity of the adjustment, the addition relating to employees’ contributions to EPF and ESI, and the consequential levy of interest.
Assessee’s Submissions
The assessee submitted that, for determining the due date for depositing employees’ contribution towards PF and ESI, the relevant “month” should be the month in which salary or wages were actually disbursed, and not the calendar month for which the salary became payable.
The assessee requested that the matter be restored to the Assessing Officer for verification of the due dates in accordance with these decisions.
Tribunal’s Observations
The Tribunal noted that the issue regarding the determination of the due date for deposit of employees’ contributions—whether it should be computed with reference to the calendar month or the month in which salary is actually disbursed—had already been considered by the coordinate bench in Sentinel Consultants Pvt. Ltd. v. ACIT.
The Tribunal reproduced the findings in that decision, which recorded that:
- CPC had issued an electronic opportunity before making the adjustment under Section 143(1).
- The CIT(A) had sustained the disallowance by relying on the Supreme Court decision in Checkmate Pvt. Ltd. v. CIT.
- The challenge to making such an adjustment under Section 143(1) stood covered against the assessee by Weather Comfort Engineers Private Limited v. ACIT-CPC.
- The plea that delayed employees’ contribution could alternatively be allowed under Section 37(1) was rejected, noting that expenditure specifically governed by Section 36(1)(va) could not simultaneously be claimed under the general deduction provision of Section 37(1). Reference was made to Checkmate Pvt. Ltd. v. CIT and Pr. CIT v. Khyati Realtors (P) Ltd.
- However, the factual issue regarding computation of the due date based on the month of actual salary disbursement had not been examined by the Assessing Officer or the CIT(A). Therefore, the matter had been restored to the Assessing Officer for examination after providing the assessee an opportunity to place the relevant facts on record.
The Tribunal also observed that similar views had been taken by the coordinate benches in B. L. Kashyap & Sons Ltd. and VVDN Technologies Pvt. Ltd.
Findings
Following the earlier coordinate bench decisions, the Tribunal restored the issue relating to the disallowance of employees’ contribution towards PF and ESI to the file of the Assessing Officer.
The Tribunal directed the Assessing Officer to examine the issue in the light of the observations made in Kanoi Paper Industries Ltd. v. ACIT, particularly regarding the determination of the due date for remittance based on the relevant month.
The Tribunal further directed that the Assessing Officer should provide the assessee with an adequate opportunity of being heard and that the assessee would be at liberty to furnish all necessary information in support of its contention.
Final Decision
The Tribunal restored the issue of disallowance of employees’ contribution to PF and ESI to the Assessing Officer for fresh examination in accordance with the observations in the earlier Tribunal decisions.
The appeal of the assessee was allowed for statistical purposes.
Cases Discussed
- Pr.CIT vs. Khyati Realtors (P) Ltd. (SC), (2022) 141 taxmann.com 461 (SC)
- Checkmate Pvt. Ltd. vs. CIT (SC), (2022) 143 taxmann.com 178 (SC)
- Dignus Services Vs. ITO, ITA. Nos. 116 & 117/Del/2023 dated 26.09.2023
- B. L. Kashyap & Sons Ltd., ITA. No. 2622/Del/2022 dated 18.07.2023
- VVDN Technologies Pvt. Ltd., ITA. No. 164/Del/2023 dated 04.07.2023
- Vigilant Security Placement & Detective Services Pvt. Ltd. Vs. DCIT, ITA. No. 2740/Del/2022 dated 13.06.2023
- Sentinel Consultants Pvt. Ltd. Vs. ACIT, ITA. Nos. 7 & 8/Del/2023 dated 12.06.2023
- Weather Comfort Engineers Private Limited vs. ACIT-CPC, ITA No. 959/Del/2021 order dated 15/02/2023
FULL TEXT OF THE ORDER OF ITAT DELHI
1. This appeal is filed by the assessee against the order of the Commissioner of Income Tax (Appeals) [hereinafter referred to CIT (Appeals)]/National Faceless Appeal Centre [NFAC] Delhi, dated 20.10.2022 for assessment year 2019-29.
2. The assessee has raised the following substantive grounds:-
“1. The Ld. CIT (A), NFAC, has erred in facts and in law in confirming the action of Ld. ADIT, CPC in making addition of Rs.1,18,48,520/- while processing the return u/s 143(1) on illegal and untenable grounds.
2. That having regard to the facts and circumstances of the case, Ld. CIT (A) ought to have quashed the order u/s 143(1) passed by Ld. ADIT, CPC as the jurisdiction was not validly assumed as per law.
3. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in confirming the action of Ld. ADIT, CPC in making aggregate addition of Rs.1,18,48,520/- on account of employee’s contribution to ESI and EPF and that too by recording incorrect facts and findings and without observing the principles of natural justice and without appreciating the facts and circumstances of the case and latest law in this regard.
4. That in any case and in any view of the matter, action of Ld. CIT (A) in confirming the action of Ld. ADIT, CPC in making aggregate addition of Rs.1,18,48,520/- on account of employee’s contribution to ESI and EPF, is bad in law and against the facts and circumstances of the case and the same is ne sustainable on various legal and factual ground.
5. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in confirming the action of Ld. ADIT, CPC in charging interest under section 234A, 234B and 234C of Income Tax Act, 1961.”
3. The Ld. Counsel for the assessee submits that for computing the period of delay “month” to be taken should be the month in which salary/wages are disbursed by the assessee and not calendar month. Reliance is placed on the decisions of Kolkata Bench of the Tribunal in the case of Kanoi Paper Industries Ltd. Vs. ACIT (75 TTJ 448) and the Delhi Benches in the cases of Vigilant Security Placement 8: Detective Services Pvt. Ltd. Vs. DCIT in ITA. No. 2740/Del/2022 dated 13.06.2023, Dignus Services Vs. ITO in ITA. Nos. 116 8: 117/Del/2023 dated 26.09.2023, Sentinel Consultants Pvt. Ltd. Vs. ACIT in ITA. Nos. 7 8: 8/Del/2023 dated 12.06.2023, B. L. Kashyap 8: Sons Ltd. in ITA. No. 2622/Del/2022 dated 18.07.2023 and VVDN Technologies Pvt. Ltd. in ITA. No. 164/Del/2023 dated 4.07.2023, Fluid Air (India) Ltd. Vs. DCIT 63 ITD 182 (Bom).
4. Heard rival submissions, perused the orders of the authorities below.
5. In so far as employees contributions towards PF 8: ESI it is noticed that the issue as to whether the due date under PF/ESI Acts should be as per the calendar month for which the salary is payable or from the month in which the salary is paid to the employee by the employer came up for adjudication in the case of Sentinel Consultants Pvt. Ltd. Vs. ACIT (supra) and the Tribunal restored the issue to the file of the AO with the following observations:-
“9. We have carefully considered the rival submissions and perused the material available on record. The disallowance of employees’ contribution to PF/ESIC for breach of condition under Section 36(1)(va) is in controversy.
9.1 We notice at the outset that an opportunity was given via electronic platform of the deptt. for the proposed adjustments and in the absence of e-response, the adjustments were carried out the CPC-Bangluru and intimation was issued enhancing the assessed income in the captioned assessment years. The CIT(A) in the first appeal has sustained the adjustments towards belated deposits of employees’ contribution to PF/ESIC in the light of the judgment rendered by the Hon’ble Supreme Court in Checkmate Pvt. Ltd. vs. CIT (2022) 143 taxmann.com 178 (SC). The contention of the Assessee that such additions cannot be made under the umbrella of S. 143(1) is covered against the assessee the decision of the co-ordinate bench in the case of Weather Comfort Engineers Private Limited vs. ACIT-CPC ITA No. 959/Del/2021 order dated 15/02/2023. The action of CPC and CIT(A) thus cannot be faulted where some opportunity was admittedly given for e- response.
9.2 We now turn to alternate plea on behalf of the assessee for grant of deduction under general provisions for deduction of expenditure under S. 37 of the Act. We do not see any merit in such plea that the belated deposit of employees contributions to PF/ESIC governed under Section 36(1)(va) is also simultaneously amenable to deduction under Section 37(1) of the Act. In terms of the provision, Section 37(1) permits deduction of expenditure which is not in the nature of expenditure prescribed in Sections 30 to 36 of the Act and also not being in the nature of capital expenditure or personal expenses of the assessee. Thus, in view of such mandate of law, the deduction of expenditure under the general clause of Section 37(1) would not extend to expenditure specially covered within the ambit of Section 36(1)(va) of the Act. The Hon’ble Supreme Court in the case of Checkmate Pvt. Ltd. (supra) itself explains this position in Para 32 of the Judgment. Such view also draws support from the observations made in recent judgment of the Hon’ble Supreme Court in the case of Pr.CIT vs. Khyati Realtors (P) Ltd. (2022) 141 taxmann.com 461 (SC). The alternate plea is thus without any merit.
9.3 We also take note of yet another plea made out on behalf the assessee towards methodology of calculation of default under the relevant PF/ESIC Act. The Ld. Counsel contends that the month during which the disbursement of salary is actually made would be relevant for the purposes of determination of due date of deposit under the respective statute. The accrual of liability towards payment of salary without actual disbursement would not fasten obligation for deposits of employees contribution in the labour Acts per se. as observed by the co-ordinate bench in Kanoi Paper and Industries Ltd. vs. ACIT (2002) 75 TTJ 448 (Cal). This aspect has not been found to be examined by the Assessing Officer or CIT (A). Hence without expressing any opinion on merits on this aspect, we deem it expedient to restore the matter to the file of designated AO. It shall be open to the assessee to place factual matrix before the AO and take such plea for evaluation of the AO. The AO shall examine this aspect and fresh order in accordance with law after giving proper opportunity.”
6. We find similar view has been taken by the co-ordinate benches in the cases of B. L. Kashyap & Sons Ltd. (supra) and VVDN Technologies Pvt. Ltd. (supra). The ld. Counsel submits that in view of these decisions the matter may be restored to the Assessing Officer to ascertain the due date for remittance of the PF/ESI contributions of employees. Considering the decisions of the coordinate benches referred to above we restore this issue to the file of the Assessing Officer to decide in the light of the observations made by the Tribunal in the case of Kanoi Paper & Industries Ltd. Vs. ACIT (supra). Needless to say that the Assessing Officer shall provide adequate opportunity of being heard to the assessee and the assessee is at liberty to provide all the necessary information in support of its contention.
7. In the result, appeal of the assessee is allowed for statistical purpose.
Order pronounced in the open court on : 17/11/2023.
