Premier Irrigation Adritec (P) Ltd. Vs ACIT (ITAT Kolkata)
ITAT Kolkata held that interest payment on delayed deposit of Income Tax (whether in form of TDS or otherwise) is not an allowable expenditure.
Facts- The assessee has agitated the confirmation of addition of Rs.10,10,774/- made by the Assessing Officer invoking the provisions to section 43B of the Act for delay in depositing employees contribution to provident fund and employees state insurance.
The assessee has agitated the confirmation of disallowance of Rs.4,99,022/- made by the Assessing Officer in respect of interest on delayed deposit of ‘taxes deducted at source’ (TDS).
Conclusion- The issue relating to grounds taken by the assessee have come to rest by the recent verdict of the Hon’ble Supreme Court in Checkmate Services Pvt. Ltd. Vs. CIT 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.”
TDS by deeming fiction has been made the tax liability of the deductor to ensure that the recipient of the payment cannot fade away without paying the due taxes on the income part of such receipts. Once, the deductee pays the due taxes, the deductor is absolved from the said tax liability but not of the interest liability on the delayed payment. Allowing of such interest payment on delayed deposit of TDS as deduction would defeat the very purpose of the TDS provisions ensuring the deduction of taxes from the income of the recipient and the payment/deposit thereof with the central Govt. within the due time.
Held that the interest payment on delayed deposit of Income Tax, whether TDS or otherwise, is not an allowable expenditure.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
The present appeal has been preferred by the assessee against the order dated 30.07.2021 of the National Faceless Appeal Centre [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’).
2. The assessee, in this appeal, has taken the following grounds of appeal:
“1. That the Leaned Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs.10,10,774 made by the Assessing Officer invoking the provisions of section 43B of the Income Tax Act, 1961 read with sections 2(24)(x) and 36(1)(va) for the alleged delay in depositing the Employees Contribution to Provident Fund and Employees State Insurance under the relevant Act but deposited before the due date of furnishing the return of income.
2. That the Learned Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs.10,10,774 relying on the amendments made in relevant provisions by Finance Act 2021 although the amendments are prospective and does not apply to the Assessment Year 2014-15.
3. That the learned Commissioner of Income Tax (Appeals) erred in confirming the disallowance of Rs.4,99,022 made by the Assessing Officer in respect of Interest on delayed deposit of Taxes deducted at source by the assessee Company.
4. That the appellant craves leave to add, alter or withdraw any ground or grounds of appeal at or before the hearing of the appeal.”
3. The registry has pointed out that there is a delay of 2 days in filing the appeal. The assessee has explained that though the online appeal was filed in time, due to certain reason physical copy of the appeal paper was submitted with the delay of 2 days. Considering the above submissions and shortness of delay, the delay in filing the appeal is hereby condoned.
4. Ground No.1 & 2 – Vide Ground Nos.1 & 2, the assessee has agitated the confirmation of addition of Rs.10,10,774/- made by the Assessing Officer invoking the provisions to section 43B of the Act for delay in depositing employees contribution to provident fund and employees state insurance.
5. Heard both the sides. At the outset, we note that the grounds of appeal relate to disallowance made 43B read with section u/s. 36(1)(va) of the Act in respect of delay in deposit of Employees’ Contribution of Provident Fund and Employees State Insurance (PF & ESI) totalling to Rs.10,10,774/-. The issue relating to grounds taken by the assessee have come to rest by the recent verdict of the Hon’ble Supreme Court in Checkmate Services Pvt. Ltd. Vs. CIT (2022) 143 com 178 (SC) dated 12.10.2022 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.” Relevant extract of the said judgment is reproduced as under:
“The deduction made by employers to approved provident fund schemes, is the subject matter of Section 36(1) (iv). It is noteworthy, that this provision was part of the original IT Act; it has largely remained unaltered. On the other hand, Section 36(1)(va) was specifically inserted by the Finance Act, 1987, w.e.f. 01-04-1988. Through the same amendment, by Section 3(b), Section 2(24) – which defines various kinds of “income” – inserted clause (x). This is a significant amendment, because Parliament intended that amounts not earned by the assessee, but received by it, – whether in the form of deductions, or otherwise, as receipts, were to be treated as income. The inclusion of a class of receipt, i.e., amounts received (or deducted from the employees) were to be part of the employer/assessee’s income. Since these amounts were not receipts that belonged to the assessee, but were held by it, as trustees, as it were, Section 36(1)(va) was inserted specifically to ensure that if these receipts were deposited in the EPF/ESI accounts of the employees concerned, they could be treated as deductions. Section 36(1)(va) was hedged with the condition that the amounts/receipts had to be deposited by the employer, with the EPF/ESI, on or before the due date. The last expression “due date” was dealt with in the explanation as the date by which such amounts had to be credited by the employer, in the concerned enactments such as EPF/ESI Acts. Importantly, such a condition (i.e., depositing the amount on or before the due date) has not been enacted in relation to the employer’s contribution (i.e., Section 36(1)(iv)).
