Kaarya Facilities and Services Limited Vs ITO (ITAT Mumbai)
Kaarya Facilities and Services Limited contested the order of the Commissioner of Income Tax (Appeals) regarding disallowance under Section 36(1)(va). Explore the legal debate surrounding the due date for wages and its implications.
Background of the Appeals: The appeals, concerning Assessment Years 2017-18, 2018-19 & 2019-20, were filed by Kaarya Facilities and Services Limited against the orders passed by the Commissioner of Income Tax (Appeals) and the National Faceless Appeal Centre under Section 250 of the Income Tax Act, 1961.
Delay Condoned: The appeals faced a time bar issue, but the delay was condoned considering sufficient cause presented by the assessee.
Key Issue: Disallowance under Section 36(1)(va): The central issue in these appeals revolved around the disallowance under Section 36(1)(va) concerning delayed payment of employees’ contributions to PF & ESIC. The assessee also raised additional grounds challenging the impugned addition.
Lead Case: ITA No. 2307/Mum/2023 (A.Y. 2017-18): The lead case, ITA No. 2307/Mum/2023, involved a disallowance of Rs.3,13,682/- for delayed PF & ESIC deposits, upheld by the Commissioner of Income Tax (Appeals) based on the Checkmate Services P. Ltd. case.
Legal Arguments: The assessee contended that the due date for PF & ESIC deposits should commence from the month of actual wage disbursement, not when wages were payable. They cited precedents and argued for the admission of additional grounds.
ITAT Mumbai’s Decision: The ITAT Mumbai admitted the additional ground and deliberated on the interpretation of the due date. It referred to the National Thermal Power Co. Ltd. case and the decision of the Madras High Court, ultimately dismissing the additional ground based on legal precedence.
Outcome: The appeals filed by the assessee were dismissed, following the ruling in the lead case. Similar decisions were made for ITA Nos. 2308 & 2309/Mum/2023, given the identical facts.
Conclusion: The dispute between Kaarya Facilities and the Income Tax Officer underscores the importance of interpreting statutory provisions accurately. The ruling provides clarity on the due date for PF & ESIC deposits, emphasizing adherence to legal precedents in income tax matters.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The captioned appeals have been filed by the assessee, challenging the order of the learned Commissioner of Income Tax (Appeals) (‘ld.CIT(A) for short), National Faceless Appeal Centre (‘NFAC’ for short) passed u/s.250 of the Income Tax Act, 1961 (‘the Act’), relevant to Assessment Years (‘A.Y.’ for short) 2017-18, 2018-19 & 2019-20.
2. The appeals are time barred and the assessee had filed an Affidavit for condoning the said delay. After hearing both the parties, we are of the considered opinion that the assessee had ‘sufficient cause’ for the delay in filing the present appeals and we, therefore, deem it fit to condone the delay. Delay condoned.
3. The solitary issue involved in all these appeals are the disallowance made u/s. 36(1)(va) of the Act pertaining to the delayed payment of employees contribution to PF & ESIC paid after the due date under the relevant Acts but before filing of the return of income. The assessee has also filed additional grounds in all these appeals pertaining to the impugned addition.
4. As the issues are common in all these appeals, we hereby pass a consolidated order by taking ITA No. 2307/Mum/2023 as a lead case.
ITA No. 2307/Mum/2023 (A.Y. 2017-18)
5. The brief facts are that the assessee company is engaged in the house keeping services and had filed its return of income dated 31.10.2017, declaring total income at Rs.80,46,007/- and the same was processed u/s. 143(1) of the Act where the Central Processing Centre (‘CPC’ for short)/ld. Assessing Officer (‘A.O.’ for short) made a disallowance of Rs.3,13,682/- being the delayed deposit of PF & ESIC u/s. 36(1)(va) of the Act which was paid before filing of the return but after the due date prescribed under the relevant Acts along with the other additions.
6. The assessee was in appeal before the ld. CIT(A) who had upheld the addition made by the ld. CPC/ld. A.O. by placing reliance on the decision of the Hon’ble Apex Court in the case of Checkmate Services P. Ltd. vs. CIT (in Civil Appeal No. 2833 of 2016 vide order dated 12.10.2022).
7. The assessee is in appeal before us, challenging the order of the ld. CIT(A) in upholding the impugned addition made u/s. 36(1)(va) of the Act.
8. The learned Authorised Representative (‘ld. AR’ for short) for the assessee submitted that the assessee had filed additional grounds of appeal where the ‘due date’ as per EPF/ESIC should be considered as ‘15 days from the close of the month of actual wage disbursement’ instead of ‘15 days from the close of the month for which wages are payable’. The ld. AR elaborated on the additional ground raised by the assessee by contending that the Hon’ble Apex Court in the case of Checkmate Services P. Ltd. (supra) has not expressly specified the ‘due date’ as per EPF and ESIC and neither the same has been specified in EPF Act, 1952. The ld. AR further stated that the nature of the business of the assessee which is into supplying of manpower services and housekeeping service is of the nature that the actual wage disbursement is mostly delayed due to the reason of delayed payment from the clients. The ld. AR further stated that the wages are paid to the employees only when authorization is received from its clients which is always scattered or delayed. In such cases, the ld. AR contended that the due date for deposit of the employee’s contribution to PF & ESIC should be 15 days from the close of the month of the actual wage disbursement. The ld. AR prayed that the additional ground shall be admitted. The ld. AR relied on the following decisions:
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