Disallowance of amount of employees’ share to ESI and PF after due date justifiable: ITAT Bangalore

Shri Thamanna Vs ACIT (ITAT Bangalore)

ITAT Bangalore held that amount of employee’s share to ESI and PF paid after due date provide under the respective statutes is liable to be disallowed. Accordingly, matter referred back for limited purpose of verification of payment challans.

Facts- The case of the assessee was selected for scrutiny under CASS. During the assessment proceedings, the AO noted that the assessee has claimed amount of Rs.1,91,50,842 towards EPF paid and debited in the P&L account, out of which certain amounts were paid after the due date as contemplated by PF Scheme. Further, the assessee has claimed an amount of Rs.49,11,683 towards ESIC and some of the amounts were paid after the due date.

AO made disallowance towards delayed deposit of EPF & ESI and added back the amount to the total income. First Appellate Authority dismissed the appeal. Being aggrieved, the present appeal is filed.

Conclusion- There is no dispute between the parties that the employees’ contribution to PF and ESI were not deposited within the due date prescribed under the PF and ESI Acts in terms of Explanation-1 to section 36(1)(va) of the Act. The said provision makes it clear that if employees’ contribution to PF and ESI is not paid within due date provided under the respective statutes, it has to be treated as income of the concerned assessee under section 2(24)(x) of the Act.