Payal Enterprise Vs DCIT (ITAT Kolkata)
In a partial victory for Payal Enterprise, the Income Tax Appellate Tribunal (ITAT), Kolkata Bench, has reversed the disallowance of Rs.6,56,020/- in employee contributions towards the Provident Fund (PF) and Employees’ State Insurance (ESI) for the Assessment Year 2021-22. The Tribunal allowed the deduction for two specific payments, accepting the assessee’s argument that their due date should be determined by the month of salary payment, not the month the salary was due. The overall disallowance had been made by the CPC in an intimation under Section 143(1) and confirmed by the Ld. CIT(A) for being belated.
The total amount disallowed was Rs.6,69,068/-. The AO/CPC made the addition based on the Tax Audit Report, which indicated that the contributions were paid after the due date prescribed under the respective special Acts (EPFO and ESIC) but before the due date for filing the income tax return. The Ld. CIT(A) upheld the entire disallowance, relying on the binding judgment of the Supreme Court in Checkmate Services Pvt Ltd vs Commissioner of Income Tax-1 (2022), which clearly states that employee contributions must be paid by the due date under the relevant Acts to be deductible under Section 36(1)(va). The ITAT upheld the disallowance for most of the payments, confirming that they were indeed belated and squarely covered by the Checkmate Services precedent.
