Atibari Tea Company Ltd. Vs DCIT (ITAT Kolkata)
The assessee appealed against the order of the JCIT(A) for AY 2024-25 concerning disallowance of employees’ contribution towards PF and ESI. The return was processed under Section 143(1), and by intimation dated 02.06.2025, the Centralized Processing Centre (CPC) disallowed ₹61,35,025 towards employees’ PF and ESI contributions. The JCIT(A) upheld the disallowance by relying on the Supreme Court’s decision in Checkmate Services (P) Ltd. vs. CIT.
The assessee contended that the issue had become debatable because the Supreme Court, in Woodland (Aero Club) Pvt. Ltd. v. ACIT (SLP No. 1532/2026), had taken up the issue for fresh consideration after referring to conflicting judicial views regarding Sections 2(24)(x), 36(1)(va), and 43B of the Income-tax Act. It was submitted that since the issue was pending before the Supreme Court, such a debatable question could not be the subject of an adjustment under Section 143(1). The Revenue supported the orders of the CPC and the JCIT(A).
The Tribunal observed that the Supreme Court in Woodland (Aero Club) Pvt. Ltd. v. ACIT had taken the issue under fresh consideration after noting conflicting judicial opinions. It held that, in the present circumstances, the issue had become debatable. Since a debatable issue is not permissible for adjustment in an intimation issued under Section 143(1), the Tribunal quashed the intimation dated 02.06.2025 relating to the disallowance of employees’ PF and ESI contributions.
The Tribunal, however, granted liberty to the Revenue to initiate proceedings within the purview of the Income-tax Act in accordance with law. The assessee’s appeal was allowed.
Cases Discussed
- Woodland (Aero Club) Pvt. Ltd. v. ACIT, SLP No.1532/2026
- Checkmate Services (P) Ltd. vs. CIT, 454 ITR 518 (SC)
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This is an appeal filed by the assessee against the order of the ADDL/JCIT(A) RANCHI [hereinafter referred to as the ‘CIT(A)’] in appeal no. ADDL/JCIT(A) RANCHI/10053/2023-24 dated 21.10.2025 for the assessment year 2024-25.
2. Shri S. K. Tulsiyan, Advocate & Lata Goyal, CA represented on behalf of the assessee and Shri Pankaj Pandey, Addl. CIT, Sr. DR represented on behalf of the revenue.
3. It was submitted by the ld. AR that the issue involved in the assessee’s appeal is in regard to employees’ contribution towards PF & ESI. It was the submission that the return filed by the assessee came to be processed and intimation issued u/s 143(1) on 02.06.2025 wherein the CPC has disallowed the employees’ contribution to an extent of Rs.61,35,025/-. It was the submission that the ld. CIT(A) dismissed the appeal of the assessee by relying upon the decision of Hon’ble Supreme Court in the case of Checkmate Services (P) Ltd. vs. CIT reported in 454 ITR 518(SC). It was the submission that the issue in the appeal is a debatable issue in so far as the Hon’ble Supreme Court in the case of Woodland (Aero Club) Pvt. Ltd. v. ACIT in SLP No.1532/2026 has considered the issue of employees’ contribution towards PF & ESI and also various decisions of various Courts and in para 11 has held as follows:
“11. In view of the conflicting opinion, as referred to above, we would like to look into this issue….”
3.1 The entire decision of the Hon’ble Supreme Court in the case of Woodland (Aero Club) Pvt. Ltd. v. ACIT referred to supra reads as follows:
“1. The High Court recorded the following findings as regards as the issue in question.
i. Employer’s contributions under Section 36(1)(iv) and employees’ contributions covered under Section 36(1)(va) read with Section 2(24)(x) are fundamentally different in nature and must be treated separately.
ii. Employees’ contribution deducted from their salaries Reason: are deemed to be income under Section 2(24)(x) and are held in trust by the employer. The employers can claim deduction only if they deposit these amounts on or before the statutory due date under Section 36(1)(va).
iii. The non-obstante clause in Section 43B cannot be applied to employees’ contributions governed by Section 36(1)(va).
iv. Alom Extrusions (supra) has been distinguished as the same has not considered Sections 2(24)(x) and 36(1)(va).
v. Explanation 5 to Section 43B was not considered at all while arriving at the decision that employees’ contribution must be deposited on or before the due dates under relevant statutes.”
2. As per Section 2(24)(x), any amount recovered by the employer from the employees towards their contribution to any provident or superannuation fund or any other fund set up under the provisions of the ESI Act, 1948 or any other fund for the welfare of the employees is income.
3. Section 36(1)(va) of the Act says that any sum so received by the assessee – employer from his employees to which provisions of Section 2(24)(x) applies, the assessee – employer shall be entitled to deduction while computing income under Section 28, if such sum is credited by the assessee – employer to the employees account before the due date.
4. The Explanation to Section 36(1) (va) says that the ‘due date’ means the date by which the assessee -cemployer is required to credit the employees contribution in the relevant fund under any Act, Rule, Order or Notification issued thereunder.
5. There are two School of thoughts as regards the interpretation of the words “due date”.
6. A combined reading of the Section 2(24)(x) and that Section 36(1) (va) of the Act, prima facie is indicative that any sum received by the assessee – employer from any of his employees as contribution towards PF & ESI is the income of the assessee under Section 2(24)(x) and it continues to be so, unless it is credited by the assessee – employer to the employee’s account in the relevant fund on or before the due date specified under the relevant PF, ESI Act.
7. The employee’s contribution towards PF, ESI received by the assessee – employer is his income under Section 2(24)(x) and if he wants to have it deducted from his income under Section 36(1)(va), he must credit the same to the employee’s account in the relevant fund on or before the due date specified under the relevant PF,ESI Act.
8. The aforesaid view is supported by the following judgments of the High Courts:-
i. Unifac Management Services (India) (P.) v. Dy. CIT [2018] 100 taxmann.com244 [2019] 260 Taxman 60/[2018] 409 ITR 225 (Mad.),
(ii) CIT v. Gujarat State Road Transport Corpn.
[2014] 41 taxmann.com 100/366 ITR 170/223 Taxman 398 (Guj.), (iii) CIT v. Merchem Ltd. [2015] 61 taxmann.com 119/235 Taxman 291/378 ITR 443 (Ker.), (iv) B.S. Patel v. Dy. CIT [2010] 326 ITR 457/[2008] 171 Taxman 304 (MP) and (v) Popular Vehicles & Services Pvt Ltd v. CIT [2018] 96 taxmann.com 13/257 Taxman 120/406 ITR (Ker).
9. The other view is that there is no difference between employees and employer contribution to PF, ESI and both would be guided by the provisions of Section 43B of the Act so as to allow deduction in the hands of the assessee – employer if the contributions are deposited on or before the due date of filling of return under Section 139(1) of the Income Tax Act, 1961.
10. The aforesaid view is supported by the following Judgments:-
i. CIT v. Aimil Ltd. [2010] 188 Taxman 265/321 ITR 508 (Delhi HC),
ii. CIT v. Plamman HR (P) Ltd. (IT Appeal No. 170 of 2018, dated 12.02.2018 (Delhi HC). (iii) CIT v. Nipso Ployfabriks Ltd.
[2013] 350 ITR 327/213 Taxman 376/30 taxmann.com90 (HP). (iv) Sagun Foundry (P.) Ltd. v. CIT [2017] 78 taxmann.com 47 (All). (v) CIT v. Udaipur Dugdh Utpadak Sahakari Sangh Ltd. [2014] 366 ITR 163/[2013] 217 Taxman 64 (Mag.)/35 taxmann.com 616 (Raj.). (vi) CIT v. Sabari Enterprises [2008] 298 ITR 141 (Kar). (vii) CIT v. Hemla Embroidery Mills (P.) Ltd. [2014] 366 ITR 167/[2013] 217 Taxman 207/37 taxmann.com 160 (Punj. & Har.). (viii) CIT v. Ghatge Patil Transports Ltd. [2014] 368 ITR 749/[2015] 53 taxmann.com 141/228 Taxman 340. (ix) Bihar State Warehousing Corpn. Ltd. v. CIT [2016] 368 ITR 410 (Patna). (x) CIT v. Vijay Shree Ltd. [2014] 43 taxmann.com 396/224 Taxman. 12 (Cal.) (Mag.) (xi) CIT v. Industrial Security & Intelligence India Pvt. Ltd. [Tax Case (Appeal) Nos.585 and 586 of 2015 & M.P.No.1 of 2015, dated 24-7-2015. (xii) Gauhati High Court in the case of CIT v. George Williamson (Assam) Ltd. [2006] 284 ITR 619 (Gauhati). (xiii) CIT v. Kichha Sugar Ltd. [2013] 356 ITR 351/216 Taxman 90/35 taxmann.com 54 (Uttarakhand). (xiv) Pr. CIT v. Plamman HR (P) Ltd, [IT Appeal No. 599 of 2017, dated 11.09.2017].
11. In view of the conflicting opinion, as referred to above, we would like to look into this issue.
12. Issue notice, returnable in four weeks.
13. Dasti, in addition, is permitted”
3.2 It was further submitted that the issue is now pending before the Hon’ble Supreme Court vide SLP dated 27.01.2026. It was the submission that the issue is a debatable issue and the disallowance is not permissible in an intimation issued u/s 143(1) of the Act. It was prayed that the intimation issued u/s 143(1) may be cancelled.
4. In reply, the ld. Sr. DR vehemently supported the orders of the CPC and JCIT(A).
5. We have considered the rival submissions. A perusal of the facts in the present case clearly shows that the issue in the decision of Hon’ble Supreme Court in the case of Checkmate Services (P) Ltd. vs. CIT is now under fresh consideration before Hon’ble Supreme Court in the case of Woodland (Aero Club) Pvt. Ltd. v. ACIT referred to supra and the Hon’ble Supreme Court has also considered various decisions. Admittedly the issue is a debatable issue in the present scenario. This being so, as a debatable issue is not permissible in an adjustment made in an intimation issued u/s 143(1) by the CPC. The CPC has taken the issue of PF & ESI contribution in respect of employees, the intimation issued u/s 143(1) dated 02.06.2025 stands quashed as the issue being debatable. Liberty is however granted to the revenue to initiate proceedings within the purview of the Income Tax Act in accordance with law.
6. In the result, the appeal of the assessee stands allowed.
Order pronounced in the open court on 13/07/2026.
