MTR Maiya’s Vs ITO (ITAT Bangalore)
ITAT Bangalore held that employees contribution has to be deposited within the due date under the relevant employee welfare legislation like PF Act, ESI Act etc. Accordingly, disallowance u/s. 36(1)(va) sustained because of non-deposit within relevant due date.
Facts- The assessee is a partnership firm engaged in the business of food preparation and sweets etc. It filed return of income for AY 2018-19 declaring total income of Rs.1,04,89,720. The return was processed u/s. 143(1) of the Act determining total income of Rs.1,22,14,931, disallowing Rs.17,25,211 towards delay in payment of employees contribution to PF and ESI u/s. 36(1)(va) of the Act.
The CIT(Appeals) dismissed the appeal of the assessee, against which the assessee is in appeal before the Tribunal.
Conclusion- This issue is settled by the Hon’ble Supreme Court judgment in Checkmate Services (P.) Ltd. Vs CIT-1, wherein it is held that that Section 43B(b) does not cover employees’ contributions to PF, ESI etc., deducted by employer from salaries of employees and that employees contribution has to be deposited within the due date u/s 36(1)(va) i.e. due dates under the relevant employee welfare legislation like PF Act, ESI Act etc. failing which the same would be treated as income in the hands of the employer u/s.2(24)(x). Respectfully following this judgment, we sustain the disallowance to the extent of Rs. 40,588/- towards belated remittances towards employees contribution to EPF & ESI under the respective Acts.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal is filed against the order of the CIT(Appeals), National Faceless Appeal Centre, Delhi [NFAC] dated 27.12.2022, DIN & Order No. ITBA/NFAC/S/250/2022-23/1048280517(1) for the AY 2018-19.
2. The sole issue involved in this appeal is with regard to disallowance u/s. 36(1)(va) in order dated 22.08.2019 u/s. 143(1) of the Income-tax Act, 1961 [the Act] and confirmed by the CIT(Appeals).
3. The assessee is a partnership firm engaged in the business of food preparation and sweets etc. It filed return of income for AY 2018-19 declaring total income of Rs.1,04,89,720. The return was processed u/s. 143(1) of the Act determining total income of Rs.1,22,14,931, disallowing Rs.17,25,211 towards delay in payment of employees contribution to PF and ESI u/s. 36(1)(va) of the Act.
4. On appeal before the CIT(Appeals), the assessee submitted that out of Rs.17,25,211, a sum of Rs.15,55,547 was paid within the due date as per the EPF & ESI Acts and the balance of Rs.1,29,106/- was paid within the due date for filing return as per 139(1) of the Act. However, there was inadvertent error while filing Form 3CD in mentioning the correct qualifying dates of remittances. The correct details of contribution to EPF and ESI are as under:-
