Case Law Details
Jayajothi & Co. Pvt Ltd Vs ITO (ITAT Chennai)
ITAT Chennai held that one delay in deposit of employees contribution to PF & ESI covered by the provisions of the General Clauses Act, 1897 as due date was a national holiday. Disallowance u/s u/s.36(1)(va) of the Income Tax Act, 1961 for such delay unjustified.
Facts- The assessee is a Limited Co., filed its return of income for AY 2018-19. The return was subsequently processed by CPC proposing disallowance of employees contribution to PF & ESI paid beyond the due date as per respective acts (but before the due date of filing of the return of income) u/s.36(1)(va) of the Income Tax Act, 1961. The assessee disagreeing with the proposed adjustment has responded to the communication of the CPC stating that several High Courts has taken the view that even the employees contribution paid before due date of filing of the return of income is also an allowable deduction.
The CPC finds no favour in the arguments of the assessee and have proceeded to complete the assessment u/s.143(1) r.w.s.144 of the Act, with the proposed disallowance. CIT(A) also has dismissed the appeal. Being aggrieved, the present appeal is filed.
Conclusion- Held that since the due date of the payment under the provisions of payment of PF Act was 15.08.2017, being a national holiday, it is obvious that the office of the assessee as well as the Bank would be closed on the said date. None of the Office bearers of the assessee who are liable or entrusted with the duty to make the payment of employee’s contribution for PF would be available to perform their duty on account of national holiday. Considering such circumstances, we are of the considered view that the provision of Sec.10 of the General Clauses Act, 1897, u/s.10 of the said Act, are very much applicable in the present case to rescue the contention of the assessee.
We therefore of the considered opinion that since the deposit of contribution received from the employees was covered by the provisions of the General Clauses Act, 1897, and therefore, the same shall be treated as payment within due date, thus no disallowance on this count is called for.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals), Income Tax Department, National Faceless Appeal Centre (NFAC), Delhi, dated 23.02.2023 and pertains to assessment year 2018-19.
2. The assessee has raised the following grounds of appeal:
1. The order of the NFAC, Delhi dated 23.02.2023 vide DIN & Order No. ITBA/NFAC/S/250/2022-23/1050055626(l) for the above mentioned Assessment Year is contrary to law, fact and in circumstances of the case.
2. The NFAC, Delhi erred in sustaining the addition of Rs. 16,45,141/- made in consequence to the disallowance of employees’ contribution to PF / ESI for the month of July, remitted on 16.08.2017, well within the due date for such remittance under the said Act in terms of Section 36(l)(va) of the Act as an adjustment in the intimation order passed under Section 143(1) (a)(iv) read with Section 154 of the Act by the CPC, Bengaluru without assigning proper reasons and justification.
3. The NFAC, Delhi failed to appreciate that disputed adjustment was not within the preview of the adjustment permissible in terms of Section 143(1)(a) (iv) of the Act, thereby vitiating the impugned order in its entirety.
4. The NFAC, Delhi failed to appreciate that the employees’ contribution to the PF & ESI fund was not belatedly remitted by one day on 16.08.2017 as against the due date of remittance falling on 15.08.2017, which day was a national holiday (Independence Day), thereby vitiating the impugned adjustment in its entirety.
5, The NFAC, Delhi ought to have appreciated that the remittance of the employees’ contribution was debited from the bank account of the appellant on the due date (16.08.2017), which date should be considered as due date as per Section 10 of The General Clauses Act, 1897, thereby negating the presumption of employees’ contribution of PF / ESI being remitted to the government account belatedly.
6. The NFAC, Delhi failed to appreciate that having placed reliance on judgement of the Supreme Court which is distinguishable from the present facts, the mechanical following of the directions rendered in the context of Section 143(3) of the Act in contra distinction to the present facts being in the context of Section 143(1) of the Act also, the consequential order passed should be reckoned as nullity in law.
7. The NFAC, Delhi failed to appreciate that there was no effective/proper opportunity given before passing the impugned order and any order passed in violation of the principles of natural justice is nullity in law.
8. The Appellant craves leave to file additional grounds/arguments at the time of hearing.
3. The brief facts of the case, rather the facts of the issue of solitary controversy involved are that the assessee is a Limited Co., filed its return of income for AY 2018-19 on 14.09.2018 declaring total income of Rs.16,56,46,438/. The return was subsequently processed by CPC proposing disallowance of employees contribution to PF & ESI paid beyond the due date as per respective acts (but before the due date of filing of the return of income) u/s.36(1)(va) of the Income Tax Act, 1961 (in short “the Act”). The assessee disagreeing with the proposed adjustment has responded to the communication of the CPC stating that several High Courts has taken the view that even the employees contribution paid before due date of filing of the return of income is also an allowable deduction.
The CPC finds no favour in the arguments of the assessee and have proceeded to complete the assessment u/s.143(1) r.w.s.144 of the Act, with the proposed disallowance.
4. Dissatisfied with the observation of the CPC, the assessee assailed the matter before the Ld.CIT(A), NFAC, Delhi. However, Ld.CIT(A) also has dismissed the appeal taking guidance from the principle of law laid down by the Hon’ble Supreme Court in the case of Chekmate Services Pvt. Ltd. v. CIT-1 dated 12.10.2022 reported in ITR [2022] 143 com 178 (SC).
5. Now, the assessee is before us with a contention that the ratio of law laid down by the Hon’ble Supreme Court in the case of Chekmate Services Pvt. Ltd. (supra) shall not be applied in the assessee’s case stating that the reason for the facts of the case of the assessee are distinguishable then the facts in the case of Chekmate Services Pvt. Ltd. (supra). The disallowance made in the case of the assessee for Rs.16,45,141/- pertains to employee’s contribution to PF for the month of July, 2017. The due date for payment of impugned contribution was on 15.08.2017 i.e. Independence Day (National /Public Holiday). The said amount was remitted and debited from the bank account of the assessee on 16.08.2017 on the next day of the due date under the respective statutes. This fact was undisputedly reported in Form No.3CA & 3CD, clause 20(b). This was the submission of the Ld.AR that as per provisions of Sec.10 of the General Clauses Act, 1897, pertains to definition / mode of computation of time, which is a binding law for such a situation, has to be considered for this matter, section 10 of the of the General Clauses Act, 1897, relied upon by the Ld AR, reads as under:
10. Computation of time.—(1) Where, by any 1 [Central Act] or Regulation made after the commencement of this Act, any act or proceeding is directed or allowed to be done or taken in any Court or office on a certain day or within a prescribed period, then, if the Court or office is closed on that day or the last day of the prescribed period, the act or proceeding shall be considered as done or taken in due time if it is done or taken on the next day afterwards on which the Court or office is open:
Provided that nothing in this section shall apply to any act or proceeding to which the 6 Indian Limitation Act, 1877 (15 of 1877), applies.
(2) This section applies also to all 2 [Central Acts] and Regulations made on or after the fourteenth day of January, 1887.
6. Ld.AR further drew our attention to the gist of submissions submitted on this issue, the same are reproduced as under:
The said Section contemplates the last / due to be very next working day if the due date happens to fall on a day when the office is closed. In this regard, it is submitted that banks are shut down on national holidays and in the case of the appellant, the said amount was remitted within the due date as prescribed in the said PF / ESI enactment as the remittance had happened undisputedly on the next working day, which should be considered as the due date.
Hence the delay in remittance of the disputed amount is not attributable to the appellant and in the conjoint reading with the provisions in Section 10 of The General Clauses Act, 1897, the remittance of the disputed amount on 16.08.2017 ought to be reckoned as remittance made within the time stipulated within the respective statutes. Moreover, the remittance of the said disputed sum on 16.08.2017 cannot be considered as belatedly / delayed remittance as brought out herein before.
The appellant places reliance upon the decision of the jurisdictional Bench of the Income Tax Appellate Tribunal in ITA No.691/CHNY/2022 dated 28.02.2023, wherein the Appellate Tribunal had adjudicated the identical issue of disallowance of belated remittance of PF & ESI on 16.08.2019 as against the due date of 15.08.2019.
The appellant had filed rectification petition against the intimation order with a view to rectify the error of law committed by the CPC, Bengaluru in mechanically disallowing the remittance of the disputed sum on 16.08.2017, which date should be reckoned as due date under the said statutes as the due date of 15.08.2017 being a national / public holiday.
The appellant thus pleads for deleting the addition made on the wrong premise of the law on the issue and thus render justice.
7. Ld. AR, also drew our attention to the copy of Tax Audit Report in Form No.3CA placed in the paper book of the assessee at Page No.16 onwards. In the Tax Audit Report at Page No.19 of the Paper Book, Clause 20(b) contains the details of contribution received from employees for various funds referred to Sec.36(1)(va) of the Act, item No.4 of the said details is showing an entry of the impugned transaction with delay of one day on account of 15th August i.e. a declared national holiday, which was disallowed by the Ld AO, without considering the law under the general clauses act, as referred herein above. In light of such facts, Ld.AR pleads for deleting the addition made by the Revenue.
Ld. DR controverting the submissions of Ld.AR has submitted that Sec.10 of the General Clauses Act, 1897 shall not be applied in the present case since all the payments under respective statutes are made in the electronic mode and whether the Office of the Department or the assessee are closed on certain date, cannot be the reason for delay in payments, and therefore, the ratio laid down by the Hon’ble Supreme Court in Chekmate Services Pvt. Ltd. (supra) will squarely apply in the present case and therefore, the disallowance made was justified. Consequently, the order of the Ld.CIT(A), NFAC, deserves to be upheld.
8. We have heard rival contentions, perused the materials available on record, orders of the authorities below and arguments on the mandate of the law as referred by the Ld. Representatives of both the parties. This is an undisputed fact in the present case that there was a payment of Rs.16,45,141/- pertaining to employee’s contribution for PF received by the assessee company and have paid the same beyond due date of payment as prescribed under the respective statutes. This is also an undisputed fact that the day on which the payment was to be made was a national / public holiday i.e. 15.08.2017 being national holiday / independence day of India. Ld.AR of the assessee has placed reliance on provisions in section Sec.10 of the General Clauses Act, 1897 which says that “any act or proceedings is directed or allowed to be done over taken in any court or office on a certain day within a prescribed period, then, if the court office closes on that day over the last day of the prescribed period, the Act or proceeding shall be considered as done or taken in due time if it is done overtaken on the next day afterwards on which the Court Office”. Taking guidance from the provisions as relied upon by the Ld.AR in the present case, since the due date of the payment under the provisions of payment of PF Act was 15.08.2017, being a national holiday, it is obvious that the office of the assessee as well as the Bank would be closed on the said date. None of the Office bearers of the assessee who are liable or entrusted with the duty to make the payment of employee’s contribution for PF would be available to perform their duty on account of national holiday. Considering such circumstances, we are of the considered view that the provision of Sec.10 of the General Clauses Act, 1897, u/s.10 of the said Act, are very much applicable in the present case to rescue the contention of the assessee. The Department submission against the contention of the assessee that since the payment under the relevant statutes were to be made by electronic mode, therefore, provisions of the General Clauses Act, allowing someone to make the compliance on the next day if the office is closed on account of National Holiday are not applicable, cannot allowed, in absence of any contrary finding that electronic / digital payments are not covered under the ambit of provisions of sec 10 of General Clauses Act. On perusal of the order of the Ld. CIT(A), the delay in payment of PF & ESI was considered as sufficient for confirming the disallowance after taking shelter of judgment in the case of Chekmate Services Pvt. Ltd. (supra). While going through the facts of the case, we have noted that the Hon’ble Supreme Court in the case of Chekmate Services Pvt. Ltd., has not dealt with the due date or situation covered by provisions of Sec.10 of the General Clauses Act, 1897, whereby a delay on account of closure of offices can be considered as no delay. Further, on perusal of Tax Audit Report, we have observed that the disallowance made was pertaining to only one payment made on account of employee’s contribution to PF for the Month of July, 2017 due on 15.08.2017. Apart from this payment, all the other 11 payments during the relevant assessment year were made in time by the assessee. Therefore, the assessee cannot be considered as regular offender or having a habit to utilize the welfare money belongs to the employees held by it as a Trustee, thus, have not had a habit to get unduely enriched from the same. We therefore of the considered opinion that since the deposit of contribution received from the employees was covered by the provisions of the General Clauses Act, 1897, and therefore, the same shall be treated as payment within due date, thus no disallowance on this count is called for. We therefore set aside the order of the Ld.CIT(A) and direct the AO to delete the addition made.
9. In the result, appeal filed by the assessee is allowed in terms of our observations hereinabove.
Order pronounced on the 23rd day of June, 2023, in Chennai.
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