Sunrise Facilitators Pvt. Ltd. Vs DCIT (ITAT Chandigarh)
The Income Tax Appellate Tribunal (ITAT), Chandigarh bench, has upheld the disallowance of late payments for employees’ contributions to Provident Fund (PF) and Employees’ State Insurance (ESI) for Sunrise Facilitators Pvt. Ltd. for the Assessment Year (AY) 2019-20. The decision aligns with the principle established by the Supreme Court in the landmark case of Checkmate Services P. Ltd. v. CIT.
The assessee had appealed an intimation issued by the Central Processing Centre (CPC), which disallowed Rs. 161.54 lakhs under Section 36(1)(va) read with Section 2(24)(x) of the Income Tax Act, 1961. The disallowance was reported by the company’s tax auditor for contributions paid after the statutory due dates.
The ITAT noted that the Supreme Court in Checkmate Services definitively distinguished between an employer’s contribution and an employee’s contribution. The latter, deducted from an employee’s salary, is considered a “deemed income” for the employer, held in trust. As such, it is subject to the strict condition of being deposited on or before the due date for the employer to claim it as a deduction.
While confirming the legal principle, the Tribunal also addressed a factual discrepancy. The assessee argued that the tax auditor had wrongly reported some payments as late when they were, in fact, deposited on time. The Tribunal acknowledged this and directed the Assessing Officer (AO) to verify the payment dates and restrict the disallowance only to the actual late payments. The appeal was, therefore, partly allowed for statistical purposes.
