COL. KRISHAN KUMAR NANDA RETD.,NEW DELHI V. DCIT , DELHI

ITA 3751/DEL/2024

AI Insights

The case involves Col. Krishan Kumar Nanda Retd., the Appellant, contesting the decision of the Commissioner of Income Tax Appeals regarding the assessment year 2018-19. The primary contention revolves around the application of Section 36(1)(v) of the Income Tax Act, 1961, concerning the employer-employee relationship and the timing of contributions to EPF and ESIC. The Appellant argued that the contributions were business expenditures deductible under Section 37, not subject to the penalties and interest applied. The Tribunal considered precedents and the Supreme Court's decision in Checkmate Services Pvt. Ltd., which influenced the interpretation of the relevant sections. However, following the Tribunal's previous decisions, the matter was remitted to the Assessing Officer for a detailed examination of the due dates for EPF/ESI contributions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 474875 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2018-2019
• Other Referred Cases: Checkmate Services Pvt. Ltd. (2022) 143 taxmann.com 178, Kanoi Paper and Industries Ltd. vs. ACIT (2002) 75 TTJ 448 (Cal), Sentinel Consultants Pvt. Ltd. Vs. ACIT, Weather Comfort Engineers Private Limited vs. ACIT-CPC ITA No. 959/Del/2021, B. L. Kashyap & Sons Ltd., VVDN Technologies Pvt. Ltd., Pr.CIT vs. Khyati Realtors (P) Ltd. (2022) 141 taxmann.com 461 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR DHANESTA
• Assessee Lawyers: ASHEESH BHANDARI
• Keywords: Opportunity of being heard; Business expenditure; Capital expenditure
• Section: 143(1); 37(1)

Judgement Text

" 1 ITA No. 3751/Del/2024 Col. Krishan Kumar Nanda Retd. Vs. DCIT IN THE INCOME TAX APPELLATE TRIBUNAL DELHI (DELHI BENCH ‘B’ NEW DELHI BEFORE SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER AND SHRI AVDHESH KUMAR MISHRA, ACCOUNTANT MEMBER ITA No. 3751/Del/2024 (A.Y. 2018-19) Col. Krishan Kumar Nanda Retd. K-316, 2nd floor, M. B. Road Lado Sarai, New Delhi PAN: ACSPN7598Q Vs DCIT Circle Sixty Two (One) Civic Centre, Minto Road, New Delhi Appellant Respondent Assessee by Sh. Asheesh Bhandari, Adv Revenue by Sh. Rajesh Kumar Dhanesta, Sr.DR Date of Hearing 23/01/2025 Date of Pronouncement 29/01/2025 ORDER PER YOGESH KUMAR, U.S. JM: The present appeal is filed by the Assessee against the order of the Commissioner of Income Tax, Appeal/ ADDL/JCIT (A)-13 Mumbai, (‘Ld. CIT(A)’ for short] dated 19/06/2024for the Assessment Year 2018-19. 2. The grounds of Appeal are as under: - “1. The respondent and the Assessing Officer grossly erred in applying Section 36(1)(v) of the Income Tax Act, 1961 in that a) The employer-employee relationship has not been established. 2 ITA No. 3751/Del/2024 Col. Krishan Kumar Nanda Retd. Vs. DCIT b) No sum was received from the “employees” towards EPF and ESIC. 2. The respondent and the Assessing Officer failed to considered that the amounts paid to the EPF and ESIC authorities were normal business expenditure which should have been allowed as a deduction u/s 37 of the Income Tax Act, 1961. 3. In the view of the above interest and penalties wee incorrectly levied.” 3. The Ld. Counsel vehemently contended that there is no employee and employer relationship, therefore, the provision of Section 36(1)(va) does not applicable. We don’t agree with the said proposition as the Assessee admittedly paid the salary and voluntarily deposited EPF and ESIC amount to the concerned Departments, however, as per the Department the Assessee made belated contribution and made addition. Considering the fact that the Assessee himself deposited EPF and ESIC amount voluntarily in respect of the salary paid to individuals, now the Assessee cannot claim that there is no employee employer relationship. Therefore, the only issue to be considered that whether the A.O. has verified actual due date as contemplated under the under the respective Acts. 3 ITA No. 3751/Del/2024 Col. Krishan Kumar Nanda Retd. Vs. DCIT 4. The issue of delay in payment of employee's contribution towards EPF & ESIC beyond the due dates u/s 36(1)(v)(a) of the Act has been considered and decided against the Assessee by the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. (2022) 143 taxmann.com 178, thus we find no merit in the grounds of Appeal of the Assessee. 5. However, the coordinate Bench of the Tribunal in the case of M/s Benson Movers Pvt. Ltd in ITA No. 2710/Del/2022 for AY 2019-20, remanded the matter to the file of the A.O. Assessing Officer to decide in the light of the observations made by the Tribunal in the case of Kanoi Paper and Industries Ltd. vs. ACIT (2002) 75 TTJ 448 (Cal) in following manners:- \"5. In so far as employees contributions towards PF & ESI it is noticed that the issue as to whether the due date under PF/ESI Acts should be as per the calendar month for which the salary is payable or from the month in which the salary is paid to the employee by the employer came up for adjudication in the case of Sentinel Consultants Pvt. Ltd. Vs. ACIT (supra) and the Tribunal restored the issue to the file of the AO with the following observations:- \"9. We have carefully considered the rival submissions and perused the material available on record. The disallowance of employees' contribution to PF/ESIC for breach of condition under Section 36(1)(va) is in controversy. 9.1 We notice at the outset that an opportunity was given via electronic platform of the deptt. For the proposed adjustments and in the absence of e- response, the adjustments were carried out the CPC-Bangluru and 4 ITA No. 3751/Del/2024 Col. Krishan Kumar Nanda Retd. Vs. DCIT intimation was issued enhancing the assessed income in the captioned assessment years. The CIT(A) in the first appeal has sustained the adjustments towards belated deposits of employees' contribution to PF/ESIC in the light of the judgment rendered by the Hon'ble Supreme Court in Checkmate Pvt. Ltd. vs. CIT (2022) 143 taxmann.com 178 (SC). The contention of the Assessee that such additions cannot be made under the umbrella of S. 143(1) is covered against the assessee the decision of the co- ordinate bench in the case of Weather Comfort Engineers Private Limited vs. ACIT-CPC ITA No. 959/Del/2021 order dated 15/02/2023. The action of CPC and CIT(A) thus cannot be faulted where some opportunity was admittedly given for e- response. 9.2 We now turn to alternate plea on behalf of the assessee for grant of deduction under general provisions for deduction of expenditure under S. 37 of the Act. We do not see any merit in such plea that the belated deposit of employees contributions to PF/ESIC governed under Section 36(1)(va) is also simultaneously amenable to deduction under Section 37(1) of the Act. In terms of the provision, Section 37(1) permits deduction of expenditure which is not in the nature of expenditure prescribed in Sections 30 to 36 of the Act and also not being in the nature of capital expenditure or personal expenses of the assessee. Thus, in view of such mandate of law, the deduction of expenditure under the general clause of Section 37(1) would not extend to expenditure specially covered within the ambit of Section 36(1)(va) of the Act. The Hon'ble Supreme Court in the case of Checkmate Pvt. Ltd. (supra) itself explains this position in Para 32 of the Judgment. Such view also draws support from the observations made in recent judgment of the Hon'ble Supreme Court in the case of Pr.CIT vs. Khyati Realtors (P) Ltd. (2022) 141 taxmann.com 461 (SC). The alternate plea is thus without any merit. 9.3 We also take note of yet another plea made out on behalf the assessee towards methodology of calculation of default under the relevant PF/ESIC Act. The Ld. Counsel contends that the month during which the disbursement of salary is actually made would be relevant for the purposes of determination of due date of deposit under the respective statute. The accrual of liability towards payment of salary without actual disbursement would not fasten obligation for deposits of employees contribution in the labour Acts per se. as observed by the co-ordinate bench in Kanoi Paper and Industries Ltd. vs. ACIT (2002) 75 TTJ 448 (Cal). This aspect has not been found to be examined by the Assessing Officer or CIT (A). Hence without expressing any opinion on merits on this aspect, we deem it expedient to restore the matter to the file of designated AO. It shall be open to the assessee to place factual matrix before the AO and take such plea for evaluation of the AO. The AO shall examine this aspect and fresh order in accordance with law after giving proper opportunity.\" 6. We find similar view has been taken by the co-ordinate benches in the cases of B. L. Kashyap & Sons Ltd. (supra) and VVDN Technologies Pvt. Ltd. 5 ITA No. 3751/Del/2024 Col. Krishan Kumar Nanda Retd. Vs. DCIT (supra). The ld. Counsel submits that in view of these decisions the matter may be restored to the Assessing Officer to ascertain the due date for remittance of the PF/ESI contributions of employees. Considering the decisions of the coordinate benches referred to above we restore this issue to the file of the Assessing Officer to decide in the light of the observations made by the Tribunal in the case of Kanoi Paper & Industries Ltd. Vs. ACIT (supra). Needless to say that the Assessing Officer shall provide adequate opportunity of being heard to the assessee and the assessee is at liberty to provide all the necessary information in support of its contention.\" 6. By following the above decisions of the Tribunal, we are inclined to remit the issue to the file of AO to decide in the light of the observations made by the Tribunal in the case of Kanoi Paper & Industries Ltd. Vs. ACIT (supra). Needless to say that the Assessing Officer shall provide adequate opportunity of being heard to the Assessee and the Assessee is at liberty to provide all the necessary information in support of its contention. 7. In the result, the Appeal of the Assessee is partly allowed for statistical purpose. Order pronounced in the open court on 29th January, 2025 Sd/- Sd/- (AVDHESH KUMAR MISHRA) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:- 29.01.2025 R.N, Sr.P.S* 6 ITA No. 3751/Del/2024 Col. Krishan Kumar Nanda Retd. Vs. DCIT Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "