Max Vigil Security Expert Pvt. Ltd., Ahmedabad V. The Dy.Commissioner of Income Tax, Circle-2(1)(2), Ahmedabad

ITA 1035/AHD/2019

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Max Vigil Security Expert Pvt. Ltd. appealed against the order of the Commissioner of Income Tax (Appeals)-2, Ahmedabad, which confirmed the addition of Rs. 1,78,66,252 to the assessee's income for the assessment year 2016-17. This addition was made by the Assessing Officer under section 36(1)(va) read with section 2(24)(x) of the Income Tax Act, due to late remittance of employees' contributions to PF and ESIC. The Tribunal noted the conflicting decisions of various High Courts and the Supreme Court's clarification that for assessment years prior to AY 2021-22, the non obstante clause under section 43B does not apply to employees' contributions held in trust by the employer, thus not absolving the employer from the liability to deposit these contributions by the due date.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131444 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 19-03-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 18-06-2019
• Other Referred Cases: Checkmate Services (P.) Ltd. vs. CIT, Harrisons Malayalam Ltd. vs. CIT, Essae Teraoka (P.) Ltd. vs. DCIT, Gujarat State Road Transport Corporation vs. CIT, Suzlon Energy Ltd. vs. CIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 43B; 43

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member Max Vigil Security Ex pert Pvt. Ltd. 42, Astha Avenue, Opp. RTO Circle, Subhash Bridge, Ah medabad -3 80027 PAN: AAFCM0 319Q (Appellant) Vs DCIT, Circle-2(1)(2 ), Ah med abad (Resp ondent) Asses see b y : Shri Su res h Ga ndhi, A.R. Revenue by : Shri S atish Solanki, Sr. D. R. Date of hearing : 20-03 -2023 Date of pronouncement : 21-03 -2023 आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This is an appeal filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-2, Ahmedabad, in proceeding u/s. 250(6) vide order dated 22/04/2019 passed for the assessment year 2016- 17. ITA No. 1035/Ahd/2019 Assessment Year 2016-17 I.T.A No. 1035/Ahd/2019 A.Y. 2016-17 Page No. Max Vigil Security Expert Pvt. Ltd. vs. DCIT 2 2. The assessee has taken the following grounds of appeal:- “1. The learned CIT(A) has erred in law and on facts in confirming the addition of Rs. 1,78,66,252/- on account of late remittance of employees' contribution to P.P. & E.S.LC. u/s. 36(l)(va) r.w.s. 2(24(x) of the Act made by the A.O., relying upon the decision of the Hon'ble Gujarat High Court in the case of Gujarat State Road Transport Corporation [2014] 41 taxmann.com 100 (Guj.)., It is submitted with due respect to the above decision that subsequently the Hon'ble Karnataka High Court in the case of Essae Teraoka (P.) Ltd. vs. DCIT [2014] 43 taxmann.com 33 (Karnataka) has taken a view in favor of the assessee while disagreeing with the decision of the Hon'ble Gujarat High Court. That apart, since the SLP filed against the said decision before the Hon'ble Supreme Court having been admitted, the issue in dispute being addition of Rs. 1,78,66,252/- be decided accordingly.” 3. The brief issue for consideration is that during the year under consideration the AO made addition of 1 ,78,66,052/-on account of late remittance of employee’s contribution of PF and ESIC u/s 36(1)(va) of the Act and the said addition was also confirmed by the Ld. CIT(Appeals) in the appellate order. The assessee is in appeal before us against the aforesaid additions confirmed by Ld. CIT(Appeals). 4. It may be noted that the position on this issue has now been unambiguously clarified by the Hon'ble Supreme Court with respect to all assessment years prior to AY 2021-22 in the case of Checkmate Services (P.) Ltd. [2022] 143 taxmann.com 178 (SC) wherein the Supreme Court held that for assessment years prior to AY 2021-22, non obstante clause under section 43B could not apply in case of amounts which were held in I.T.A No. 1035/Ahd/2019 A.Y. 2016-17 Page No. Max Vigil Security Expert Pvt. Ltd. vs. DCIT 3 trust as was case of employee's contribution which were deducted from their income and was held in trust by assessee-employer as per section 2(24)(x), thus, said clause would not absolve assessee-employer from its liability to deposit employee's contribution on or before due date as a condition for deduction. The Supreme Court observed that there is a marked difference between nature and character of assessee-employer's contribution and amounts retained by assessee from out of employee's income by way of deduction wherein one is liability to be paid by employer and second is deemed income as per section 2(24)(x) which is held in trust by assessee- employer, thus, said marked difference was to be borne while interpreting obligation of assessee-employer under section 43B of the Act. The Hon'ble Supreme held that the non obstante clause under section 43B could not apply in case of amounts which were held in trust as was case of employee's contribution which were deducted from their income and was not part assessee-employer's income, thus, said clause would not absolve assessee- employer from its liability to deposit employee's contribution on or before due date as a condition for deduction. Again the Supreme Court in the case of Harrisons Malayalam Ltd. [2022] 145 taxmann.com 608 (SC), dismissed the SLP of the Department against order of High Court that where assessee-company failed to pay employees’ contribution towards EPF and ESI within due date prescribed in respective Acts, deduction under section 36(1)(va) was not allowable. Recently in the case of Ms. NalinaDyave Gowda [2023] 146 taxmann.com 420 (Bangalore - Trib.) the assessee during, financial year 2018-19 (assessment year 2019-20) made payment of employees' contribution to ESI and PF beyond due date specified under relevant Act and claimed deduction of same under section 36(1)(va).The I.T.A No. 1035/Ahd/2019 A.Y. 2016-17 Page No. Max Vigil Security Expert Pvt. Ltd. vs. DCIT 4 Assessing Officer made disallowance of employees' contribution to ESI and PF while electronically processing return of income under section 143(1)(a) of the Act. The ITAT held that disallowance under section 143(1)(a) was valid in view of Supreme Court's decision in case of Checkmate Services (P.) Ltd. v. CIT [2022] 143 taxmann.com 178 and the assessee will not be entitled to deduction of belated payment of ESI and PF of employees' share of contribution as per provisions of section 36(1)(va) of the Act. Further, jurisdictional High Court decision in case of Gujarat State Road Transportation Corporation (2014) 41 taxman.com 100, wherein it was held that where assessee did not deposit employees' contribution to employees' account in relevant fund before due date prescribed in Explanation to section 36(1)(va), no deduction would be admissible even though he deposits same before due date under section 43B of the Act. Again the Gujarat High Court in the case of Pr. CIT v. Suzlon Energy Ltd. [2020] 115 taxmann.com 340 (Gujarat) held that where assessee had not deposited employees' contributions towards PF and ESI amounting Rs. 15.20 lakhs within prescribed period in law and Assessing Officer by invoking provisions of section 36(1)(va) read with section 2(24)(x) made addition of aforesaid amount to income of assessee, impugned addition made to income of assessee was justified. 5. In view of the above observations, respectfully following the decision of the Honourable Supreme Court in the case of Checkmate Services Private Ltd supra and Harrisons Malayalam Ltd supra, we are hereby dismissing the appeal of the assessee. I.T.A No. 1035/Ahd/2019 A.Y. 2016-17 Page No. Max Vigil Security Expert Pvt. Ltd. vs. DCIT 5 6. In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on 21-03-2023 Sd/- Sd/- (WASEEM AHMED) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 21/03/2023 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/ आदेश से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद