Swiss Pharma Pvt. Ltd., Ahmedabad V. The DCIT, CPC, Bangalore Present Juridiction The ITO, Ward-4(1)(1), Ahmedabad

ITA 112/AHD/2023

• Counselvise Citation: [2023] 101 COUNSELVISE.COM (IT) 9524 (ITAT-AHMEDABAD)
• Duration Of Justice: 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-12-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 22-02-2023
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 2; 43B; 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I .T .A . No .1 12 /A h d / 20 23 ( A s se ss m e nt Y e a r : 20 18- 19 ) Sw is s Ph ar m a Pv t. Ltd ., 37 09, G I D S P ha s e- I V, V a t va , A h m e da ba d - 3 8 2 44 5 V s. D e p ut y Co m m i ss io n er o f I nc o m e Ta x , C P C , B a n ga lo r e Pr e se nt J ur is dic tio n I nc o m e Ta x O f f ic e r , Wa r d- 4( 1) ( 1 ) , A h m ed a ba d [ P A N N o. A A C C S 6 20 3L ] (Appellant) .. (Respondent) Appellant by : Shri Hemanshu Shah, C.A. Respondent by: Shri Yogesh Mishra, Sr. D.R. D a t e of H ea r i ng 06.12.2023 D a t e of P r o no u n ce me nt 15.12.2023 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeal), (in short “Ld. CIT(A)”), National Faceless Appeal Centre, (in short “NFAC”), Delhi in DIN & Order No. ITBA/NFAC/S/250/2022-23/1049285843(1) vide order dated 31.01.2023 passed for Assessment Year 2018-19. 2. The assessee has taken the following grounds of appeal:- “1. In law and in facts and circumstances of the Appellant’s case, the learned Commissioner of Income Tax (Appeals) has grossly erred in points of law and facts. 2. In law and in facts and circumstances of the Appellant’s case, the learned Commissioner of Income Tax (Appeals) has grossly erred in confirming disallowance of late payment of employees’ contribution to PF and ESIC of Rs. 8,23,901 in the intimation issued u/s 143(1)(a) of the I T Act. ITA No. 112/Ahd/2023 Swiss Pharma Pvt. Ltd. vs. ITO Asst.Year –2018-19 - 2– 3. In law and in the facts and circumstances of the Appellant’s case, the learned Commissioner of Income Tax (Appeals) has grossly erred confirming charging of interest u/s 234A of Rs. 1,500, u/s. 234B of Rs. 28,515 and u/s. 234C of Rs. 7,575. 4. In law and in the facts and circumstances of the Appellant’s case, the learned Commissioner of Income Tax (Appeals) has grossly erred in confirming raising demand of Rs. 1,87,630. 5. Your appellant reserves the right to add, alter, amend all or any of the above ground of appeal as may be advised from time to time.” 3. The brief issue for consideration before us is whether Ld. CIT(A) erred in confirming the disallowance of late payment of employee’s contribution to Provident Fund and ESIC of Rs. 8,23,901/- in the intimation issued under Section 143(1)(a) of the Act. 4. The Counsel for the assessee placed reliance on the case of Arihant Automobiles v. ITO 137 Taxman.com (Jaipur ITAT) and also on the case of Jasbir Singh v ADIT in ITA number 1787/Mumbai/2021 which have taken the view that disallowance for late deposit of EPF/ESIC cannot be made by way of intimation under Section 143(1)(a) of the Act. 5. 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 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 ITA No. 112/Ahd/2023 Swiss Pharma Pvt. Ltd. vs. ITO Asst.Year –2018-19 - 3– 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 of 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. 6. We observe that ITAT Ahmedabad in the case of Adani Infrastructure and Developers (P.) Ltd. 152 taxmann.com 564 (Ahmedabad - Trib.) has on identical facts, decided the issue against the assessee with the following observations: “4. We observe 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. (supra) 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 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 ITA No. 112/Ahd/2023 Swiss Pharma Pvt. Ltd. vs. ITO Asst.Year –2018-19 - 4– 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 of 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. v. CIT [2022] 145 taxmann.com 608/[2023] 291 Taxman 196/[2022] 449 ITR 391, 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. Nalina Dyave Gowda v. Asstt. DIT [2023] 146 taxmann.com 420/199 ITD 28 (Bang. - 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 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. (supra) 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. Again, recently Pune ITAT in the case of Cemetile Industries v. ITO [2022] 145 taxmann.com 209/[2023] 198 ITD 322 (Pune - Trib.) held that where assessee- employer deposited amount of employees contribution towards employees' provident fund and employees' state insurance corporation beyond due date stipulated in respective Acts, disallowance made under section 36(1)(va) was justified. The ITAT further held that adjustment under section 143(1)(a) by means of disallowance made for latedeposit of employees' share to relevant funds beyond date prescribed under respective Acts was proper. 4.1 In view of the above observations respectfully following the decision of the Honourable Supreme Court in the case of Checkmate Services (P.) Ltd. (supra) and Harrisons Malayalam Ltd. (supra) and in the light of our observations, we hereby dismiss the assessee's appeal. 5. In the result, the appeal of the assessee is dismissed.” 7. Recently in the case of Ms. Nalina Dyave Gowda [2023] 146 taxmann.com 420 (Bangalore - Trib.) the assessee during, financial year 2018-19 (Assessment Year 2019-20) made payment of employees' contribution ITA No. 112/Ahd/2023 Swiss Pharma Pvt. Ltd. vs. ITO Asst.Year –2018-19 - 5– to ESI and PF beyond due date specified under relevant Act and claimed deduction of same under Section 36(1)(va). The 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. 8. Again, recently Pune ITAT in the case of Cemetile Industries v. ITO [2022] 145 taxmann.com 209 (Pune - Trib.) held that where assessee- employer deposited amount of employees contribution towards employees' provident fund and employees' state insurance corporation beyond due date stipulated under the respective Acts, disallowance made under Section 36(1)(va) was justified. The ITAT further held that adjustment under Section 143(1)(a) by means of disallowance made for late deposit of employees' share to relevant funds beyond date prescribed under respective Acts was proper. 9. In the case of Guntubolu Uma Sai Prasad 154 taxmann.com 655 (Visakhapatnam - Trib.), the ITAT held that disallowance can be made under Section 143(1)(a) towards employees' contribution to EPF and ESI where assessee made payment towards employees' contribution to EPF and ESI beyond due date prescribed under respective Acts. 10. In view of the above observations and respectfully following the decision of the Hon’ble Supreme Court in the case of Checkmate Services ITA No. 112/Ahd/2023 Swiss Pharma Pvt. Ltd. vs. ITO Asst.Year –2018-19 - 6– Pvt. Ltd. (supra) and Harrisons Malayalam Ltd. (supra) and in the light of our observations, we hereby dismiss the assessee’s appeal. 11. In the result, the appeal of the assessee is dismissed. This Order pronounced in Open Court on 15/12/2023 Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 15/12/2023 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 11.12.2023(Dictated by Hon’ble Member on his Dragon Software) 2. Date on which the typed draft is placed before the Dictating Member 11.12.2023 3. Other Member..................... 4. Date on which the approved draft comes to the Sr.P.S./P.S 13.12.2023 5. Date on which the fair order is placed before the Dictating Member for pronouncement .12.2023 6. Date on which the fair order comes back to the Sr.P.S./P.S 15.12.2023 7. Date on which the file goes to the Bench Clerk 15.12.2023 8. Date on which the file goes to the Head Clerk.......................................... 9. The date on which the file goes to the Assistant Registrar for signature on the order.......................... 10. Date of Despatch of the Order..........................................