Shashwat Manufacturing, Surat V. Dy. Commissioner of Income Tax, CPC, Bangalore

ITA 127/SRT/2022

AI Insights

The case involves Shashwat Manufacturing, the appellant, contesting the disallowance of a deduction for employees' contributions to PF/ESIC, which amounted to Rs. 8,11,428. The disallowance was initially made by the Assessing Officer/Central Processing Centre (CPC) and was upheld by the Commissioner of Income Tax (Appeals). The primary legal contention revolved around the timing of the deposit of these contributions, with the appellant arguing that the deposits were made within the statutory deadlines, contrary to the findings of the lower authorities. The Tribunal's decision referenced the Supreme Court's ruling in Checkmate Services, which established that such contributions must be deposited by the due date to be deductible.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 302069 (ITAT-SURAT)
• Duration Of Justice: 13 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 12-12-2022
• Assessment Year: misc
• Appeal Filed On: 18-01-2009
• Other Referred Cases: CIT Vs Gujarat State Road Transport Corporation (GSRTC) [2014] 366 ITR 170 (Gujarat), CIT Vs Bharat Hotels (2019) 410 ITR 417 (Delhi), Checkmate Services Private Limited Vs CIT in Civil Appeal No. 2833 of 2016 dated 12/10/2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No. 127/Srt/2022 (Assessment Year: 2018-19) (Virtual hearing) Shashwat Manufacturing, H-31, Gangotri Tower, Kesarba Market, Gotalawadi, Surat-395003. PAN No. ADEFS 2326 L Vs. D.C.I.T., CPC, Bangalore. Appellant/ assessee Respondent/ revenue Assessee represented by Shri Deven Kapadia, AR with Ms. Mitali Mehta, CA Department represented by Shri Vinod Kumar, Sr. DR Date of hearing 13/12/2022 Date of pronouncement 13/12/2022 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of National Faceless Appeal Centre, Delhi (NFAC)/learned Commissioner of Income Tax (Appeals), (in short, the ld. CIT(A)) dated 23/03/2022 for the Assessment year (AY) 2018-19 wherein the assessee has raised following grounds of appeal: “1. The ld. CIT(A) has erred both in law and on the facts and circumstances of the case in confirming the disallowance made u/s 36(1)(va) of the Act in respect of the employees contribution towards PF/ESIC amounting to Rs. 8,11,428/- despite of the fact that the same has been deposited before due date as specified u/s 43B of the Income Tax Act, 1961 (Act). 2. The ld. CIT(A) was not justified in confirming disallowance made u/s 36(1)(va) amounting to Rs. 8,11,428/- ignoring the fact that CPC cannot make adjustments under Section 143(10(a) of the Act by wrongly considering information provided in point No. 20(b) of tax audit report as ‘disallowance’. ITA No. 127/Srt/2022 Shashwat Manufacturing Vs DCIT 2 3. The ld. CIT(A) has erred in law and on facts in confirming the disallowance made u/s 36(1)(va) of the Act by not properly interpreting the explanatory memorandum to the Finance Act, 2021, whereby the legislature itself has condoned the impugned default before 01/04/2021 by proposing amendment in both the Sections i.e. 36(1)(va) and 43B of the Act. 4. The ld. CIT(A) has erred in law and facts and in circumstances of the case by confirming disallowance made u/s 36(1)(va) of the Act since the appellant is entitled to make payment of employees contribution together with employer contribution and administrative charges within 15 days of he close of the “month” during which the disbursement of salary/wages is actually made and not from the month to which wage relates. 5. Lower authorities have passed the orders without properly appreciating the facts, without understanding the law, without proper application of mind and they further erred in grossly ignoring submission, explanations and information submitted by the appellant which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and principles of natural justice and therefore deserves to be quashed.” 2. Brief facts of the case are that the Assessing Officer / Central Processing Centre (CPC) processing return of income for the A.Y. 2018-19 made disallowance of Rs. 8,11,428/- under Section 36(1)(va) of the Income Tax Act, 1961 (in short, the Act) on account of delay in deposit of employees’ contribution of ESIC and PF, in order dated 17.10.2019. On appeal before the ld. CIT(A), the disallowance was confirmed. The ld CIT(A)/ NFAC upheld the order of Assessing Officer by following the decision of Hon'ble Gujarat High Court in CIT Vs Gujarat State Road Transport Corporation (GSRTC) [2014] 366 ITR 170 (Gujarat) and Delhi High Court in CIT Vs Bharat Hotels (2019) 410 ITR 417 (Delhi). Further aggrieved, the assessee has filed the present appeal before this Tribunal. 3. We have heard the submissions of parties and have gone through the orders of the lower authorities carefully. At the outset of hearing, the ITA No. 127/Srt/2022 Shashwat Manufacturing Vs DCIT 3 learned Senior Departmental Representative (ld. Sr DR) for the revenue submits that the grounds of appeal raised by the assessee is covered against the assessee by the latest decision of Hon’ble Apex Court in the case of Checkmate Services Private Limited Vs CIT in Civil Appeal No. 2833 of 2016 dated 12/10/2022 wherein the Hon’ble Apex Court held that it is an essential condition for claiming such deduction that employee’s contribution of ESI and PF are deposited on or before due date. It was further held that non-obstante clause under Section 43B or in any content in that provision would not absolve the assessee from its liability to deposit the employee’s contribution on or before due date for filing return as a condition for deduction. 4. On the other hand, the learned Authorised Representative (ld. AR) of the assessee has relied on many decisions of various Hon’ble High Courts as well as Tribunals and submits that the assessee has deposited the employee’s contribution towards ESI and PF before filing of return of income. The ld AR for the assessee also submits that no adjustment / disallowance of Contribution of ESI & PF can be made under section 143(1)(a) 5. We have considered the submissions of both the parties and have gone through the orders of lower authorities. We have also gone through the case laws relied upon by both the parties. We find that the lower authorities disallowed the deduction of employees’ contribution of ESI ITA No. 127/Srt/2022 Shashwat Manufacturing Vs DCIT 4 and PF and other funds by taking a view that such contribution was paid beyond due date prescribed under the said Act. We find that the Hon'ble Apex Court in the case of Checkmate Services Private Limited Vs CIT (supra) in a recent decision by considering divergent views of various High Courts held that it is an essential condition for deduction of such amount are that employees’ contribution are deposited on or before due date under the statutory provisions under such Acts. It was further held that non-obstante clause would not in any manner dilute or override the employees’ obligation to deposit the amount retained by it or deducted by it from employee’s income, unless the condition i.e. deposited on or before due date, is correct and justified. The non-obstante clause has to be understood in the context of entire provisions of Section 43B which is to ensure timely payment before the returns are filed of certain liabilities which are to be borne by assessee in the form of tax, interest payment and other liabilities. The decision of Hon'ble Apex Court is a binding precedent by virtue of Article 141 of the Constitution of India. Therefore, we do not find any merit in the grounds of appeal raised by the assessee. 6. In the result, this appeal of assessee is dismissed. Order pronounced in the open court on 13 th December, 2022. Sd/- Sd/- (Dr. ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 13/12/2022 *Ranjan ITA No. 127/Srt/2022 Shashwat Manufacturing Vs DCIT 5 Copy to: 1. Assessee – 2. Revenue - 3. CIT(A) 4. CIT 5. DR 6. Guard File By order Sr. Private Secretary, ITAT, Surat