Shri Siddhesh Kumar Gaur , Jodhpur V. ADIT, CPC, ACIT, Circle-3, Bengaluru / Jodhpur

ITA 18/JODH/2023

AI Insights

The case involves Siddhesh Kumar Gaur, the appellant, contesting the decision of the CIT(A) and the assessing officer regarding the disallowance of deductions for employees' contributions to PF/ESI. The primary legal contention was whether these contributions, which were not deposited by the statutory due dates, could be allowed as deductions under Section 36(1)(va) of the Income Tax Act. The Tribunal referenced the Supreme Court's decision in Checkmate Services Pvt. Ltd. vs. CIT-I, which established that such contributions are deemed income of the employer and are only deductible if deposited by the due dates specified under the relevant laws. The Tribunal dismissed the appeal, aligning with the Supreme Court's precedent.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 122875 (ITAT-JODHPUR)
• Duration Of Justice: 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 19-09-2023
• Assessment Year: 2019-2020
• Appeal Filed On: 23-01-2023
• Other Referred Cases: Checkmate Services Pvt. Ltd. vs. CIT-I, Commissioner of Income Tax vs. Alom Extrusions Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJEEV MOHAN
• Keywords: Business expenditure
• Section: 40A(3); 40(a)(ia); 37(1); 143(1); 43

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH: JODHPUR Before Shri Saktijit Dey, Vice President Dr. B. R. R. Kumar, Accountant Member ITA No.18/Jodh/2023 : Asstt. Year: 2019-20 Siddhesh Kumar Gaur, C/o CA. Manoj Gupta, 16, Imertiya Bera, Paota C Road, Jodhpur. Vs ADIT, CPC, Bengaluru. (APPELLANT) (RESPONDENT) PAN No. JDHS13393C Assessee by : None Revenue by : Sh. Rajeev Mohan, JCIT-DR Date of Hearing: 20.09.2023 Date of Pronouncement: 22.09.2023 ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeal has been filed by assessee against the order of ld. CIT(A), Udaipur-2, dated 25.11.2022. 2. Following grounds have been raised by the assessee: 1. Because the order passed by learned CIT(A) dismissing appeal is bad in law. 2. Because the learned CIT(A) erred in confirming the disallowances made by the learned assessing officer under section 143(1) making the disallowance under section 36(1)(va). 3. Because the learned CIT(A) erred in dismissing the alternate plea that even if the employees contribution to PF/ESI is not allowable u/s 36(1)(va) then the same is allowable u/s 37(1) as business expenditure. ITA No.18/Jodh/2023 Siddhesh Kumar Gaur 2 4. Because the learned CIT(A) erred in confirming the order made by the learned assessing officer making disallowance under section 40(a)(ia) in the facts and circumstances of the case. 5. Because the learned CIT(A) erred in confirming the order made by the learned assessing officer making disallowance under section 40A(3) in the facts and circumstances of the case. 6. The appellant craves leave to add/alter/ any of the grounds of appeal on or before date of hearing. 3. The issue of ESI/PF payment has attained finality by the order of the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs. CIT-I, vide order dated 12 th October, 2022 wherein it was observed that employers have to deposit the employee's contribution towards EPF/ESI on or before the due date for availing deduction. In the cases before the Hon’ble Apex Court, the employers had belatedly deposited their employees' contribution towards the EPF and ESI, considering the due dates under the relevant provisions of the Act. The Assessing Officer ruled that by virtue of Section 36(1)(va) read with Section 2(24)(x) of the IT Act, such sums received by the appellants constituted "income". It was held that those amounts could not have been allowed as deductions under Section 36(1)(va) of the IT Act when the payment was made beyond the relevant due date under the respective acts. The Income Tax Appellate Tribunal and later the Gujarat High Court dismissed the challenge against this order of AO. In appeal, the court noted that the Hon’ble Kerala High Court has also ruled in favour of revenue on this issue whereas the Hon’ble High Courts of Bombay, Himachal Pradesh, Calcutta, Guwahati and Delhi ITA No.18/Jodh/2023 Siddhesh Kumar Gaur 3 have favoured the interpretation beneficial to the assessee. The Hon’ble Apex Bench effectively reversed the judgment in Commissioner of Income Tax vs. Alom Extrusions Ltd. (1 SCC 489) relied upon by the assessee. 4. The Hon’ble Apex Court in the case of Checkmate Services P. Ltd. vs. Commissioner Of Income Tax-I in CA No. 2833/2016 vide order dated 12.10.2022 observed that there is a marked distinction between the nature and character of the two amounts viz., the employers’ contribution and employees’ contribution required to be deposited by the employer. The first one is the employer’s liability is to be paid out of its income whereas the second is deemed an income, by definition, since it is the deduction from the employees’ income and held in trust by the employer. The Hon’ble Apex Court held as under: "In the opinion of this Court, the reasoning in the impugned judgment that the non-obstante clause would not in any manner dilute or override the employer's obligation to deposit the amounts retained by it or deducted by it from the employee's income, unless the condition that it is deposited on or before the due date, is correct and justified. The non-obstante clause has to be understood in the context of the entire provision of Section 43 B which is to ensure timely payment before the returns are filed, of certain liabilities which are to be borne by the assessee in the form of tax, interest payment and other statutory liability. In the case of these liabilities, what constitutes the due date is defined by the statute. Nevertheless, the assessees are given some leeway in that as long as deposits are made beyond the due date, but before the date of filing the return, the deduction is allowed. That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees' contributions- which are deducted from their income. They are not part of the assessee employer's income, nor are they heads of deduction per se in the form of statutory pay out. They are others' income, monies, only deemed to be income, with the object of ensuring that they are paid within the ITA No.18/Jodh/2023 Siddhesh Kumar Gaur 4 due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. If such interpretation were to be adopted, the non-obstante clause under Section 43 B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee's contribution on or before the due date as a condition for deduction." 5. As the issue of payment of employees contribution towards the PF has been ruled against the assessee by the Hon’ble Supreme Court, the appeal of the assessee on this ground is liable to be dismissed. 6. In the result, the appeal of the assessee is dismissed. Order Pronounced in the Open Court on 22/09/2023. Sd/- Sd/- (Saktijit Dey) (Dr. B. R. R. Kumar) Vice President Accountant Member Dated: 22/09/2023 *dk* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR