INDU BALA SAINI, FARIDABAD V. ITO,Ward-1(3), Faridabad

ITA 199/DEL/2023

AI Insights

The case involves Indu Bala Saini, the appellant, contesting an order from the National Faceless Appeal Centre (NFAC), Delhi, regarding the assessment year 2017-18. The core issue was the timing of the deposit of employees' contributions to EPF/ESI, which the Supreme Court has ruled must be deposited by the due date to qualify for deductions under the Income Tax Act. The Assessing Officer had initially ruled these contributions as income when not deposited by the due date, a decision upheld by the Income Tax Appellate Tribunal and the Gujarat High Court. However, conflicting decisions from other High Courts and the Supreme Court's recent judgment in Checkmate Services P. Ltd. highlighted the need for a re-examination of the case, particularly concerning the technical delays claimed by the assessee in depositing these contributions.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 116162 (ITAT-DELHI)
• Duration Of Justice: 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 06-08-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 29-01-2023
• Other Referred Cases: Commissioner of Income Tax vs. Alom Extrusions Ltd., Checkmate Services P. Ltd. vs. Commissioner Of Income Tax-I
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 43

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘C’, NEW DELHI Before Sh. C. M. Garg, Judicial Member Dr. B. R. R. Kumar, Accountant Member ITA No. 199/Del/2023 : Asstt. Year : 2017-18 Indu Bala Saini, 182/3E, Faridabad, Haryana Vs Income Tax Officer, Ward-1(3), Faridabad (APPELLANT) (RESPONDENT) PAN No. ADZPS5766K Assessee by : None Revenue by : Sh. Vivek Vardhan, Sr. DR Date of Hearing: 07.08.2023 Date of Pronouncement: 31.08.2023 ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeal has been filed by the assessee against the order of National Faceless Appeal Centre (NFAC), Delhi dated 01.12.2022 for AY 2017-18. 2. The issue of due date of deposit of ESI & PF has attained finality by the order of the Hon’ble Supreme Court 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 ITA No. 199/Del/2023 Indu Bala Saini 2 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 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. 3. 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 ITA No. 199/Del/2023 Indu Bala Saini 3 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 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." 4. Since, the assessee has taken the ground that the deposit has been delayed by one or two days due to technical issues in the respective website of the ESI & PF, we remand the matter to the file of the Assessing Officer to examine the issue of non- operation of website during the relevant period and take a decision in accordance with the judgment of Hon’ble Supreme Court in the case of Checkmate Services P. Ltd. vs. Commissioner Of Income Tax-I (supra). 5. In the result, the appeal of the assessee is allowed ex- parte for statistical purpose. Order Pronounced in the Open Court on 31/08/2023. Sd/- Sd/- (C. M. Garg) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 31/08/2023 *Subodh Kumar, Sr. PS*