Bercos Melody House, New Delhi V. DCIT Circle 52(1), New Delhi

ITA 277/DEL/2023

AI Insights

The case involves two appeals by Bercos Melody House against the orders of the CIT(Appeals)-NFAC, Delhi, for the assessment years 2018-19 and 2019-20. The appeals contest the disallowance of PF & ESI contributions under section 36(1)(va) of the Income Tax Act, which were initially disallowed by the Assessing Officer (CPC, Bengaluru) due to late deposit. The assessee argued that the contributions were made in the months following the salary disbursement, thus should be considered timely. The ITAT referenced similar cases and precedents, particularly the decision in Sentinel Consultants Pvt. Ltd. Vs. ACIT, which led to the restoration of the matter to the AO for factual verification and compliance with legal standards.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 113314 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-09-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 05-02-2023
• Other Referred Cases: Rekha Vs. ITO, Kanoi Paper & Industries Ltd. Vs. ACIT, Sentinel Consultants Pvt. Ltd. Vs. ACIT, Checkmate Pvt. Ltd. vs. CIT, Weather Comfort Engineers Private Limited vs. ACIT-CPC, Pr.CIT vs. Khyati Realtors (P) Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 37; 37(1); 143(1)

Judgement Text

I.T.A. Nos. 277 & 278/Del/2023 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “A” NEW DELHI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER आ .अ.स ं /.I.T.A No.277/Del/2023 /Assessment Year:2018-19 Bercos Melody House, B-26, Mayfare Gardens, Hauz Khas, New Delhi. ब म Vs. DCIT Circle 52(1), New Delhi. PAN No. AAAFB0104C अ Appellant /Respondent & आ.अ.स ं /.I.T.A No.278/Del/2023 /Assessment Year:2019-20 Bercos Melody House, B-26, Mayfare Gardens, Hauz Khas, New Delhi. बनाम Vs. ACIT Circle 52(1), Delhi. PAN No. AAAFB0104C अ Appellant /Respondent न ा /Assessee by Shri Rakesh Nanda, FCA ा /Revenue by Shri Zafarul Haque Tanweer, CIT DR न ा ा / Date of hearing: 19.09.2023 ा ा /Pronouncement on 25.09.2023 आदेश /O R D E R PER BENCH: These two appeals are filed by the assessee against the order of the Ld.CIT(Appeals)-NFAC, Delhi for the assessment years 2018-19 I.T.A. Nos. 277 & 278/Del/2023 2 and 2019-20 in sustaining the action of the Assessing Officer (CPC, Bengaluru) in disallowing PF & ESI contributions u/s 36(1)(va) of the Act. 2. The only contention of the assessee in these two assessment years are that the contributions towards PF & ESI for the month of April, May and July 2017 for the AY 2018-19 have been actually paid in the subsequent months i.e. May, June and August, 2017 and, therefore, the due date for deposit of PF & ESI shall be reckoned from the month in which disbursement of salary was made. Similar is the case for the AY 2019-20. The Ld. Counsel placing reliance on the decision of the coordinate bench in the case of Rekha Vs. ITO [ITA No.584/Del/2023] dated 09.08.2023 submits that identical issue has been considered by the coordinate bench and the matter is restored for factual verification and redetermination of the issue in the light of the decision of the Kolkata Bench of the Tribunal in Kanoi Paper & Industries Ltd. Vs. ACIT (75 TTJ 448). 3. The Ld. DR supported the orders of the authorities below. 4. Heard rival submissions. Identical issue came up before the coordinate bench in the case of Rekha Vs. ITO, ITA No.584/Del/2020 dated 09.08.2023 and also in the case of Sentinel Consultants Pvt. I.T.A. Nos. 277 & 278/Del/2023 3 Ltd. Vs. ACIT, ITA No. 7 & 8/Del/2023 dated 12.06.2023. The coordinate bench in the case of Sentinel Consultants Pvt. Ltd. Vs. ACIT (supra) restored the issue to the file of the AO with the following observations: - “9. We have carefully considered the rival submissions and perused the material available on record. The disallowance of employees’ contribution to PF/ESIC for breach of condition under Section 36(1)(va) is in controversy. 9.1 We notice at the outset that an opportunity was given via electronic platform of the deptt. for the proposed adjustments and in the absence of e-response, the adjustments were carried out the CPC- Bangluru and intimation was issued enhancing the assessed income in the captioned assessment years. The CIT(A) in the first appeal has sustained the adjustments towards belated deposits of employees’ contribution to PF/ESIC in the light of the judgment rendered by the Hon’ble Supreme Court in Checkmate Pvt. Ltd. vs. CIT (2022) 143 taxmann.com 178 (SC). The contention of the Assessee that such additions cannot be made under the umbrella of S. 143(1) is covered against the assessee the decision of the co-ordinate bench in the case of Weather Comfort Engineers Private Limited vs. ACIT-CPC ITA No. 959/Del/2021 order dated 15/02/2023. The action of CPC and CIT(A) thus cannot be faulted where some opportunity was admittedly given for e- response. 9.2 We now turn to alternate plea on behalf of the assessee for grant of deduction under general provisions for deduction of expenditure under S. 37 of the Act. We do not see any merit in such plea that the belated deposit of employees contributions to PF/ESIC governed under Section 36(1)(va) is also simultaneously amenable to deduction under Section 37(1) of the Act. In terms of the provision, Section 37(1) permits deduction of expenditure which is not in the nature of expenditure I.T.A. Nos. 277 & 278/Del/2023 4 prescribed in Sections 30 to 36 of the Act and also not being in the nature of capital expenditure or personal expenses of the assessee. Thus, in view of such mandate of law, the deduction of expenditure under the general clause of Section 37(1) would not extend to expenditure specially covered within the ambit of Section 36(1)(va) of the Act. The Hon’ble Supreme Court in the case of Checkmate Pvt. Ltd. (supra) itself explains this position in Para 32 of the Judgment. Such view also draws support from the observations made in recent judgment of the Hon’ble Supreme Court in the case of Pr.CIT vs. Khyati Realtors (P) Ltd. (2022) 141 taxmann.com 461 (SC). The alternate plea is thus without any merit. 9.3 We also take note of yet another plea made out on behalf the assessee towards methodology of calculation of default under the relevant PF/ESIC Act. The Ld. Counsel contends that the month during which the disbursement of salary is actually made would be relevant for the purposes of determination of due date of deposit under the respective statute. The accrual of liability towards payment of salary without actual disbursement would not fasten obligation for deposits of employees contribution in the labour Acts per se. as observed by the co-ordinate bench in Kanoi Paper and Industries Ltd. vs. ACIT (2002) 75 TTJ 448 (Cal). This aspect has not been found to be examined by the Assessing Officer or CIT(A). Hence without expressing any opinion on merits on this aspect, we deem it expedient to restore the matter to the file of designated AO. It shall be open to the assessee to place factual matrix before the AO and take such plea for evaluation of the AO. The AO shall examine this aspect and fresh order in accordance with law after giving proper opportunity.” I.T.A. Nos. 277 & 278/Del/2023 5 5. Following the decision of the coordinate bench, we restore this issue to the file of the AO to decide the issue in the light of the observations made by the coordinate bench in the case of Sentinel Consultants Pvt. Ltd. and also the decision of the Kolkata Bench in the case of Kanoi Paper & Industries Ltd. Vs. ACIT (supra). Needless to say that the Assessing Officer shall provide adequate opportunity of being heard to the assessee, the assessee is at liberty to provide all the necessary information in support of its contention. 6. In the result, appeals of the assessee are allowed for statistical purpose. Order pronounced in the open court on 25.09.2023 Sd/- Sd/- (PRADIP KUMAR KEDIA) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 25.09.2023 *Kavita Arora, Sr. P.S. Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order Assistant Registrar, ITAT: Delhi Benches-Delhi