Elysium Pharmaceuticals Limited, Vodadara V. The Asstt.CIT.,Circle-1(1)(2), Vadodara

ITA 383/AHD/2022

AI Insights

Elysium Pharmaceuticals Ltd. appealed against the order of the Commissioner of Income Tax (Appeals), which confirmed the addition of Rs. 31,38,091 to their income for the late deposit of employees' contributions to PF/ESI. The Tribunal considered the Supreme Court's decision in Checkmate Services P. Ltd. and other relevant cases, which established that for assessment years prior to AY 2021-22, the non obstante clause under section 43B does not apply to amounts held in trust, such as employees' contributions. Therefore, the assessee's failure to deposit these contributions by the due dates disqualifies them from deduction under Section 36(1)(va). The Tribunal dismissed the appeal, affirming the addition made by the Assessing Officer.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 125034 (ITAT-AHMEDABAD)
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-09-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 09-10-2022
• Other Referred Cases: Checkmate Services P. Ltd. v/s. Commissioner of Income Tax-1, Harrisons Malayalam Ltd., Gujarat State Road Transportation Corporation, Pr. CIT v. Suzlon Energy Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business expenditure; Deemed to accrue or arise in india
• Section: 43B; 139; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I .T .A . No .3 83 /A h d / 20 22 ( A s se ss m e nt Y e a r : 20 14- 15 ) El ys i u m Pha r m ac eu tic a l s Lt d ., Pl ot N o . 1 1 75 , Po s t D a b h as a , Pa d r a , V a d o da r a- 39 14 4 0 V s .As s is ta nt C o m mi s s i one r of I nc o me Ta x , C ir c l e- 1 ( 1 ) ( 2 ) , Va do dar a [ P AN N o. A A BC E1 23 2 A ] (Appellant) .. (Respondent) Appellant by : None (Written Submission) Respondent by: Shri Ashok Kumar Suthar, Sr. D.R. D a t e of H ea r i ng 18.09.2023 D a t e of P r o no u n ce me nt 19.09.2023 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(Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre, (in short “NFAC”), Delhi in Order No. ITBA/NFAC/S/250/2022-23/1044801753(1) vide order dated 18.08.2022 passed for Assessment Year 2014-15. 2. The assessee has taken the following grounds of appeal:- “1. The Ld. Commissioner (Appeals) has erred in confirming the order of ACIT without considering our submission and has made addition in the Assessment order. ITA No. 383/Ahd/2022 Elysium Pharmaceuticals Ltd. vs. ACIT Asst.Year –2014-15 - 2– He further erred in holding that such payment is disallowed as there was a delay in the depositing the same to the Government treasury. He failed to appreciate that- The payment being done has to be allowed u/s 36 of the Act. The Appellant prays that the AO be directed to allow the said contribution Rs. 31,38,091/- as business expenses u/s 36 of the Act. So, it is prayed to your honour that addition may please be deleted. 2. The ld. Commissioner (Appeals) ought not to have confirmed the issue/ items for which disallowance/ additions made in the assessment order are highly debatable and favourable ruling for allow ability of the said before the due date of filing of Return of Income u/s 139 of the Act. 3. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.” 3. The brief facts of the case are that the assessee for the year under consideration, did not pay the Employees’ contribution to ESIC / PF by the due dates as specified in the respective Act, as pointed out by the Auditor in the Tax Audit Report. Accordingly, the Assessing Officer made an addition of Rs. 31,38,091/- under Section 36(1)(va) of the Act on account of late contribution in the Employees’ contribution to PF/ESI. 4. Before us a written submission has been filed by the assessee vide letter dated 29.08.2023, in this written submission the assessee raise the following observation which are reproduced as under:- ITA No. 383/Ahd/2022 Elysium Pharmaceuticals Ltd. vs. ACIT Asst.Year –2014-15 - 3– “We noticed that hearing of subject appeal speaks on the Disallowance of the delayed payment of employees contribution in PF and ESIC of Rs. 31,38,091/- but before filing of return u/s 139. However, the matter is already decided by Supreme Court in the case of 2022 (10) TMI 617 – Supreme Court Checkmate Services P. Ltd. v/s. Commissioner of Income Tax-1 against Assessee. We earnestly requested that the subject matter may please be decided considering the said judgement of the checkmate case.” 5. The assessee is in appeal before us against the aforesaid order passed by the Ld. CIT(A) confirming the addition. 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. [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 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 ITA No. 383/Ahd/2022 Elysium Pharmaceuticals Ltd. vs. ACIT Asst.Year –2014-15 - 4– 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. Further, the issue is also squarely covered against the assessee by the Jurisdictional High Court decision in case of Gujarat State Road Transportation Corporation (2014) 41 taxman.com 100, wherein it was held that where assessee did not deposit employees' contribution to employees' account in relevant fund before due date prescribed in Explanation to section 36(1)(va), no deduction would be admissible even though he deposits same before due date under section 43B of the Act. Again, the Gujarat High Court in the case of Pr. CIT v. Suzlon Energy Ltd. [2020] 115 taxmann.com 340 (Gujarat) held that where assessee had not deposited employees' contributions towards PF and ESI within prescribed period in law and Assessing Officer by invoking provisions of section 36(1)(va) read with section 2(24)(x) made addition of aforesaid amount to income of assessee, impugned addition made to income of assessee was justified. ITA No. 383/Ahd/2022 Elysium Pharmaceuticals Ltd. vs. ACIT Asst.Year –2014-15 - 5– 6. Respectfully following the above decisions of Hon'ble Supreme Court and Jurisdictional High Gujarat High Court, we hold that there is no infirmity in the order passed by Ld. CIT(A). 7. In the result, the appeal of the assessee is dismissed. This Order pronounced in Open Court on 19/09/2023 Sd/- Sd/- (WASEEM AHMED) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 19/09/2023 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 19.09.2023 2. Date on which the typed draft is placed before the Dictating Member 19.09.2023 3. Other Member..................... 4. Date on which the approved draft comes to the Sr.P.S./P.S .09.2023 5. Date on which the fair order is placed before the Dictating Member for pronouncement .09.2023 6. Date on which the fair order comes back to the Sr.P.S./P.S 19 .09.2023 7. Date on which the file goes to the Bench Clerk 19 .09.2023 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..........................................