Max Vigil Security Expert Pvt. Ltd., Ahmedabad V. The DCIT, Circle-2(1)(2), Ahmedabad

ITA 46/AHD/2022

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Max Vigil Security Expert Pvt. Ltd. appealed against the order of the National Faceless Appeal Centre, which confirmed the addition of Rs. 63,26,850 for late remittance of employees' contributions to PF and ESIC under section 36(1)(va) read with section 2(24)(x) of the Income Tax Act. The Tribunal noted that the issue had been settled by the Supreme Court, which ruled that such contributions must be deposited by the due date to qualify for deduction. The Tribunal dismissed the appeal, aligning with the Supreme Court's precedent.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131403 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-06-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 10-02-2022
• Other Referred Cases: Gujarat State Road Transport Corporation vs. CIT, Essae Teraoka (P.) Ltd. vs. DCIT, Checkmate Services (P.) Ltd. vs. CIT, Harrisons Malayalam Ltd. vs. CIT, Ms. Nalina Dyave Gowda vs. CIT, Cemetile Industries vs. ITO
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 43B; 250

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH Before: Ms. Annapurna Gupta, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member Max Vigil Security Ex pert Pvt. Ltd. 42, Astha Avenue, Opp. RTO Circle, Subhash Bridge, Ah medabad -3 80027 PAN: AAFCM0 319Q (Appellant) Vs Dy . CIT, Circle-2(1)(2 ) Ah med abad (Resp ondent) Asses see b y : Shri Su res h Ga ndhi, A.R. Revenue by : Shri Bhola ram Dev ashi, Sr. D. R. Date of hearing : 14-06 -2 023 Date of pronouncement : 16-06 -2 023 आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This is an appeal filed by the assessee against the order of the National Faceless Appeal Centre, (NFAC), Delhi, in proceeding u/s. 250 vide order dated 16/12/2021 passed for the assessment year 2017-18. ITA No. 46/Ahd/2022 Assessment Year 2017-18 I.T.A No. 46/Ahd/2022 A.Y. 2017-18 Page No. Max Vigil Security Expert Pvt. Ltd. vs. DCIT 2 2. The assessee has taken the following grounds of appeal:- “1. The learned CIT(A) has erred in law and on facts in confirming the addition of Rs. 63,26,850/- on account of late remittance of employees' contribution to P.P. & E.S.I.C. u/s. 36(l)(va) r.w.s. 2(24(x) of the Act made by the A.O., relying upon the decision of the Hon'ble Gujarat High Court in the case of Gujarat State Road Transport Corporation [2014] 41 taxmann.com 100 (Guj.) and other legal decisions mentioned in the order. It is submitted with due respect to the said decision that subsequently the Hon'ble Karnataka High Court in the case of Essae Teraoka (P.) Ltd. vs. DCIT [2014] 43 taxmann.com 33 (Karnataka) has taken a view in favor of the assessee while disagreeing with the decision of the Hon'ble Gujarat High Court. That apart, since the SLP filed against the said decision before the Hon'ble Supreme Court having been admitted, the issue in dispute being addition of Rs. 63,26,850/- be decided accordingly.” 3. At the outset, the counsel for the assessee submitted that the issue for the impugned year under consideration relates to disallowance on account of late remittance of employee’s contribution to PF and ESIC, and the issue has now been settled by the Hon'ble Supreme Court against the assessee. Accordingly, this ground may be decided against assessee in light of the decision rendered by Hon'ble Supreme Court. 4. We observe that the position on this issue has now been unambiguously clarified by the Hon'ble Supreme Court with respect to all I.T.A No. 46/Ahd/2022 A.Y. 2017-18 Page No. Max Vigil Security Expert Pvt. Ltd. vs. DCIT 3 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 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. Recently in the case of Ms. Nalina Dyave I.T.A No. 46/Ahd/2022 A.Y. 2017-18 Page No. Max Vigil Security Expert Pvt. Ltd. vs. DCIT 4 Gowda [2023] 146 taxmann.com 420 (Bangalore - Trib.) the assessee during, financial year 2018-19 (assessment year 2019-20) made payment of employees' contribution to ESI and PF beyond due date specified under relevant Act and claimed deduction of same under section 36(1)(va). The Assessing Officer made disallowance of employees' contribution to ESI and PF while electronically processing return of income under section 143(1)(a) of the Act. The ITAT held that disallowance under section 143(1)(a) was valid in view of Supreme Court's decision in case of Checkmate Services (P.) Ltd. v. CIT [2022] 143 taxmann.com 178 and the assessee will not be entitled to deduction of belated payment of ESI and PF of employees' share of contribution as per provisions of section 36(1)(va) of the Act. Again, recently Pune ITAT in the case of Cemetile Industries v. ITO [2022] 145 taxmann.com 209 (Pune - Trib.) held that where assessee-employer deposited amount of employees contribution towards employees' provident fund and employees' state insurance corporation beyond due date stipulated in respective Acts, disallowance made under section 36(1)(va) was justified. The ITAT further held that adjustment under section 143(1)(a) by means of disallowance made for late deposit of employees' share to relevant funds beyond date prescribed under respective Acts was proper. 5. In view of the above observations respectfully following the decision of the Honourable Supreme Court in the case of Checkmate Services Private Ltd supra and Harrisons Malayalam Ltd supra and in the light of our observations, we hereby dismiss the assessee’s appeal. I.T.A No. 46/Ahd/2022 A.Y. 2017-18 Page No. Max Vigil Security Expert Pvt. Ltd. vs. DCIT 5 6. In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on 16-06-2023 Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 16/06/2023 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/ आदेश से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद