M/s. General Power System, Nashik V. The Income Tax Officer, Ward-1(1), Nashik

ITA 960/PUN/2023

AI Insights

The case involves M/s. General Power System appealing against the order of the National Faceless Appeal Centre (NFAC), which confirmed the disallowance of Rs.7,07,429 for late deposit of employees' contributions to ESI and EPF. The disallowance was initially made by the Central Processing Centre (CPC), Bengaluru, and was based on the late deposit beyond the due dates prescribed under the respective Acts, although the amounts were deposited before the due date under section 139(1) of the Income-tax Act. The Tribunal considered the amendments made by the Finance Act, 2021, which clarified that the due dates for the deposit of employees' contributions are those stipulated under the respective Acts, and section 43B does not apply to these contributions. The Tribunal agreed with the CIT(A) on the disallowance of employees' contributions but allowed the appeal regarding the employer's contributions, remitting the matter back to the AO for further action.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 124093 (ITAT-PUNE)
• Duration Of Justice: 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 04-10-2023
• Assessment Year: 2019-2020
• Appeal Filed On: 28-08-2023
• Other Referred Cases: Checkmate Services Pvt. Ltd. (2022) 448 ITR 518 (SC)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Department Lawyers: KUMAR ARVIND BHARDWAJ
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT आयकर अपीऱ सं. /ITA No.960/PUN/2023 निर्धारण वषा / Assessment Year : 2019-20 M/s. General Power System, Plot No.26, Vaibhav Niwas, Shivaji Nagar, Dindori Road, Mhasrul, Panchavati, Nashik 422 004 Maharashtra PAN : AAJFG5474D Vs. ITO, Ward-1(1), Nashik Appellant Respondent आदेश / ORDER PER R.S. SYAL, VP: This appeal by the assessee arises out of the order dated 06-03-2023 passed by the National Faceless Appeal Centre (NFAC), Delhi u/s.250 of the Income-tax Act, 1961 (hereinafter also called „the Act‟) in relation to the assessment year 2019-20. 2. The only issue raised in this appeal is against the confirmation of disallowance u/s.36(1)(va) amounting to Rs.7,07,429/- made by the ADIT, CPC, Bengaluru in the intimation u/s.143(1) towards late deposit of employee‟s contribution to ESI and EPF etc. Assessee by Shri Sanket Joshi Revenue by Shri Kumar Arvind Bhardwaj Date of hearing 05-10-2023 Date of pronouncement 06-10-2023 ITA No. 960/PUN/2023 M/s. General Power System 2 3. Briefly stated, the facts of the case are that the CPC, Bengaluru made the disallowance of Rs.7,07,429/- on account of late deposit of the employee‟s share of contribution to ESI/EPF beyond the due date under the respective Acts but paid before the due date u/s.139(1) of the Act. The ld. CIT(A) affirmed the intimation by relying on the Hon‟ble Supreme Court judgment in the case of Checkmate Services Pvt. Ltd. (2022) 448 ITR 518 (SC). Aggrieved thereby, the assessee has come up in appeal before the Tribunal. 4 Having heard the rival submissions and gone through the relevant material on record, it is seen that the issue of disallowance of employee‟s contribution to ESI and EPF etc. u/s.36(1)(va) has been set to rest by the Hon‟ble Supreme Court in the aforenoted case of Checkmate Services (supra) by holding that the delay in the deposit of the employee‟s share beyond the due date prescribed under the respective Acts has to be confirmed notwithstanding the fact that the amount was actually deposited before the due date u/s.139(1) of the Act. It is further noted that the Finance Act, 2021 has inserted Explanation 1 to section 36(1)(va) providing that the due date for the purpose of this clause means “the date by which the assessee is required as an employer to credit an employee‟s contribution to the employee‟s account in the relevant fund under any Act, rule or order ITA No. 960/PUN/2023 M/s. General Power System 3 or notification issued thereunder or under any standing order, award, contract of service or otherwise”. Explanation 2 has also been inserted by the same Finance Act clarifying for the removal of doubts “that the provisions of section 43B shall not apply and shall be deemed never to have been applied for the purpose of determining the `due date‟ under this clause”. The effect of insertion of these two Explanations to section 36(1)(va) is that the due date for the purposes of deposit of employees‟ share will have to be considered as the one which is stipulated under the respective Acts; and that the provisions of section 43B, granting the benefit of deduction even if the amount is actually paid after the close of the year but before the due date u/s 139(1) of the Act, shall not apply. Simultaneous amendment has been carried out to section 43B by means of insertion of Explanation 5 by the same Finance Act, 2021, again for the removal of doubts “that the provisions of this section shall not apply and shall be deemed never to have been applied to a sum received by the assessee from any of his employees to which the provisions of sub-section (x) of clause (24) of section 2 applies”. The net effect of the amendments made to sections 36(1)(va) and 43B, which are patently clarificatory in nature, is that deduction in respect of employees‟ share of ESI/EPF etc. will be allowed to the employer only if it is actually paid by the stipulated ITA No. 960/PUN/2023 M/s. General Power System 4 date under the respective Acts. In case, such an amount is paid beyond the due date under the respective Acts but before the due date u/s.139(1) of the Act, the deduction is lost forever. Notwithstanding the above, the share of employer‟s contribution to recognized provident fund etc. continues to get deducted in the same previous year even if it is paid beyond the due date under the respective Acts but before the due date for filing of return u/s.139(1). In view of the above position, I hold that the authorities below were justified in not allowing deduction u/s.36(1)(va) in respect of employee‟s contribution to ESI/EPF. 5. The ld. AR submitted that while making the disallowance, the CPC, Bengaluru considered not only the contribution by the employee‟s to these funds but also the contribution made by the employer as well. It was submitted that the contribution made by the employer needs to be allowed as deduction in terms of section 43B of the Act. I agree with the contention of the ld AR that deduction towards the employer‟s share of ESI/EPF etc. needs to be allowed in the year under consideration if the payment is made before the time granted u/s.139(1) of the Act for filing of the return. I, therefore, set- aside the impugned order to this extent and remit the matter to the file of the AO for examining the details and restricting the disallowance in ITA No. 960/PUN/2023 M/s. General Power System 5 above terms. Needless to say, the assessee will be allowed reasonable opportunity of hearing. 6. In the result, the appeal is allowed for statistical purposes. Order pronounced in the Open Court on 06 th October, 2023. Sd/- (R.S.SYAL) VICE PRESIDENT प ु णे Pune; ददिधंक Dated : 06 th October, 2023 Satish आदेश की प्रतिलिपि अग्रेपिि/Copy of the Order is forwarded to: 1. अपीऱधर्थी / The Appellant; 2. प्रत्यर्थी / The Respondent; 3. The Pr.CIT concerned 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण, SMC, Pune / DR, ITAT, Pune 5. गार्ड फाईल / Guard file आदेशान ु सार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अविकरण ,पुणे / ITAT, Pune ITA No. 960/PUN/2023 M/s. General Power System 6 Date 1. Draft dictated on 05-10-2023 Sr.PS 2. Draft placed before author 06-10-2023 Sr.PS 3. Draft proposed & placed before the second member JM 4. Draft discussed/approved by Second Member. JM 5. Approved Draft comes to the Sr.PS/PS Sr.PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *