JYOTI WEIGHING SYSTEMS PRIVATE LIMITED,INDORE V. DCIT, CPC BENGALURU, BANGLORE

ITA 3496/DEL/2024

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The case involves Jyoti Weighing Systems Private Limited, the appellant, contesting the adjustments made by the CPC in the assessment year 2018-19. The adjustments were related to disallowances under section 36(1)(va) of the Income Tax Act concerning employee contributions to PF/ESI. The primary legal contention was whether the deductions for these contributions were permissible when the payments were not made by the due dates specified under the respective statutes. The CIT(A) and the Tribunal both relied on the Supreme Court's decision in Checkmate Services Private Limited Vs. CIT, which clarified that such contributions must be paid within the due dates to be eligible for deductions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 34210 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2018-2019
• Other Referred Cases: Checkmate Services Private Limited Vs. CIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: OM PRAKASH
• Section: 143(1); 139(1); 234B; 43B

Judgement Text

"ITA No.3496/Del/2024 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “C” NEW DELHI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER आ.अ.सं/.I.T.A No.3496/Del/2024 िनधा\tरणवष\t/Assessment Year:2018-19 Jyoti Weighing Systems Private Limited, 88, Jaora Compound CGO Complex Indore, Madhya Prades. बनाम Vs. DCIT, CPC, Bengaluru, Post Bag 2, Electronic City, Post Office, Bangalore, Karnataka. अपीलाथ\u0014 Appellant \u0016\u0017यथ\u0014/Respondent Assessee by None Revenue by Shri Om Prakash, Sr. DR सुनवाईक\bतारीख/ Date of hearing: 07.02.2025 उ\u000eोषणाक\bतारीख/Pronouncement on 19.02.2025 आदेश /O R D E R PER C.N. PRASAD, J.M. This appeal is filed by the assessee against the order of the Ld.CIT(Appeals)/Addl./JCIT(Appeals), Aurangabad dated 16/10/2019 for the assessment year 2018-19. Assessee has raised the following grounds of appeal which read as under: - 1. “That on the facts and circumstances of the case, the Ld. CIT(Appeals) has erred under the law while confirming the ITA No.3496/Del/2024 2 action of CPC u/s 143(1) after making adjustments in the returned income which are not permissible u/s 143(1), of the Act and thereby determined the demand of Rs.1,86,724/-, in the intimation dated 16.10.2019 issued u/s 143(1) of the Act. 2. That the CIT(A) is not justified in law and facts while confirming the adjustment of Rs.3,45,665/- u/s 36(1)(va) of the Act as made by CPC without appreciating the fact that the appellant has duly deposited all employee contribution to PF/ESI before due date of filing of ITR u/s 139(1) and the amendment as made in the section by finance bill 2020 is effective from AY 2020-21. 3. That on the facts and circumstances of the case the Ld. CIT(A) failed to appreciate that the assessee has paid the amount on account of Employee contribution before the due date of filing return u/s 139(1) of the Act as duly covered u/s 43B upto AY 2020-21 but wrongly applied to apex court judgment checkmate services private Limited Vs. CIT because explanation 5 was inserted by Finance Act, 2021 as it applicable w.e.f. AY 2021-22. Thus wrongly applied for appeal assessment year. Thus, the disallowance made u/s 36(1)(va) r.w.s. 43B is not justified because payment duly made within period as allowed u/s 43B of the Act. 4. That the CIT(A) is not justified in law and facts while confirming levying interest u/s 234A, 234B and 234C. Hence, be waived because appellant denies his liability to the same. 5. That the appropriate order for granting justice and relief be passed. 6. Your appellant reserves its right to add to amend to alter or to modify any of above grounds and to pursue any other or further grounds as may be required.” ITA No.3496/Del/2024 3 2. In spite of issue of notice, none appeared on behalf of the assessee nor any adjournment was moved. As the issue in appeal was already decided by the Hon’ble Supreme Court, we dispose of this appeal by hearing Ld. DR. 3. The only issue for adjudication in this appeal is whether the assessee is eligible for deduction in respect of contributions made to PF & ESI beyond the due date specified under the respective acts. 4. We have heard Ld. DR and perused the orders of the authorities below. We find that the issue in appeal is squarely covered by the decision of the Hon’ble Supreme Court in the case of Checkmate Services Private Limited Vs. CIT (448 ITR 518) which held as under: - “Several cases have come to notice where taxpayers do not discharge their statutory liability such as in respect of excise duty, employer's contribution to provident fund, Employees' State Insurance Scheme, etc., for long periods of time, extending sometimes to several years. For the purpose of their income-tax assessments, they claim the liability as deduction on the ground that they maintain accounts on mercantile or accrual basis. On the other hand, they dispute the liability and do not discharge the same. For some reason or the other, undisputed liabilities also are not paid. 35.3 To curb this practice, the Finance Act has inserted a new section 43B to provide that ITA No.3496/Del/2024 4 deduction for any sum payable by the assessee by way of tax or duty under any law for the time being in force or any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare- of employees shall irrespective of the previous year in which the liability to pay such sum was incurred, be allowed only in computing the income of that previous year in which such sum is actually paid by the assessee.\" … 54. In the opinion of this Court, the reasoning in the impugned judgment that the nonobstante 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 nonobstante clause has to be understood in the context of the entire provision of Section 43B 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 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 ITA No.3496/Del/2024 5 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 43B 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 In the light of the above reasoning, this court is of the opinion that there is no infirmity in the approach of the impugned judgment. The decisions of the other High Courts, holding to the contrary, do not lay down the correct law. For these reasons, this court does not find any reason to interfere with the impugned judgment. The appeals are accordingly dismissed. ” 7. The assessee in his “Statement of Facts” has stated that “… These additions had been made in disregard to the settled law according to which no such prima facie adjustments can be made for issues which are debatable and controversial. Even the decisions of the Honble Apex Court and the jurisdictional High Court on this issue were kept at bay while making the said additions\". However, their lordships, when deciding the case cited supra, had occasion to consider all the existing decisions in this regard. After due consideration and deliberation their lordship have distinguished the issue in the dispute herein and ruled differently: wherein it is held that Employee’s contributions has to be paid on or before the due dates. Hence, the earlier rulings on this aspect are no longer good law and the settled law has been enunciated in this Judgement.” 5. Careful perusal of the order of the Ld.CIT(A), we see no infirmity in sustaining the disallowance as the Ld.CIT(A) decided the ITA No.3496/Del/2024 6 issue following the decision of the Hon’ble Supreme Court in the case of Checkmate Services Vs. CIT (supra). 6. In the result, appeal of the assessee is dismissed. Order pronounced in the open court on 19.02.2025 Sd/- Sd/- (NAVEEN CHANDRA) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 19.02.2025 *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 "