MAA HARSIDDHI INFRA DEVELOPERS PVT. LTD., RAIPUR,RAIPUR V. .COMMISSIONER OF INCOME TAX, CIRCLE-1(1), BILASPUR) , BILASPUR

ITA 306/RPR/2024

AI Insights

The case revolves around an appeal by Maa Harsiddhi Infra Developers Private Limited against the disallowance of a deduction claim for delayed deposit of employees' contributions to ESIC and EPF. The initial disallowance was made by the Centralized Processing Centre (CPC), Bengaluru, under an intimation issued under Section 143(1) of the Income-tax Act, 1961. The Commissioner of Income-Tax (Appeals) upheld this disallowance, which was then challenged in the Tribunal. The Tribunal's decision was influenced by the Supreme Court's ruling in Checkmate Services Pvt. Ltd. vs. CIT, which clarified the legal position regarding the treatment of delayed deposits of employees' contributions to welfare funds.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 35704 (ITAT-RAIPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2019-2020
• Other Referred Cases: Checkmate Services Pvt. Ltd. Vs. CIT, M/s. BPS Infrastructure Vs. ITO, Ward-1(3), Raipur
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRIYANKA PATEL
• Assessee Lawyers: G.S. AGRAWAL; WAY OF TAX OR DUTY OR
• Keywords: Condonation of delay; Set aside; Business income; Business expenditure; Question of law; Depreciation; Period of limitation
• Section: 154; 143(1); 64; 11; 139(1); 12A; 12; 28; 2; 43B

Judgement Text

"आयकर अपीलȣय अͬधकरण Ûयायपीठ रायपुर मɅ। IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI ARUN KHODPIA, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.306/RPR/2024 Ǔनधा[रण वष[ / Assessment Year : 2019-20 Maa Harsiddhi Infra Developers Private Limited S-6 & Part of S-7, 2nd Floor, L.K. Corporate Tower, L.K. Logistic Park, Dumartarai, NH-30, Dhamtari Road, Raipur-492 015 (C.G.) PAN: AAGCM7052H .......अपीलाथȸ / Appellant बनाम / V/s. The Assistant Commissioner of Income Tax, Circle-1(1), Bilaspur ……Ĥ×यथȸ / Respondent Assessee by : Shri G.S. Agrawal, CA Revenue by : Dr. Priyanka Patel, Sr. DR सुनवाई कȧ तारȣख / Date of Hearing : 16.12.2024 घोषणा कȧ तारȣख / Date of Pronouncement : 19.12.2024 2 Maa Harsiddhi Infra Developers Private Limited Vs. ACIT, Circle-1(1), Bilaspur ITA No. 306/RPR/2024 आदेश / ORDER PER RAVISH SOOD, JM: The present appeal filed by the assessee company is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 28.11.2022, which in turn arises from the intimation issued by the Centralized Processing Centre (CPC)/A.O under Sec.143(1) of the Income-tax Act, 1961 (in short ‘the Act’) dated 27.02.2020 for the assessment year 2019-20. The assessee company has assailed the impugned order on the following grounds of appeal before us: “1. That under facts & the law, the learned CIT (A) erred in confirming the disallowance of Rs.32,77,451/- made by CPC, Bengaluru in intimation u/s.143(1) dt. 27.02.2020 for not making payment of contribution of employees towards Employees Provident Fund and ESIC within time as prescribed under above Act which is a debatable issue and such adjustment cannot be made u/s 143(1). This amount was paid by appellant much before the due date for filing of Income Tax Return. Prayed to delete the disallowance of Rs.32,77,451/-. 2. That under the facts & the law the learned CIT (Appeals) erred in confirming the disallowance of Rs.32,77,451/- made by CPC, Bengaluru towards contribution of employees towards Employees Provident Fund and ESIC though explanation inserted by Finance Act, 2021 to section 36(1)(va) and section 43B are not retrospective and are categorically made effective from Assessment Year 2021-22 by Finance Act 2021 and not applicable to the year under consideration and that judgement of Apex Court in Checkmate Services Private Limited dated 12.10.2022 was not there while passing Intimation Order u/s.143(1) on 27.02.2020. Prayed to delete the disallowance of Rs.32,77,451/-.” 3 Maa Harsiddhi Infra Developers Private Limited Vs. ACIT, Circle-1(1), Bilaspur ITA No. 306/RPR/2024 2. Succinctly stated, the A.O/CPC, Bengaluru vide its intimation issued u/s. 143(1) of the Act, dated 27.02.2020, had declined the assessee’s claim for deduction of delayed deposit of employees share of contribution towards PF & ESIC of Rs. 32,77,451/-. 3. Aggrieved the assessee carried the matter in appeal before the CIT(Appeals), who after relying on a plethora of judicial pronouncements upheld the disallowance of the assessee’s claim for deduction of delayed deposits of employees share of contribution towards PF & ESIC of Rs. 32,77,451/- made by the A.O/CPC. 4. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 5. We have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. 6. Shri G.S. Agrawal, Ld. Authorized Representative (for short ‘AR') for the assessee company, at the threshold, submitted that the present appeal involves a delay of 517 days. Elaborating on the reasons leading to the aforesaid delay, the Ld.AR submitted that the reasons which had resulted to the impugned delay of 517 days, viz. (i) wrong advice by Shri Awdhesh 4 Maa Harsiddhi Infra Developers Private Limited Vs. ACIT, Circle-1(1), Bilaspur ITA No. 306/RPR/2024 Jaiswal, the erstwhile counsel of the assessee company; (ii) financial instability of the assessee company; (iii) absence of Senior Accountant i.e. Shri R. Janardhan who was looking after the income tax matters and compliances as regards PF, ESIC, ROC etc.; (iv) the assessee company remained engrossed in 25 cases of bouncing of cheques i.e. u/s. 138 of the Negotiable Instruments Act; (v) Shri Koda Babu Ellarao, director of the assessee company during the relevant period on account of unstable state of affairs and blocked finances coupled with multiple allegations, had to undertake travelling and remained mostly outside Raipur; and (vi) the assessee was totally engrossed in filing and following of 16 cases against Chhattisgarh Power Distribution Company Ltd. (CSPDCL), Jharkhand; Vidhyut Nigam Limited; Tripura State Electricity Corporation Limited for recovery of outstanding balances. The Ld. AR in support of his aforesaid contention had placed on record an “affidavit”, dated 23.07.2024 of Shri Koda Babu Ellarao, the director of the assessee company. The Ld.AR submitted that though there was substantial delay involved in filing of the present appeal but considering the gravity of the multiple reasons which had resulted to the delay the same in all fairness be condoned. 7. Per contra, Dr. Priyanka Patel, Ld. Sr. Departmental Representative (for short ‘DR’) submitted that as the delay involved in filing of the present appeal was inordinate, therefore, the same did not merit to be condoned. 5 Maa Harsiddhi Infra Developers Private Limited Vs. ACIT, Circle-1(1), Bilaspur ITA No. 306/RPR/2024 8. We have thoughtfully considered the reasons leading to the delay in the backdrop of the material available on record and the contentions advanced by both the parties. Admittedly, the assessee company had given multi-facet reasons which were beyond its control that had resulted to the delay in filing of the present appeal by 517 days. As observed by us hereinabove, Shri Koda Babu Ellarao, director of the assessee company has filed an application a/w. an “affidavit” dated 23.07.2024 to support his claim as to why delay had crept in filing of the present appeal. We find that the contents of the application/affidavit as regards the delay involved in filing of the present appeal had not been rebutted by the department by placing on record any material proving to the contrary. At this stage, we may herein observe that the Hon’ble High Court of Chhattisgarh in the case of Navojit Samaj Sevi Sanstha Vs. ITO, Ward-Jagdalpur, TAXC No.225 of 2024, dated 09.12.2024, wherein the assessee on account of wrong advice of his counsel had delayed the filing of the appeal, and had deposed the said fact by filing an “affidavit” which was not controverted by the department, then the same in all fairness acted upon and delay therein involved ought to have been condoned by the Tribunal. For the sake of clarity, the observation of the Hon’ble High Court are culled out as under: “22. A conspectus of the aforesaid judgments noticed herein- above (supra) would show that their Lordships of the Supreme Court have clearly indicated that a liberal approach in considering the application for condonation of delay construing sufficient cause has to be adopted and appeal has to be decided 6 Maa Harsiddhi Infra Developers Private Limited Vs. ACIT, Circle-1(1), Bilaspur ITA No. 306/RPR/2024 on merits unless the case is hopelessly without merit. “Sufficient cause” within the meaning of Section 253(5) of the IT Act has to be construed liberally so as to advance substantial justice especially when the delay is not deliberate and outcome of mala fide. 23. Reverting to the facts of the present case, in the present case, appeal preferred by the appellant Society was delayed by 55 days, as noticed above, for which cause much less sufficient cause has to be shown and the appellant has explained that on account of wrong advise of his counsel to reapply for registration, he had firstly preferred application afresh under Section 12A of the IT Act for registration and thereafter, due to delay in deciding the second application for registration and realising the mistake, he preferred appeal with a delay of 55 days, that is how the delay in filing the appeal has taken place. This fact remained uncontroverted, as no counter-affidavit controverting the facts stated and cause shown for not preferring the appeal right within the period of limitation was filed by the Revenue. As such, the cause shown for delay in filing the application supported by affidavit remains uncontroverted and it would constitute “sufficient cause” within the meaning of Section 253(5) of the IT Act. The rejection of application for condonation of delay has serious civil consequences upon the status of the Society, as by rejection of the application of the appellant Society, the Society would not be able to claim tax exemption under the provisions contained in Sections 11 & 12 of the IT Act, and that too in absence of counter-affidavit filed by the Revenue opposing the application for condonation of delay supported by affidavit. The ITAT ought to have condoned the delay in preferring the appeal as there is no allegation that delay in filing the appeal is mala fide or it is deliberate, rather it is bona fide based on wrong advise of his counsel to reapply for registration. 24. In that view of the matter, the order impugned dated 20-9- 2024 passed by the Income Tax Appellate Tribunal, Raipur Bench, Raipur in ITA No.304/RPR/2024 is set aside and delay of 55 days in preferring the appeal is hereby condoned. The appeal is restored to its original number to the file of the ITAT. The matter is remitted to the ITAT for considering and deciding the appeal afresh on merits within three months from the date of receipt of a copy of this order. It is made clear that this Court has not expressed any opinion on the merits of the matter. 25. The tax appeal stands allowed. No order as to cost(s).” 7 Maa Harsiddhi Infra Developers Private Limited Vs. ACIT, Circle-1(1), Bilaspur ITA No. 306/RPR/2024 9. We, thus in terms of our aforesaid observations are of the view that as the delay involved in filing of the present appeal had occasioned for the reasons which were beyond the control of the assessee, therefore, the same merits to be condoned. 10. Admittedly, it is a matter of fact borne from record that the Hon’ble Apex Court in the case of Checkmate Services P. Ltd. Vs. Commissioner of Income Tax-I, Civil Appeal No.2833 of 2016 dated 12.10.2022, while clarifying the position of law, had held that the delayed deposit of employee’s share of contributions towards labour welfare funds, viz. Employee’s Provident fund (EPF) and Employee’s State Insurance (ESI) is liable to be disallowed as per the mandate of Section 36(1)(va) r.w.s. 2(24)(x) of the Act. Considering the law laid down by the Hon’ble Apex Court in the case of Checkmate Services P. Ltd. Vs. Commissioner of Income Tax-I (supra), we concur with the CIT(Appeals) that the disallowance of the assessee's claim for deduction of delayed deposit of employees share of contribution towards ESIC & EPF had rightly been made by the CPC, Bengaluru u/s. 143(1) of the Act. 11. The Hon’ble Apex Court in the case of Checkmate Services Pvt. Ltd. Vs. CIT (supra) had observed that the employee’s share of contributions towards ESI & EPF deposited by the assessee beyond the due dates prescribed under the said respective Acts would by virtue of Section 36(1)(va) 8 Maa Harsiddhi Infra Developers Private Limited Vs. ACIT, Circle-1(1), Bilaspur ITA No. 306/RPR/2024 r.w.s. 2(24)(x) of the Act constitute income of the assessee. It was observed by the Hon’ble Apex Court as under: “Analysis and Conclusions 30. The factual narration reveals two diametrically opposed views in regard to the interpretation of Section 36(1)(va) on the one hand and proviso to Section 43(b) on the other. If one goes by the legislative history of these provisions, what is discernible is that Parliament’s endeavour in introducing Section 43B [which opens with its non- obstante clause] was to primarily ensure that deductions otherwise permissible and hitherto claimed on mercantile basis, were expressly conditioned, in certain cases upon payment. In other words, a mere claim of expenditure in the books was insufficient to entitle deduction. The assessee had to, before the prescribed date, actually pay the amounts – be it towards tax liability, interest or other similar liability spelt out by the provision. 31. Section 43B falls in Part-V of the IT Act. What is apparent is that the scheme of the Act is such that Sections 28 to 38 deal with different kinds of deductions, whereas Sections 40 to 43B spell out special provisions, laying out the mechanism for assessments and expressly prescribing conditions for disallowances. In terms of this scheme, Section 40 (which too starts with a non- obstante clause overriding Sections 30-38), deals with what cannot be deducted in computing income under the head “Profits and Gains of Business and Profession”. Likewise, Section 40A(2) opens with a non-obstante clause and spells out what expenses and payments are not deductible in certain circumstances. Section 41 elaborates conditions which apply with respect to certain deductions which are otherwise allowed in respect of loss, expenditure or trading liability etc. If we consider this scheme, Sections 40- 43B, are concerned with and enact different conditions, that the tax adjudicator has to enforce, and the assessee has to comply with, to secure a valid deduction. 32. The scheme of the provisions relating to deductions, such as Sections 32- 37, on the other hand, deal primarily with business, commercial or professional expenditure, under various heads (including depreciation). Each of these deductions, has its contours, depending upon the expressions used, and the conditions that are to be met. It is therefore necessary to bear in mind that specific enumeration of deductions, dependent upon fulfilment of particular conditions, would qualify as allowable deductions: failure by the assessee to comply with those conditions, would render the claim vulnerable to rejection. In this scheme the deduction made by employers to approved provident fund schemes, is the subject matter of Section 36 (iv). It is noteworthy, that this provision was part of the original IT Act; it has largely remained unaltered. On the other hand, Section 36(1)(va) was specifically inserted by the Finance Act, 1987, w.e.f. 01-04-1988. Through the same amendment, by Section 3(b), Section 2(24) – which defines various kinds of “income” – inserted clause (x). This is a significant amendment, because Parliament intended that amounts not earned by the assessee, but received by it, - whether in the form of deductions, or 9 Maa Harsiddhi Infra Developers Private Limited Vs. ACIT, Circle-1(1), Bilaspur ITA No. 306/RPR/2024 otherwise, as receipts, were to be treated as income. The inclusion of a class of receipt, i.e., amounts received (or deducted from the employees) were to be part of the employer/assessee’s income. Since these amounts were not receipts that belonged to the assessee, but were held by it, as trustees, as it were, Section 36(1)(va) was inserted specifically to ensure that if these receipts were deposited in the EPF/ESI accounts of the employees concerned, they could be treated as deductions. Section 36(1)(va) was hedged with the condition that the amounts/receipts had to be deposited by the employer, with the EPF/ESI, on or before the due date. The last expression “due date” was dealt with in the explanation as the date by which such amounts had to be credited by the employer, in the concerned enactments such as EPF/ESI Acts. Importantly, such a condition (i.e., depositing the amount on or before the due date) has not been enacted in relation to the employer’s contribution (i.e., Section 36(1)(iv)). 33. The significance of this is that Parliament treated contributions under Section 36(1)(va) differently from those under Section 36(1)(iv). The latter (hereinafter, “employers’ contribution”) is described as “sum paid by the assessee as an employer by way of contribution towards a recognized provident fund”. However, the phraseology of Section 36(1)(va) differs from Section 36(1)(iv). It enacts that “any sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date.” The essential character of an employees’ contribution, i.e., that it is part of the employees’ income, held in trust by the employer is underlined by the condition that it has to be deposited on or before the due date. 34. It is therefore, manifest that the definition of contribution in Section 2 (c) is used in entirely different senses, in the relevant deduction clauses. The differentiation is also evident from the fact that each of these contributions is separately dealt with in different clauses of Section 36 (1). All these establish that Parliament, while introducing Section 36(1)(va) along with Section 2(24)(x), was aware of the distinction between the two types of contributions. There was a statutory classification, under the IT Act, between the two. 35. It is instructive in this context to note that the Finance Act, 1987, introduced to Section 2(24), the definition clause (x), with effect from 1 April 1988; it also brought in Section 36(1)(va). The memorandum explaining these provisions, in the Finance Bill, 1987, presented to the Parliament, is extracted below: “Measures of penalising employers mis-utilising contributions to the provident fund or any funds set up under the provisions of the Employees State Insurance Act, 1948, or any other fund for the welfare of employees - 12.1. The existing provisions provide for a deduction in respect of any payment by way of contribution to the provident fund or a superannuation fund or any other fund for welfare of employees in the year in which the liabilities are actually discharged (Section 43B). The effect of the amendment brought about by the Finance act, is that no deduction will be allowed in the assessment of the employer, unless such 10 Maa Harsiddhi Infra Developers Private Limited Vs. ACIT, Circle-1(1), Bilaspur ITA No. 306/RPR/2024 contribution is paid into the fund on or before the due date. “Due date” means the date by which an employer is required to credit the contribution to the employees account in the relevant fund or under the relevant provisions of any law or term of the contract of service or otherwise. (Explanation to Section 36 (1) of the Finance Act) 12.2. In addition, contribution of the employees to the various funds which are deducted by the employer from the salaries and wages of the employees will be taxed as income within brackets insertion of new [clause (x) in clause (24) of Section 2] of the employer, if such contribution is not credited by the employer in the account of the employee in the relevant fund by the due date. Where such income is not chargeable to tax under the head “profits and gains of business or profession” it will be assessed under the head “income from other sources.” 36. Significantly, the same Finance Act, 1987 also introduced provisos to Section 43B, through amendment (clause 10 of the Finance Bill). The memorandum explaining the Bill, pertinently states, in relation to second proviso to Section 43B that: “…The second proviso seeks to provide that no deduction shall be allowed in regard to the sum referred to in clause (b) unless such sum has actually been paid during the previous year on or before the due date. The due date for the purposes of this proviso shall be the due date as under Explanation to clause (va) of sub-section (1) of Section 36.” 37. It is evident that the intent of the lawmakers was clear that sums referred to in clause (b) of Section 43B, i.e., “sum payable as an employer, by way of contribution” refers to the contribution by the employer. The reference to “due date” in the second proviso to Section 43B was to have the same meaning as provided in the explanation to Section 36(1)(va). Parliament therefore, through this amendment, sought to provide for identity in treatment of the two kinds of payments: those made as contributions, by the employers, and those amounts credited by the employers, into the provident fund account of employees, received from the latter, as their contribution. Both these contributions had to necessarily be made on or before the due date. 38. This court had occasion to consider the object of introducing Section 43B, in Allied Motors. The court held, after setting out extracts of the Budget speech of the Finance Minister, for 1983-84, that: \"Section 43B was, therefore, clearly aimed at curbing the activities of those tax- payers, who did not discharge their statutory liability of payment of excise duty, employer’s contribution to provident fund, etc., for long periods of time but claimed deductions in that regard from their income on the ground that the liability to pay these amounts had been incurred by them in the relevant previous year. It was to stop this mischief that Section 43B was inserted.” 11 Maa Harsiddhi Infra Developers Private Limited Vs. ACIT, Circle-1(1), Bilaspur ITA No. 306/RPR/2024 39. Original Section 43B(b) enabled the assessee/employer to claim deduction towards contribution as an employer, “by way of contribution to any provident fund”. The second proviso was substituted by Finance Act, 1989 with effect from 01.04.1989 and read as under: “…Provided further that no deduction shall in respect of any sum referred to in clause (b) be allowed unless such sum has actually been paid in cash or to by issue of a cheque or draft or by any other mode on or before the due date as defined in the explanation below Clause (va) of sub-section (1) of Section 36, and where such payment has been made otherwise than in cash, the same has been realised within 15 days from the due date.\" 40. The position in law remained unchanged for 14 years. The Central Government then constituted the Kelkar Committee, to suggest tax reforms. The report suggested amendments inter alia, to Section 43B. The relevant extract of the report is as follows: \"In terms of the provisions of section 43B of the Income-tax Act, deduction for statutory payments relating to labour, taxes and State and public financial institutions are allowed as deductions, if they are paid during the financial year. However, under the provisions payment of taxes and interest to State and public financial institution are deemed to have been paid during the financial year even if they are paid by the due date of filing of return. Further if the liability is discharged in the subsequent year after the due date of filing of return, the payment is allowed as a deduction in the subsequent year. In the case of statutory payment relating to labour, the deduction for the payment is disallowed if such payment is made any time after the last date of payment of the about related liability. Trade and industry across the country represented that the delayed payment of statutory liability related to labour should be accorded the same treatment as delayed payment of taxes and interest, i.e. they should be allowed in the year of account. Since the objective of the provision is to ensure that a tax-payer does not avail of any statutory liability without actually making a payment for the same, we are of the view that these objectives would be served if the deduction for the statutory liability relating to labour are allowed in the year of payment. The complete disallowance of such payments is too harsh a punishment for delayed payments. Therefore, we recommend that the deduction for delayed payment of statutory liability relating to labour should be allowed in the year of payment like delayed taxes and interest.\" Based on the report, the Union introduced amendments to the IT Act, including an amendment to Section 43B; the memorandum explaining the provisions in the Finance Bill, 2003 in the matter of Section 43B. inter alia, reads thus: \"The Bill also proposes to provide that in case of deduction of payments made by the assessee as an employer by way of contribution to any provident fund or superannuation fund or any other fund for the welfare of the employees shall be allowed in computing the income of the year in which such sum is actually paid. In case the same is paid before the due date of filing the return of income for the 12 Maa Harsiddhi Infra Developers Private Limited Vs. ACIT, Circle-1(1), Bilaspur ITA No. 306/RPR/2024 previous year, the allowance will be made in the year in which the liability was incurred. These amendments will take effect from 1st April, 2004 and will accordingly apply in relation to the assessment year 2004-05 and subsequent years.” 41. The Notes on Clauses inter alia, reads as follows: \"It is also proposed to amend the first proviso to the said section so as to omit the references of clause (a), clause (c), clause (d), clause (e) and clause (f) which is consequential in nature. It is also proposed to omit the second proviso to the said section. These amendments will take effect from 1st April, 2004 and will, accordingly, apply in relation to the assessment year 2004-2005 and subsequent years.\" 42. The rationale for introduction of Section 43B was explained by this court in M.M. Aqua Technologies Ltd. vs. Commissioner of Income Tax, Delhi:16 “19. The object of Section 43B, as originally enacted, is to allow certain deductions only on actual payment. This is made clear by the non- obstante Clause contained in the beginning of the provision, coupled with the deduction being allowed irrespective of the previous years in which the liability to pay such sum was incurred by the Assessee according to the method of accounting regularly employed by it. In short, a mercantile system of accounting cannot be looked at when a deduction is claimed under this Section, making it clear that incurring of liability cannot allow for a deduction, but only \"actual payment\", as contrasted with incurring of a liability, can allow for a deduction.” 43. This condition, i.e., of payment of actual amount on or before the due date to enable deduction, continued for 14 years. By the amendment of 2003, the second proviso was deleted. This court interpreted the law, in the light of these developments, in Alom Extrusions. The court considered the effect of omission of the second proviso, and observed as follows: “10. “Income” has been defined under Section 2(24) of the Act to include profits and gains. Under Section 2(24)(x), any sum received by the assessee from his employees as contributions to any provident fund/superannuation fund or any fund set up under the Employees’ State Insurance Act, 1948, or any other fund for the welfare of such employees constituted income. This is the reason why every assessee(s) M.M. Aqua Technologies Ltd. vs. Commissioner of Income Tax, Delhi, 2021 SCC OnLine SC 575. [employer(s)] was entitled to deduction even prior to 1-4-1984, on mercantile system of accounting as a business expenditure by making provision in his books of accounts in that regard. In other words, if an assessee(s) [employer(s)] is maintaining his books on accrual system of accounting, even after collecting the contribution from his employee(s) and even without remitting the amount to the Regional Provident Fund Commissioner (RPFC), the assessee(s) would be entitled to deduction as business expense by merely making a provision to that effect in his books of accounts. The 13 Maa Harsiddhi Infra Developers Private Limited Vs. ACIT, Circle-1(1), Bilaspur ITA No. 306/RPR/2024 same situation arose prior to 1-4-1984, in the context of assessees collecting sales tax and other indirect taxes from their respective customers and claiming deduction only by making provision in their books without actually remitting the amount to the exchequer. To curb this practice, Section 43-B was inserted with effect from 1-4- 1984, by which the mercantile system of accounting with regard to tax, duty and contribution to welfare funds stood discontinued and, under Section 43-B, it became mandatory for the assessee(s) to account for the aforestated items not on mercantile basis but on cash basis. This situation continued between 1-4-1984 and 1-4-1988, when Parliament amended Section 43-B and inserted the first proviso to Section 43- B. 11. By this first proviso, it was, inter alia, laid down, in the context of any sum payable by the assessee(s) by way of tax, duty, cess or fee, that if an assessee(s) pays such tax, duty, cess or fee even after the closing of the accounting year but before the date of filing of the return of income under Section 139(1) of the Act, the assessee(s) would be entitled to deduction under Section 43-B on actual payment basis and such deduction would be admissible for the accounting year. This proviso, however, did not apply to the contribution made by the assessee(s) to the labour welfare funds. To this effect, the first proviso stood introduced with effect from 1-4-1988. *** 15. By the Finance Act, 2003, the amendment made in the first proviso equated in terms of the benefit of deduction of tax, duty, cess and fee on the one hand with contributions to the Employees' Provident Fund, superannuation fund and other welfare funds on the other. However, the Finance Act, 2003, bringing about this uniformity came into force with effect from 1-4-2004. Therefore, the argument of the assessee(s) is that the Finance Act, 2003, was curative in nature, it was not amendatory and, therefore, it applied retrospectively from 1-4-1988, whereas the argument of the Department was that the Finance Act, 2003, was amendatory and it applied prospectively, particularly when Parliament had expressly made the Finance Act, 2003 applicable only with effect from 1-4-2004. *** 18. However, as stated above, the second proviso resulted in implementation problems, which have been mentioned hereinabove, and which resulted in the enactment of the Finance Act, 2003, deleting the second proviso and bringing about uniformity in the first proviso by equating tax, duty, cess and fee with contributions to welfare funds. Once this uniformity is brought about in the first proviso, then, in our view, the Finance Act, 2003, which is made applicable by Parliament only with effect from 1-4-2004, would become curative in nature, hence, it would apply retrospectively with effect from 1-4-1988. 19. Secondly, it may be noted that, in Allied Motors (P) Ltd. v. CIT [(1997) 3 SCC 472 : (1997) 224 ITR 677] , the scheme of Section 43-B of the Act came to be examined. In that case, the question which arose for determination was, whether sales tax collected by the assessee and paid after the end of the relevant previous year but 14 Maa Harsiddhi Infra Developers Private Limited Vs. ACIT, Circle-1(1), Bilaspur ITA No. 306/RPR/2024 within the time allowed under the relevant sales tax law should be disallowed under Section 43-B of the Act while computing the business income of the previous year? That was a case which related to Assessment Year 1984-1985. The relevant accounting period ended on 30-6-1983. The Income Tax Officer disallowed the deduction claimed by the assessee which was on account of sales tax collected by the assessee for the last quarter of the relevant accounting year. The deduction was disallowed under Section 43-B which, as stated above, was inserted with effect from 1-4-1984 *** 22. It is important to note once again that, by the Finance Act, 2003, not only is the second proviso deleted but even the first proviso is sought to be amended by bringing about a uniformity in tax, duty, cess and fee on the one hand vis-à-vis contributions to welfare funds of employee(s) on the other. This is one more reason why we hold that the Finance Act, 2003 is retrospective in operation. Moreover, the judgment in Allied Motors (P) Ltd. [(1997) 3 SCC 472 : (1997) 224 ITR 677] was delivered by a Bench of three learned Judges, which is binding on us. Accordingly, we hold that the Finance Act, 2003 will operate retrospectively with effect from 1-4-1988 (when the first proviso stood inserted). 23. Lastly, we may point out the hardship and the invidious discrimination which would be caused to the assessee(s) if the contention of the Department is to be accepted that the Finance Act, 2003, to the above extent, operated prospectively. Take an example, in the present case, the respondents have deposited the contributions with RPFC after 31st March (end of accounting year) but before filing of the returns under the Income Tax Act and the date of payment falls after the due date under the Employees' Provident Fund Act, they will be denied deduction for all times. In view of the second proviso, which stood on the statute book at the relevant time, each of such assessee(s) would not be entitled to deduction under Section 43- B of the Act for all times. They would lose the benefit of deduction even in the year of account in which they pay the contributions to the welfare funds, whereas a defaulter, who fails to pay the contribution to the welfare fund right up to 1-4-2004, and who pays the contribution after 1-4-2004, would get the benefit of deduction under Section 43-B of the Act.” 44. There is no doubt that in Alom Extrusions, this court did consider the impact of deletion of second proviso to Section 43B, which mandated that unless the amount of employers’ contribution was deposited with the authorities, the deduction otherwise permissible in law, would not be available. This court was of the opinion that the omission was curative, and that as long as the employer deposited the dues, before filing the return of income tax, the deduction was available. 45. A reading of the judgment in Alom Extrusions, would reveal that this court, did not consider Sections 2(24)(x) and 36(1)(va). Furthermore, the separate provisions in Section 36(1) for employers’ contribution and employees’ contribution, too went unnoticed. The court observed inter alia, that: 15 Maa Harsiddhi Infra Developers Private Limited Vs. ACIT, Circle-1(1), Bilaspur ITA No. 306/RPR/2024 “15. …It is important to note once again that, by Finance Act, 2003, not only the second proviso is deleted but even the first proviso is sought to be amended by bringing about an uniformity in tax, duty, cess and fee on the one hand vis-a-vis contributions to welfare funds of employee(s) on the other. This is one more reason why we hold that the Finance Act, 2003, is retrospective in operation. Moreover, the judgement in Allied Motors (P) Limited (supra) is delivered by a Bench of three learned Judges, which is binding on us. Accordingly, we hold that Finance Act, 2003 will operate retrospectively with effect from 1st April, 1988 [when the first proviso stood inserted]. Lastly, we may point out the hardship and the invidious discrimination which would be caused to the assessee(s) if the contention of the Department is to be accepted that Finance Act, 2003, 2003, to the above extent, operated prospectively. Take an example - in the present case, the respondents have deposited the contributions with the R.P.F.C. after 31st March [end of accounting year] but before filing of the Returns under the Income Tax Act and the date of payment falls after the due date under the Employees' Provident Fund Act, they will be denied deduction for all times. In view of the second proviso, which stood on the statute book at the relevant time, each of such assessee(s) would not be entitled to deduction under Section 43B of the Act for all times. They would lose the benefit of deduction even in the year of account in which they pay the contributions to the welfare funds, whereas a defaulter, who fails to pay the contribution to the welfare fund right upto 1st April, 2004, and who pays the contribution after 1st April, 2004, would get the benefit of deduction under Section 43B of the Act. In our view, therefore, Finance Act, 2003, to the extent indicated above, should be read as retrospective. It would, therefore, operate from 1st April, 1988, when the first proviso was introduced. It is true that the Parliament has explicitly stated that Finance Act, 2003, will operate with effect from 1st April, 2004. However, the matter before us involves the principle of construction to be placed on the provisions of Finance Act, 2003”. 46. A discussion on the Principles of interpretation of tax statutes is warranted. In Ajmera Housing Corporation & Ors. vs. Commissioner of Income17 this court held as follows: “27. It is trite law that a taxing statute is to be construed strictly. In a taxing Act one has to look merely at what is said in the relevant provision. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. There is no room for any intendment. There is no equity about a tax. (See: Cape Brandy Syndicate v. Inland Revenue Commissioners (1921) 1 KB 64 and Federation of A.P. Chambers of Commerce and Industry and Ors. v. State of A.P. and Ors.(2000) 6 SCC 550. In interpreting a taxing statute, the Court must look squarely at the words of the statute and interpret them. Considerations of hardship, injustice and equity are entirely out of place in interpreting a taxing statute. (Also see: Commissioner of Sales Tax, Uttar Pradesh v. The Modi Sugar Mills Ltd. 1961 (2) SCR 189.)” 16 Maa Harsiddhi Infra Developers Private Limited Vs. ACIT, Circle-1(1), Bilaspur ITA No. 306/RPR/2024 47. Likewise, this court underlined the rule, regarding interpretation of taxing statutes, in Commissioner of Income Tax-III v Calcutta Knitwears, Ludhiana.18 Recently, in Union of India & Ors. vs. Exide Industries Limited & Ors,19 this court examined, and repelled a challenge to the constitutionality of Section 43B, especially the provision requiring actual payment, in respect of leave encashment benefit of employees. The court observations in this regard are relevant: “20. Section 43B, however, is enacted to provide for deductions to be availed by the Assessee in lieu of liabilities accruing in previous year without making actual payment to discharge the same. It is not a provision to place any embargo upon the autonomy of the Assessee in adopting a particular method of accounting, nor deprives the Assessee of any lawful deduction. Instead, it merely operates as an additional condition for the availment of deduction qua the specified head. Ajmera Housing Corporation & Ors. vs. Commissioner of Income, 2010 (8) SCC 739. Commissioner of Income Tax-III v Calcutta Knitwears, Ludhiana 2014 (6) SCC 444. Union of India & Ors. vs. Exide Industries Limited & Ors., 2020 (5) SCC 274. 21. Section 43B bears heading \"certain deductions to be only on actual payment\". It opens with a non-obstante clause. As per settled principles of interpretation, a non obstante Clause assumes an overriding character against any other provision of general application. It declares that within the sphere allotted to it by the Parliament, it shall not be controlled or overridden by any other provision unless specifically provided for. Out of the allowable deductions, the legislature consciously earmarked certain deductions from time to time and included them in the ambit of Section 43B so as to subject such deductions to conditionality of actual payment. Such conditionality may have the inevitable effect of being different from the theme of mercantile system of accounting on accrual of liability basis qua the specific head of deduction covered therein and not to other heads. But that is a matter for the legislature and its wisdom in doing so. 22. The existence of Section 43B traces back to 1983 when the legislature conceptualised the idea of such a provision in the 1961 Act. Initially, the provision included deductions in respect of sum payable by Assessee by way of tax or duty or any sum payable by the employer by way of contribution to any provident fund or superannuation fund. It is noteworthy that the legislature explained the inclusion of these deductions by citing certain practices of evasion of statutory liabilities and other liabilities for the welfare of employees...” *** 23. With the passage of time, the legislature inserted more deductions to Section 43B including cess, bonus or commission payable by employer, interest on loans payable to financial institutions, scheduled banks etc., payment in lieu of leave 17 Maa Harsiddhi Infra Developers Private Limited Vs. ACIT, Circle-1(1), Bilaspur ITA No. 306/RPR/2024 encashment by the employer and repayment of dues to the railways. Thus understood, there is no oneness or uniformity in the nature of deductions included in Section 43B. It holds no merit to urge that this Section only provides for deductions concerning statutory liabilities. Section 43B is a mix bag and new and dissimilar entries have been inserted therein from time to time to cater to different fiscal scenarios, which are best determined by the government of the day. It is not unusual or abnormal for the legislature to create a new liability, exempt an existing liability, create a deduction or subject an existing deduction to override regulations or conditions. 24. The leave encashment scheme envisages the payment of a certain amount to the employees in lieu of their unused paid leaves in a year. The nature of this payment is beneficial and pro-employee. However, it is not in the form of a bounty and forms a part of the conditions of service of the employee. An employer seeking deduction from tax liability in advance, in the name of discharging the liability of leave encashment, without actually extending such payment to the employee as and when the time for payment arises may lead to abhorrent consequences. When time for such payment arises upon retirement (or otherwise) of the employee, an employer may simply refuse to pay. Consequently, the innocent employee will be entangled in litigation in the evening of his/her life for claiming a hard-earned right without any fault on his part. Concomitantly, it would entail in double benefit to the employer - advance deduction from tax liability without any burden of actual payment and refusal to pay as and when occasion arises. It is this mischief Clause (f) seeks to subjugate.” 48. One of the rules of interpretation of a tax statute is that if a deduction or exemption is available on compliance with certain conditions, the conditions are to be strictly complied with.20 This rule is in line with the general principle that taxing statutes are to be construed strictly, and that there is no room for equitable considerations. 49. That deductions are to be granted only when the conditions which govern them are strictly complied with. This has been laid down in State of Jharkhand v Ambay Cements21 as follows: “23…. In our view, the provisions of exemption clause should be strictly construed and if the condition under which the exemption was granted stood changed on account of any subsequent event the exemption would not operate. 24. In our view, an exception or an exempting provision in a taxing statute should be construed strictly and it is not open to the court to ignore the conditions prescribed in the industrial policy and the exemption notifications. 25. In our view, the failure to comply with the requirements renders the writ petition filed by the respondent liable to be dismissed. While mandatory rule must be strictly observed, substantial compliance might suffice in the case of a directory rule. 26. Whenever the statute prescribes that a particular act is to be done in a particular manner and also lays down that failure to comply with the said requirement leads to severe consequences, such requirement would be mandatory. It is the cardinal rule of interpretation that where a statute provides that a particular thing should be done, it should be done in the manner prescribed and not in any other way. It is also settled 18 Maa Harsiddhi Infra Developers Private Limited Vs. ACIT, Circle-1(1), Bilaspur ITA No. 306/RPR/2024 rule of interpretation that where a statute is penal in character, it must be strictly construed and followed. Since the requirement, in the instant case, of obtaining prior permission is mandatory, therefore, non-compliance with the same must result in cancelling the concession made in favour of the grantee, the respondent herein.” See for e.g., Eagle Flask Industries Ltd. v. Commissioner of Central Excise, 2004 Supp (4) SCR 35. State of Jharkhand v Ambay Cements, (2005) 1 SCC 368. This was also reaffirmed in a number of judgments, such as Commissioner of Income Tax v. Ace Multi Axes Systems Ltd.22 50. The Constitution Bench, in Commissioner. of Customs v. Dilip Kumar & Co. 23 endorsed as following: “24. In construing penal statutes and taxation statutes, the Court has to apply strict rule of interpretation. The penal statute which tends to deprive a person of right to life and liberty has to be given strict interpretation or else many innocents might become victims of discretionary decision-making. Insofar as taxation statutes are concerned, Article 265 of the Constitution [ “265. Taxes not to be imposed save by authority of law.—No tax shall be levied or collected except by authority of law.”] prohibits the State from extracting tax from the citizens without authority of law. It is axiomatic that taxation statute has to be interpreted strictly because the State cannot at their whims and fancies burden the citizens without authority of law. In other words, when the competent legislature mandates taxing certain persons/certain objects in certain circumstances, it cannot be expanded/interpreted to include those, which were not intended by the legislature. *** 34. The passages extracted above, were quoted with approval by this Court in at least two decisions being CIT v. Kasturi & Sons Ltd. [CIT v. Kasturi & Sons Ltd., (1999) 3 SCC 346] and State of W.B. v. Kesoram Industries Ltd. [State of W.B. v. Kesoram Industries Ltd., (2004) 10 SCC 201] (hereinafter referred to as “Kesoram Industries case [State of W.B. v. Kesoram Industries Ltd., (2004) 10 SCC 201]”, for brevity). In the later decision, a Bench of five Judges, after citing the above passage from Justice G.P. Singh's treatise, summed up the following principles applicable to the interpretation of a taxing statute: ‘(i) In interpreting a taxing statute, equitable considerations are entirely out of place. A taxing statute cannot be interpreted on any presumption or assumption. A taxing statute has to be interpreted in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any deficiency; (ii) Before taxing any person, it must be shown that he falls within the ambit of the charging section by clear words used in the section; and (iii) If the words are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject and there is nothing Commissioner of Income Tax v. Ace Multi Axes Systems Ltd., 2018 (2) SCC 158 Commissioner. of Customs v. Dilip Kumar & Co, 2018 (9) SCC 1. 19 Maa Harsiddhi Infra Developers Private Limited Vs. ACIT, Circle-1(1), Bilaspur ITA No. 306/RPR/2024 unjust in a taxpayer escaping if the letter of the law fails to catch him on account of the legislature's failure to express itself clearly.’” 51. The analysis of the various judgments cited on behalf of the assessee i.e., Commissioner of Income-Tax v. Aimil Ltd.24; Commissioner of Income-Tax and another v. Sabari Enterprises25; Commissioner of Income Tax v. Pamwi Tissues Ltd.26; Commissioner of Income-Tax, Udaipur v. Udaipur Dugdh Utpadak Sahakari Sandh Ltd.27 and Nipso Polyfabriks (supra) would reveal that in all these cases, the High Courts principally relied upon omission of second proviso to Section 43B (b). No doubt, many of these decisions also dealt with Section 36(va) with its explanation. However, the primary consideration in all the judgments, cited by the assessee, was that they adopted the approach indicated in the ruling in Alom Extrusions. As noticed previously, Alom Extrutions did not consider the fact of the introduction of Section 2(24)(x) or in fact the other provisions of the Act. 52. When Parliament introduced Section 43B, what was on the statute book, was only employer’s contribution (Section 34(1)(iv)). At that point in time, there was no question of employee’s contribution being considered as part of the employer’s earning. On the application of the original principles of law it could have been treated only as receipts not amounting to income. When Parliament introduced the amendments in 1988-89, inserting Section 36(1)(va) and simultaneously inserting the second proviso of Section 43B, its intention was not to treat the disparate nature of the amounts, similarly. As discussed previously, the memorandum introducing the Finance Bill clearly stated that the provisions – especially second proviso to Section 43B - was introduced to ensure timely payments were made by the employer to the concerned fund (EPF, ESI, etc.) and avoid the mischief of employers retaining amounts for long periods. That Commissioner of Income-Tax Vs. Aimil Ltd., [2010] 321 ITR 508 (Delhi High Court). Commissioner of Income-Tax and another Vs. Sabari Enterprises, [2008] 298 ITR 141 (Karnataka High Court). Commissioner of Income Tax Vs. Pamwi Tissues Ltd., [2009] 313 ITR 137 (Bombay High Court). Commissioner of Income-Tax, Udaipur v. Udaipur Dugdh Utpadak Sahakari Sandh Ltd., [2013] 35 taxmann.com 616 (Rajasthan High Court). Parliament intended to retain the separate character of these two amounts, is evident from the use of different language. Section 2(24)(x) too, deems amount received from the employees (whether the amount is received from the employee or by way of deduction authorized by the statute) as income - it is the character of the amount that is important, i.e., not income earned. Thus, amounts retained by the employer from out of the employee’s income by way of deduction etc. were treated as income in the hands of the employer. The significance of this provision is that on the one hand it brought into the fold of “income” amounts that were receipts or deductions from employees income; at the time, payment within the prescribed time – by way of contribution of the employees’ share to their credit with the relevant fund is to be 20 Maa Harsiddhi Infra Developers Private Limited Vs. ACIT, Circle-1(1), Bilaspur ITA No. 306/RPR/2024 treated as deduction (Section 36(1)(va)). The other important feature is that this distinction between the employers’ contribution (Section 36(1)(iv)) and employees’ contribution required to be deposited by the employer (Section 36(1)(va)) was maintained - and continues to be maintained. On the other hand, Section 43B covers all deductions that are permissible as expenditures, or out-goings forming part of the assessees’ liability. These include liabilities such as tax liability, cess duties etc. or interest liability having regard to the terms of the contract. Thus, timely payment of these alone entitle an assessee to the benefit of deduction from the total income. The essential objective of Section 43B is to ensure that if assessees are following the mercantile method of accounting, nevertheless, the deduction of such liabilities, based only on book entries, would not be given. To pass muster, actual payments were a necessary pre-condition for allowing the expenditure. 53. The distinction between an employer’s contribution which is its primary liability under law – in terms of Section 36(1)(iv), and its liability to deposit amounts received by it or deducted by it (Section 36(1)(va)) is, thus crucial. The former forms part of the employers’ income, and the later retains its character as an income (albeit deemed), by virtue of Section 2(24)(x) - unless the conditions spelt by Explanation to Section 36(1)(va) are satisfied i.e., depositing such amount received or deducted from the employee on or before the due date. In other words, there is a marked distinction between the nature and character of the two amounts – the employer’s liability is to be paid out of its income whereas the second is deemed an income, by definition, since it is the deduction from the employees’ income and held in trust by the employer. This marked distinction has to be borne while interpreting the obligation of every assessee under Section 43B. 54. In the opinion of this Court, the reasoning in the impugned judgment that the non- obstante 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 non-obstante 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 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 21 Maa Harsiddhi Infra Developers Private Limited Vs. ACIT, Circle-1(1), Bilaspur ITA No. 306/RPR/2024 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. 55. 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.” 12. Apropos the Ld. AR's claim that the A.O could not have disallowed the delayed deposit of employees share of contribution towards ESIC & EPF u/s. 36(1)(va) r.w.s. 2(24) (x) of the Act prior to the judgment of the Hon'ble Apex Court in the case of Checkmate Services Pvt. Ltd. Vs. CIT (supra), vide an intimation issued u/s. 143(1)(a) of the Act, we are unable to persuade ourselves to subscribe to the same. We find that the aforesaid issue, i.e. as to whether or not the delayed deposit of employees share of contribution towards ESIC & EPF could have been made by the A.O prior to the judgment of the Hon'ble Apex Court in the case of Checkmate Services Pvt. Ltd. Vs. CIT (supra) vide an intimation u/s. 143(1) of the Act, had been looked into by the Hon'ble High Court of Chhattisgarh in the case of M/s. BPS Infrastructure Vs. ITO, Ward-1(3), Raipur, TAXC No.87 of 2024, dated 12.04.2024, wherein the Hon'ble High Court on the said issue had observed as under: \"9. We have heard learned counsel for the parties, perused the pleadings and documents annexed with the appeal. 10. From perusal of the orders of the learned ITAT and other authorities of the Department, it transpires that the assessee firm had e-filed its return of income for A.Y 2019-20 on 30.09.2010, declaring an income of Rs.14,66,150/-. The 22 Maa Harsiddhi Infra Developers Private Limited Vs. ACIT, Circle-1(1), Bilaspur ITA No. 306/RPR/2024 A.O/CPC, Bengaluru vide intimation issued under Section 143(1) of the Act, dated 06.03.2020 disallowed the assessee's claim for deduction of delayed deposit of employees share of contribution towards ESI/PF of Rs.19,84,415/- under Section 36(1) (va) of the Act and determined its income at Rs. 34,50,570/-. The assessee carried the matter in appeal before the CIT(A) but without success. Observing, that the disallowance of the assessee's claim for deduction of delayed deposit of employees share of contribution towards ESI/PF was rightly made by the A.O under Section 36(1) (va) of the Act, the CIT(A) approved the adjustment made by the DCIT, CPC, Bengaluru under Section 143(1) of the Act. Being aggrieved with the order of the CIT (A), the assessee took up the matter in an appeal before the learned ITAT wherein the submission of the assessee has been mentioned in para 5 of the order the ITAT which is as under: “5. Shri Ravi Agrawal Ld. Authorized Representative (for short 'AR') for the assessee at the threshold of hearing of the appeal submitted that a delay of 690 days was involved in filing of the present appeal. Elaborating on the reasons leading to the aforesaid delay, It was submitted by the Ld. AR that the same had occasioned for the reason that the accountant of the assessee firm. viz. Shri Amitabh Paul had failed to bring to the notice of the partners of the assessee firm the order of the CIT (Appeals), dated 20.09.2021. The Ld. AR submitted that Shri Bhuvneshwar Prasad Sahu, partner of the assessee firm received the aforesaid order from his accountant only as on 08.10.2023. The Ld. AR submitted that Shri Amitabh Paul, accountant had admitted that though the order of the CIT(Appeals) was received by him way back but it had skipped from his mind to bring the same to the notice of the partners of the assessee firm. Carrying this contention further, the Ld. AR submitted that it was only when Shri Bhuwaneshwar Prasad Sahu (supra) had further brought the aforesaid order of the CIT (Appeals) on 29.09.2021, to the notice of his chartered account, viz. Shri Ajay Agrawal that he was informed that the appeal of the assessee firm had been dismissed by the CIT(Appeals) Raipur. The Ld. AR further submitted that as the order of the CIT(Appeals) was dropped in the email account, viz., \"[e-mail]\" i.e. email account that was generated by his accountant Shri Amitabh Paul and the partners of the assessee firm had no access to the same, thus, it was for the said bonafide reason that they had remained unaware about the order passed by the CIT/Appeals) dated 29.09.2021…..” 11. The reason that the delay in filing of the present appeal can by no means be held to be justified for the reason that partners 23 Maa Harsiddhi Infra Developers Private Limited Vs. ACIT, Circle-1(1), Bilaspur ITA No. 306/RPR/2024 of the assessee firm had remained unaware about the order passed by the CIT (A) dated 29.09.2021 which was dropped in the e-mail account of his accountant, viz. Shri Amitabh Paul. As the reason given by the assessee firm regarding the inordinate delay involved in filing of the present appeal does not inspire any confidence, and in fact reveals a lackadaisical conduct of the partners of the assessee firm, therefore, the same cannot be summarily accepted on the very face of it. Considering the callous and lackadaisical conduct of the partners of the assessee firm who ought to have remained vigilant about their income tax matter was held by the ITAT. 12. As has been rightly relied on by the learned ITAT that in the case of State of West Bengal v. Administrator, Howrah reported in 1972 AIR SC 749, the Hon'ble Apex Court had held that the expression \"sufficient cause should receive a liberal construction so as to advance substantial justice, particularly when there is no motive behind the delay The expression \"sufficient cause will always have relevancy to reasonableness. The action which can be condoned by the court should fall within the realm of normal human conduct or normal conduct of a litigant. However, as the appellant/ assessee in the present case is acting in defiance of law, therefore there can be no reason to allow its application and condone the substantial delay of 690 days involved in preferring of the captioned appeal. Further, the Hon'ble Supreme Court in Ramlal, Motilal and Chotelal v. Rewa Coalfields Ltd. reported in AIR (1962) 361 (SC) that seeker of justice must come with clean hands, therefore, now when in the present appeal the assessee appellant had failed to come forth with any good and sufficient reason that would justify condonation of the delay involved in preferring of the captioned appeal, the ITAT declined to condone the delay of 690 days, without adverting to the merits of the case and hence dismissed the captioned appeal of the assessee as barred by limitation. 13. As far as the issue involved pertaining to claiming of deduction under section 36 (1) (va) of the IT Act 1961 on delayed payment of employees share of contribution towards ESI/PF of Rs. 19,84,415, in the instant case is concerned is no more res integra. The Hon’ble Supreme Court has decided the legal issue on merits in the matter of Checkmate Services P. Ltd. v. Commissioner of Income Tax-1, {Civil Appeal No. 2833 of 2016, decided on 12.10.2022}, wherein at paragraphs 51 to 54, it was observed as under:- “51. The analysis of the various judgments cited on behalf of the assessee i.e., Commissioner of Income-Tax v. Aimil Ltd. [2010] 321 ITR 508 (Delhi High Court); Commissioner of Income-Tax 24 Maa Harsiddhi Infra Developers Private Limited Vs. ACIT, Circle-1(1), Bilaspur ITA No. 306/RPR/2024 and another v. Sabari Enterprises [2008] 298 ITR 141 (Karnataka High Court).; Commissioner of Income Tax v. Pamwi Tissues Ltd. [2009] 313 ITR 137 (Bombay High Court).; Commissioner of Income-Tax, Udaipur v. Udaipur Dugdh Utpadak Sahakari Sandh Ltd. [2013] 35 taxmann.com 616 (Rajasthan High Court) and Nipso Polyfabriks (supra) would reveal that in all these cases, the High Courts principally relied upon omission of second proviso to Section 43B (b). No doubt, many of these decisions also dealt with Section 36(va) with its explanation. However, the primary consideration in all the judgments, cited by the assessee, was that they adopted the approach indicated in the ruling in Alom Extrusions. As noticed previously, Alom Extrutions did not consider the fact of the introduction of Section 2(24)(x) or in fact the other provisions of the Act. 52. When Parliament introduced Section 43B, what was on the statute book, was only employer’s contribution (Section 34(1)(iv)). At that point in time, there was no question of employee’s contribution being considered as part of the employer’s earning. On the application of the original principles of law it could have been treated only as receipts not amounting to income. When Parliament introduced the amendments in 1988-89, inserting Section 36(1)(va) and simultaneously inserting the second proviso of Section 43B, its intention was not to treat the disparate nature of the amounts, similarly. As discussed previously, the memorandum introducing the Finance Bill clearly stated that the provisions – especially second proviso to Section 43B - was introduced to ensure timely payments were made by the employer to the concerned fund (EPF, ESI, etc.) and avoid the mischief of employers retaining amounts for long periods. That Parliament intended to retain the separate character of these two amounts, is evident from the use of different language. Section 2(24)(x) too, deems amount received from the employees (whether the amount is received from the employee or by way of deduction authorized by the statute) as income - it is the character of the amount that is important, i.e., not income earned. Thus, amounts retained by the employer from out of the employee’s income by way of deduction etc. were treated as income in the hands of the employer. The significance of this provision is that on the one hand it brought into the fold of “income” amounts that were receipts or deductions from employees income; at the time, payment within the prescribed time – by way of contribution of the employees’ share to their credit with the relevant fund is to be treated as deduction (Section 36(1)(va)). The other important feature is that this distinction between the employers’ contribution (Section 25 Maa Harsiddhi Infra Developers Private Limited Vs. ACIT, Circle-1(1), Bilaspur ITA No. 306/RPR/2024 36(1)(iv)) and employees’ contribution required to be deposited by the employer (Section 36(1)(va)) was maintained – and continues to be maintained. On the other hand, Section 43B covers all deductions that are permissible as expenditures, or out-goings forming part of the assessees’ liability. These include liabilities such as tax liability, cess duties etc. or interest liability having regard to the terms of the contract. Thus, timely payment of these alone entitle an assessee to the benefit of deduction from the total income. The essential objective of Section 43B is to ensure that if assessees are following the mercantile method of accounting, nevertheless, the deduction of such liabilities, based only on book entries, would not be given. To pass muster, actual payments were a necessary pre-condition for allowing the expenditure. 53. The distinction between an employer’s contribution which is its primary liability under law – in terms of Section 36(1)(iv), and its liability to deposit amounts received by it or deducted by it (Section 36(1)(va)) is, thus crucial. The former forms part of the employers’ income, and the later retains its character as an income (albeit deemed), by virtue of Section 2(24)(x) - unless the conditions spelt by Explanation to Section 36(1)(va) are satisfied i.e., depositing such amount received or deducted from the employee on or before the due date. In other words, there is a marked distinction between the nature and character of the two amounts – the employer’s liability is to be paid out of its income whereas the second is deemed an income, by definition, since it is the deduction from the employees’ income and held in trust by the employer. This marked distinction has to be borne while interpreting the obligation of every assessee under Section 43B. 54. In the opinion of this Court, the reasoning in the impugned judgment that the non-obstante 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 non-obstante 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’ 26 Maa Harsiddhi Infra Developers Private Limited Vs. ACIT, Circle-1(1), Bilaspur ITA No. 306/RPR/2024 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 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.” 14. Looking to the facts and circumstances of the case and law laid down by the Hon’ble Supreme Court in Checkmates Services (supra), the present appeal filed by the appellant is not only devoid of merits but also barred by limitation as provided under Section 253 of the Act. The learned ITAT has rightly dismissed the appeal of the assessee. We, therefore, are not persuaded to differ with the view taken by the ITAT and the reason assigned thereof. 15. Resultantly, the present appeal is dismissed as devoid of any merit and no substantial question of law arises in this appeal for consideration by this Court.\" (emphasis supplied by us) Accordingly, in the backdrop of the judgment of the Hon'ble Apex Court in the case of Checkmate Services Pvt. Ltd. Vs. CIT (supra), we are unable to concur with the Ld. AR that the A.O/CPC, Bengaluru had erred in rejecting the assessee's application filed u/s. 154 of the Act, wherein the latter had sought for setting aside the disallowance of his claim for deduction of delayed deposit of employees share of contributions towards ESIC & EPF 27 Maa Harsiddhi Infra Developers Private Limited Vs. ACIT, Circle-1(1), Bilaspur ITA No. 306/RPR/2024 u/s. 36(1)(va) r.w.s. 2(24)(x) of the Act made by the AO/CPC, Bengaluru vide an intimation u/s. 143(1)(a) of the Act prior to the judgment of the Hon'ble Apex Court in the case of Checkmate Services Pvt. Ltd. Vs. CIT (supra). We, thus, in terms of our aforesaid deliberations, finding no infirmity in the view taken by the CIT(Appeals) uphold the same and sustain the disallowance of Rs.32,77,451/- made by the A.O u/s.36(1)(va) r.w. Sec.2(24)(x) of the Act. Thus, the Grounds of appeals No. 1 & 2 raised by the assessee company are dismissed in terms of our aforesaid observations. 13. In the result, appeal of the assessee company is dismissed in terms of our aforesaid observations. Order pronounced in open court on 19th day of December, 2024. Sd/- Sd/- ARUN KHODPIA RAVISH SOOD (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायपुर/ RAIPUR ; Ǒदनांक / Dated : 19th December, 2024. **SB, Sr. PS आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. The CIT(Appeals)-1, Raipur (C.G.) 4. The Pr. CIT, Raipur-1 (C.G) 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, रायपुर बɅच, रायपुर / DR, ITAT, Raipur Bench, Raipur. 6. गाड[ फ़ाइल / Guard File. 28 Maa Harsiddhi Infra Developers Private Limited Vs. ACIT, Circle-1(1), Bilaspur ITA No. 306/RPR/2024 आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलȣय अͬधकरण, रायपुर / ITAT, Raipur. "