NEW ERA INDUSTRIAL SERVICES PRIVATE LIMITED,GURGAON V. DY. COMMISSIONER OF INCOME TAX, CIRCLE - 3(1), GURGAON

ITA 3272/DEL/2024

AI Insights

The case involves New Era Industrial Services Private Ltd. appealing against the order of the Commissioner of Income-tax (Appeals) which upheld the disallowances of expenditure amounting to Rs.13,35,083 for delays in remitting employees' contributions to ESIC and Provident Fund. The Tribunal considered similar precedents and the legal interpretation of the due dates for such remittances under Section 36(1)(va) of the Income-tax Act, 1961. The Tribunal noted that the issue had been previously addressed in cases like Sentinel Consultants Pvt. Ltd. and Bensons Movers Pvt. Ltd., where it was decided that the matter should be remanded to the Assessing Officer to verify the actual dates of remittance against the statutory deadlines.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 23625 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2020-2021
• Other Referred Cases: Checkmate Services Pvt. Ltd. vs. CIT, Kanoi Paper and Industries Ltd. vs. ACIT, Sentinel Consultants Pvt. Ltd. vs. ACIT, Bensons Movers Pvt. Ltd. vs. ACIT, Kamlesh Kumar Sing vs. Assessing Officer, Weather Comfort Engineers Private Limited vs. ACIT-CPC, PR Packaging Services vs. CIT, B. L. Kashyap & Sons Ltd. vs. ACIT, VVDN Technologies Pvt. Ltd. vs. ACIT, Khyati Realtors (P) Ltd. vs. CIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DHIRAJ KUMAR JAIN
• Assessee Lawyers: PRAMOD JAIN
• Keywords: Opportunity of being heard; Capital expenditure
• Section: 143(1); 139(1); 37; 37(1)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘E’: NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER and SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA No.3272/DEL/2024 (Assessment Year: 2020-21) ITA No.3273/DEL/2024 (Assessment Year: 2021-22) New Era Industrial Services Private Ltd., vs. DCIT, Circle 3 (1), 404, IMT View, Plot No.52, Gurgaon. IMT Manesar, Gurgaon – 122 052 (Haryana). (PAN : AAECN2338M) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Pramod Jain, CA REVENUE BY : Shri Dhiraj Kumar Jain, Sr. DR Date of Hearing : 21.01.2025 Date of Order : 21.01.2025 O R D E R PER S. RIFAUR RAHMAN, JM: 1. These appeals are filed by the assessee against the order of ld. Commissioner of Income-tax (Appeals) dated 20.05.2024 for the Assessment Years 2020-21 & 2021-22. 2. Since the issues are common and the appeals are connected, hence the same are heard together and being disposed off by this common order. 2 ITA Nos.3272 & 3273/DEL/2024 3. The only issue involved in all these appeals is that the ld. CIT (A) has erred in upholding the disallowances of expenditure of Rs.13,35,083/- made by the Assessing Officer representing delay in remittance of Employee’s Contribution towards ESIC and Provident Fund invoking provisions of section 36(1)(va) of the Income-tax Act, 1961 (for short ‘the Act’). 4. At the time of hearing, ld. AR for the assessee submitted as under :- “• We hereby like to state that that the issue is covered in favor of assessee by the judgement of the Hon'ble ITAT - Delhi, 'C' Bench in case of ITA no. 1458/De1/2021 for AY 2017-18, dated 06.09.2023. • In the said case Hon'ble Bench, dealt with the disallowance of employee's contributions to PF/ESIC due to delayed deposit beyond the due dates under the respective Acts but within the extended deadline of Section 139(1). • The Hon'ble Bench restored the matter to the file of the Ld. Assessing Officer (AO) for fresh determination. It relied on precedents like Kanoi Paper and industries Ltd. (2002) (75TTJ 448) (Cal.) and emphasized the due date for deposit being linked to the disbursement month of salary. • The Hon'ble Bench observed that compliance with payments before the due date under S. 139(1) should be verified factually by the AO. It directed a pre-computation in accordance with legal principles, granting the assessee appropriate relief if deposits aligned with the defined criteria. • In light of the identical issue adjudicated in ITA No. 1458/De1l2021, it is respectfully prayed that the matter for A Y 2020-21 be remanded to the Ld. AO for fresh consideration.” 3 ITA Nos.3272 & 3273/DEL/2024 5. Ld. AR further, relying on the decisions of ITAT in Kamlesh Kumar Sing vs. Assessing Officer in ITA No.1458/Del/2021 dated 06.09.2023, Sentinel Consultants Pvt. Ltd. vs. ACIT in ITA No.7 & 8/Del/2023 and Bensons Movers Pvt. Ltd. in ITA No.2710/Del/2022 dated 17.11.2023 made alternative plea that, “without prejudice, it is requested that the matter be remanded back to the AO for re-computation of disallowance with a direction that the term \"every month\" specified in Section 38 of the Provident Fund Scheme signifies the month in which the salary or wages are actually paid and irrespective of the month to which salary / wages relate.” 6. On the other hand, ld. DR for the Revenue objected to the submissions made by the ld. AR for the assessee and submitted that the issue is squarely covered by the decision of Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs. CIT 143 taxmann.com 178. 7. Considered the rival submissions and material placed on record. We observed that the first plea of the assessee that the issue under consideration is beyond the scope of section 143(1)(a) of the Income-tax Act, 1961 (for short ‘the Act’). In our considered view, this issue is already settled in favour of the Department and ld. AR for the assessee relied on the decision of PR Packaging Services 199 ITD 724 (Mum.) and other similar case laws. These case laws are already distinguished by 4 ITA Nos.3272 & 3273/DEL/2024 the coordinate Benches. Accordingly, this plea of the assessee is rejected. 8. Coming to alternative plea of the assessee. Considered the rival submissions and this plea was considered by the coordinate Bench in the case of Benson Movers Pvt. Ltd. (supra) and the relevant decision of the coordinate Bench is as under :- “5. In so far as employees contributions towards PF & ESI it is noticed that the issue as to whether the due date under PF/ESI Acts should be as per the calendar month for which the salary is payable or from the month in which the salary is paid to the employee by the employer came up for adjudication in the case of Sentinel Consultants Pvt. Ltd. Vs. ACIT (supra) and the Tribunal restored the issue to the file of the AO with the following observations:- “9. We have carefully considered the rival submissions and perused the material available on record. The disallowance of employees’ contribution to PF/ESIC for breach of condition under Section 36(1)(va) is in controversy. 9.1 We notice at the outset that an opportunity was given via electronic platform of the deptt. For the proposed adjustments and in the absence of e- response, the adjustments were carried out the CPC- Bangluru and intimation was issued enhancing the assessed income in the captioned assessment years. The CIT(A) in the first appeal has sustained the adjustments towards belated deposits of employees’ contribution to PF/ESIC in the light of the judgment rendered by the Hon’ble Supreme Court in Checkmate Pvt. Ltd. vs. CIT (2022) 143 taxmann.com 178 (SC). The contention of the Assessee that such additions cannot be made under the umbrella of S. 143(1) is covered against the assessee the decision of the co- ordinate bench in the case of Weather Comfort 5 ITA Nos.3272 & 3273/DEL/2024 Engineers Private Limited vs. ACIT-CPC ITA No. 959/Del/2021 order dated 15/02/2023. The action of CPC and CIT(A) thus cannot be faulted where some opportunity was admittedly given for e- response. 9.2 We now turn to alternate plea on behalf of the assessee for grant of deduction under general provisions for deduction of expenditure under S. 37 of the Act. We do not see any merit in such plea that the belated deposit of employees contributions to PF/ESIC governed under Section 36(1)(va) is also simultaneously amenable to deduction under Section 37(1) of the Act. In terms of the provision, Section 37(1) permits deduction of expenditure which is not in the nature of expenditure prescribed in Sections 30 to 36 of the Act and also not being in the nature of capital expenditure or personal expenses of the assessee. Thus, in view of such mandate of law, the deduction of expenditure under the general clause of Section 37(1) would not extend to expenditure specially covered within the ambit of Section 36(1)(va) of the Act. The Hon’ble Supreme Court in the case of Checkmate Pvt. Ltd. (supra) itself explains this position in Para 32 of the Judgment. Such view also draws support from the observations made in recent judgment of the Hon’ble Supreme Court in the case of Pr.CIT vs. Khyati Realtors (P) Ltd. (2022) 141 taxmann.com 461 (SC). The alternate plea is thus without any merit. 9.3 We also take note of yet another plea made out on behalf the assessee towards methodology of calculation of default under the relevant PF/ESIC Act. The Ld. Counsel contends that the month during which the disbursement of salary is actually made would be relevant for the purposes of determination of due date of deposit under the respective statute. The accrual of liability towards payment of salary without actual disbursement would not fasten obligation for deposits of employees contribution in the labour Acts per se. as observed by the co-ordinate bench in Kanoi Paper and Industries Ltd. vs. ACIT (2002) 75 TTJ 448 6 ITA Nos.3272 & 3273/DEL/2024 (Cal). This aspect has not been found to be examined by the Assessing Officer or CIT (A). Hence without expressing any opinion on merits on this aspect, we deem it expedient to restore the matter to the file of designated AO. It shall be open to the assessee to place factual matrix before the AO and take such plea for evaluation of the AO. The AO shall examine this aspect and fresh order in accordance with law after giving proper opportunity.” 6. We find similar view has been taken by the co- ordinate benches in the cases of B. L. Kashyap & Sons Ltd. (supra) and VVDN Technologies Pvt. Ltd. (supra). The ld. Counsel submits that in view of these decisions the matter may be restored to the Assessing Officer to ascertain the due date for remittance of the PF/ESI contributions of employees. Considering the decisions of the coordinate benches referred to above we restore this issue to the file of the Assessing Officer to decide in the light of the observations made by the Tribunal in the case of Kanoi Paper & Industries Ltd. Vs. ACIT (supra). Needless to say that the Assessing Officer shall provide adequate opportunity of being heard to the assessee and the assessee is at liberty to provide all the necessary information in support of its contention.” 9. Since the above issue is squarely covered by the above decision, we are inclined to remit the issue back to the file of AO to consider the alternative plea of the assessee as per law after giving proper opportunity of being heard to the assessee. Accordingly, appeal being ITA No.3272/Del/2024 is partly allowed for statistical purposes. 10. With regard to ITA No.3273/Del/2024 for AY 2021-22, since the facts are exactly similar to ITA No.3272/Del/2024 for AY 2020-21 our above findings in ITA No.3272/Del/2024 are applicable mutatis mutandis in 7 ITA Nos.3272 & 3273/DEL/2024 ITA No.3273/Del/2024. Accordingly, the appeal being ITA No.3273/Del/2024 filed by the assessee is partly allowed for statistical purposes. 11. In the result, both the appeals of the assessee are partly allowed for statistical purposes. Order pronounced in the open court on this 21st day of January, 2025 after the conclusion of hearing. SD/- SD/- (SATBEER SINGH GODARA) (S.RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 21.01.2025 TS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals). 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "