SHIVA INDUSTRIAL SECURITY AGENCY GUJARAT PVT. LTD V. DEPUTY COMMISSIONER OF INCOME TAX

TAXAP/330/2019

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The case involves Shiva Industrial Security Agency Gujarat Pvt. Ltd, the appellant, contesting an order from the Income-tax Appellate Tribunal which confirmed disallowances made by the Deputy Commissioner of Income Tax. The disallowances pertained to amounts claimed under Section 36(1)(va) of the Income Tax Act, 1961, which deals with the deduction of employees' contributions to provident funds and ESIC. The main legal contention was whether the contributions were deposited within the due dates as required by the relevant statutes. The High Court referenced previous decisions to affirm that the contributions must be deposited within the statutory time limits, which are not flexible based on the actual payment date of salaries.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 769052 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 09-07-2019
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax vs. Gujarat State Road Transport Corporation, M/s Checkmate Facility And Electronic Solutions Pvt. Ltd. vs. Deputy Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961, Employees Provident Funds & Miscellaneous Provisions Act, 1952, Employees State Insurance Act, 1948
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: VAIBHAVI PARIKH
• Keywords: Disallowances; Employees Contribution; ESIC; Provident fund; Tax appeal
• Section: 36(1)(va); 2(24)(x); 38; 260-A

Judgement Text

"C/TAXAP/330/2019 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 330 of 2019 ============================================= SHIVA INDUSTRIAL SECURITY AGENCY GUJARAT PVT. LTD Versus DEPUTY COMMISSIONER OF INCOME TAX ============================================= Appearance: MS VAIBHAVI K PARIKH(3238) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ============================================= CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR.JUSTICE A.C. RAO Date : 09/07/2019 ORAL ORDER (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1. This Tax Appeal under Section 260-A of the Income Tax Act, 1961 (for short “the Act, 1961”) is at the instance of the appellant-assessee and is directed against the order passed by the Appellate Tribunal Surat Bench, dated 13.11.2018 in ITA No.2528/Ahd/2015 for the Assessment Year 2011-12. 2. The assessee has proposed the following two questions as the substantial questions of law in its memorandum of the Tax Appeal : “(i) Whether in the facts and circumstances of the case, the Income-tax Appellate Tribunal was right in law in confirming the disallowances of Rs.31,09,082/- and Rs.3,08,247/- under Section 36(1)(va) read with Section 2(24)(x) of the Income Tax Act, 1961? Page 1 of 5 C/TAXAP/330/2019 ORDER (ii) Whether in the facts and circumstances of the case, the Income-tax Appellate Tribunal was right in law in not appreciating that the due date of payment of employees’ contribution into the Government treasury as contemplated under the provisions of Employees Provident Funds & Miscellaneous Provisions Act, 1952 and Employees State Insurance Act, 1948 should be reckoned from the date of actual payment of salary and not its accrual?” 3. Having heard Mr. Tushar Hemani, the learned counsel appearing for the appellant-assessee and having gone through the materials on record, we are of the view that both the questions proposed by the assessee are no longer res integra. Both the issues are squarely covered by a decision of this Court. So far as the question no.(i) proposed by the assessee is concerned, the same is squarely covered by a Division Bench decision of this Court in the case of Commissioner of Income Tax vs. Gujarat State Road Transport Corporation reported in (2014) 266 ITR 170. 3.1 So far as the second question which has been proposed is concerned, is also squarely covered by the decision of this Court in the case of M/s Checkmate Facility And Electronic Solutions Pvt. Ltd. vs. Deputy Commissioner of Income Tax (Tax Appeal No.1256 of 2018) decided on Page 2 of 5 C/TAXAP/330/2019 ORDER 15th October, 2018, wherein this Court has observed as under : “3. Learned counsel for the appellant would not dispute that the issue of disallowance of late deposited employees’ contributions of PF and ESIC stands covered by the Division Bench judgment of this Court in case of Commissioner of Income Tax v. Gujarat State Road Transport Corporation reported in [2014] 366 ITR 170 (Guj). He however raised a slightly different contention which did not arise for consideration before this Court in case of Gujarat State Road Transport Corporation (supra). He submitted that in terms of section 38 of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, reference to the time limit for depositing the contributions within 15 days of close of the month must be to the month in which the salary payment is made. For example, therefore if the salary payment for the month of June is made on 5th July, the employer would have time upto 15th of August for depositing the employee’s contribution of provident fund. Looking from this angle, there was no delay or default on the part of the present assessee. 4. In terms of section 36(1)(va) of the Act, any sum received by the assessee from any of his employees to which the provisions of section 2(24)(x) applies, would be deducted as long as such sum is credited by the assessee to the employee’s account in the relevant funds on or before due date. Explanation to the said subsection provides that for the purpose of the said clause, “due date” means a date by which the assessee is required as an employer to credit an employee’s contribution to the Page 3 of 5 C/TAXAP/330/2019 ORDER account in which relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise. Section 38 of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, becomes relevant. Subsection (1) thereof reads as under: “(1) The employer shall, before paying the member his wages in respect of any period or part of period for which contributions are payable, deduct the employee’s contribution from his wages which together with his own contribution as well as an administrative charge of such percentage [of the pay (basic wages, dearness allowance, retaining allowance, if any, and cash value of food concessions admissible thereon) for the time being payable to the employees other than an excluded employee, as the Central Government may fix. He shall within fifteen days of the close of every month pay the same to the fund “electronic through internet banking of the State Bank of India or any other Nationalized Bank authorized for collection” on account of contributions and administrative charge]: “Provided that the Central Provident Fund Commissioner may for reasons to be recorded in writing, allow any employer or class of employer to deposit the contributions by any other mode other than internet banking”. 5. This provision thus requires an employer before Page 4 of 5 C/TAXAP/330/2019 ORDER paying the employee his wages to deduct the employee’s contribution along with the employer’s own contribution as fixed by the Government. It is further required that he shall within fifteen days of the close of every month pay the same to the fund such contribution and administrative charges. In terms of this provision thus, after deducting the employee’s contribution towards the funds, the same has to be deposited with the Government within fifteen days of the close of every month. Reference to fifteen days of the close of the month must be in relation to the month during which the payment of wages is to be made and corresponding liability to deduct employee’s contribution to the fund arises. The expression “within fifteen days of the close of every month” therefore must be interpreted as having reference to the close of the month, for which, the wages are required to be paid with corresponding duty to deduct employee’s contribution and to deposit the same in the fund.” 4. In view of the aforesaid, we do not find any error much less error of law in the order passed by the Appellate Tribunal. In the result, this appeal fails and is hereby dismissed. (J. B. PARDIWALA, J) (A. C. RAO, J) Dolly Page 5 of 5 "