SHREE RAMA MULTI-TECH LTD.,GANDHINAGAR V. THE DY.CIT., CIRCLE-4(1)(1), AHMEDABAD

ITA 1044/AHD/2023

AI Insights

The case involves Shree Rama Multi-Tech Ltd., which appealed against the order of the Commissioner of Income-tax (Appeals) regarding the disallowance of deductions for belated payments of employees' contributions to PF amounting to Rs.2,03,031 under Section 36(1)(va) of the Income-tax Act. The primary legal issue was whether the late deposit of employees' contributions to PF and ESI could still qualify for deductions under the Income-tax Act. The Tribunal referenced the Supreme Court's decision in Checkmate Services Pvt. Ltd. vs. CIT-I, which established that such contributions must be deposited by the statutory due date to be deductible.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 473701 (ITAT-AHMEDABAD)
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 19-11-2024
• Assessment Year: 2021-2022
• Appeal Filed On: 13-12-2023
• Other Referred Cases: Checkmate Services Pvt. Ltd. vs. CIT- I, Commissioner of Income Tax vs. Alom Extrusions Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C. DHARANI NATH
• Assessee Lawyers: ADJOURNMENT APPLICATION FILED
• Section: 250; 43B

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD BEFORE DR. B.R.R. KUMAR, VICE-PRESIDENT MS. SUCHITRA R. KAMBLE, JUDICIAL MEMBER I.T.A. No. 1044/Ahd/2023 (Assessment Year: 2021-22) Shree Rama Multi-Tech Ltd., 1557, Moti Bhoyan, Kalol- Khatraj Road, Tal. Kalol, Dist. Gandhinagar-382721 PAN : AAJCS 1563 N Vs. Dy. Commissioner of Income-tax, Circle 4(1)(1), Ahmedabad (Appellant) .. (Respondent) Appellant by : Adjournment application filed. Employee attended Respondent by: Shri C. Dharani Nath, Sr DR Date of Hearing 19.11.2024 Date of Pronouncement 22.11.2024 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT : 1. Adjournment application rejected. 2. This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre [NFAC], Delhi (hereinafter referred to as \"CIT(A)\" for short), dated 17.10.2023 passed under Section 250 of the Income-tax Act, 1961 [hereinafter referred to as \"the Act\" for short], for Assessment Year (AY) 2021-22. 3. The Assessee has taken following grounds of appeal:- ITA No. 1044/Ahd/2023 Shree Rama Multi-Tech Ltd Vs. DCIT Asst. Year :– 2021-22 - 2– “1. In law and in facts and circumstances of the Appellant case, the learned Addl/Jt. Commissioner of Income-tax (Appeals) has grossly erred in points of law and facts. 2. In law and in the facts and circumstances of the Appellant case, the learned Addl/Jt. Commissioner of Income-tax (Appeals) has grossly erred in dismissing the ground of the appellant regarding disallowance of belated payment of employees contribution to P.F. of Rs.2,03,031-u/s 36(1) (va) of LT. Act.” 4. The issue involved in the present appeal is regarding allowability of ESI and PF which was deposited after the due date prescribed in the respective Act, which is no more res-integra. The issue of ESI/PF payment has attained finality by the order of the Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs. CIT- I, vide order dated 12th October, 2022 wherein it was observed that employers have to deposit the employee's contribution towards EPF/ESI on or before the due date for availing deduction. In the cases before the Hon'ble Apex Court, the employers had belatedly deposited their employees' contribution towards the EPF and ESI, considering the due dates under the relevant provisions of the Act. The Assessing Officer ruled that by virtue of Section 36(1)(va) read with Section 2(24)(x) of the IT Act, such sums received by the appellants constituted \"income\". It was held that those amounts could not have been allowed as deductions under Section 36(1)(va) of the IT Act when the payment was made beyond the relevant due date under the respective acts. The Income Tax Appellate Tribunal and later the Gujarat High Court dismissed the challenge against this order of AO. In appeal, the court noted that the Hon'ble Kerala High Court has also ruled in favour of revenue on this issue whereas the Hon'ble High Courts of Bombay, Himachal Pradesh, Calcutta, Guwahati and Delhi have favoured the interpretation beneficial to ITA No. 1044/Ahd/2023 Shree Rama Multi-Tech Ltd Vs. DCIT Asst. Year :– 2021-22 - 3– the assessee. The Hon'ble Apex Bench effectively reversed the judgment in Commissioner of Income Tax vs. Alom Extrusions Ltd. (1 SCC 489) relied upon by the assessee. 5. The Hon'ble Apex Court in the case of Checkmate Services P. Ltd. vs. Commissioner Of Income Tax-I in CA No. 2833/2016 vide order dated 12.10.2022 observed that there is a marked distinction between the nature and character of the two amounts viz., the employers' contribution and employees' contribution required to be deposited by the employer. The first one is 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 employees' income and held in trust by the employer. The Hon'ble Apex Court held as under: \" 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 that provision would not absolve the ITA No. 1044/Ahd/2023 Shree Rama Multi-Tech Ltd Vs. DCIT Asst. Year :– 2021-22 - 4– assessee from its liability to deposit the employee's contribution on or before the due date as a condition for deduction.\" 6. As the issue of payment of employees’ contribution towards the PF has been ruled against the assessee by the Hon'ble Supreme Court, the appeal of the assessee on this ground is liable to be dismissed. 7. In the result, appeal of the assessee is dismissed. The order is pronounced in the open Court on 22.11.2024 Sd/- Sd/- (SUCHITRA R. KAMBLE) (DR. B.R.R. KUMAR) JUDICIAL MEMBER VICE-PRESIDENT Ahmedabad; Dated 22/11/2024 btk आदेश की \u0007ितिलिप अ\rेिषत/Copy of the Order forwarded to : 1. अपीलाथ\u0007 / The Appellant 2. \b\tथ\u0007 / The Respondent. 3. संबंिधत आयकर आयु\u0015 / Concerned CIT 4. आयकर आयु\u0015(अपील) / The CIT(A)- 5. िवभागीय \bितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड\u001f फाईल / Guard file. आदेशानुसार/ BY ORDER, True Copy उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation …19.11.2024….. 2. Date on which the typed draft is placed before the Dictating Member …20.11.2024 3. Other Member…20.11.2024……………… 4. Date on which the approved draft comes to the Sr.P.S./P.S …21.11.2024…………. 5. Date on which the fair order is placed before the Dictating Member for pronouncement 22.11.24. 6. Date on which the fair order comes back to the Sr.P.S./P.S …22.11.2024……………. 7. Date on which the file goes to the Bench Clerk ……22.11.2024….…. 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order 10. Date of Dispatch of the Order…………………………………… "