SRI LAKSHMI ROAD TRANSPORT COMPANY,HYDERABAD V. DCIT., CIRCLE-6(1), HYDERABAD

ITA 1209/HYD/2025

AI Insights

M/s Sri Lakshmi Road Transport Company appealed against the order of the Learned First Appellate Authority, which had sustained the addition of Rs. 14,51,140 as a result of disallowing employee contributions to PF and ESI due to their delayed payment. The tribunal considered the precedents set by the Hon'ble Supreme Court and the Hon'ble Telangana High Court, which clarified that such contributions are not deductible if not paid within the statutory deadlines. The tribunal found no merit in the assessee's arguments and dismissed the appeal, affirming the adjustments made by the CPC under section 143(1) of the Income Tax Act.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 788346 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: misc
• Appeal Filed On: 23-07-2025
• Other Referred Cases: Checkmate Services Pvt. Ltd. vs The Dy. CIT, Dondapati Sudhakar Rao vs ITO, Rajkumar Bothra vs DCIT, Synergies Castings Ltd. vs ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: C. MAHESHWAR REDDY
• Keywords: Business expenditure; Question of law; TDS
• Section: 154; 43B; 37(1); 260A

Judgement Text

" ITA No 1209 of 2025 Sri Lakshmi Road Transport Co Page 1 of 10 आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ B ‘ Bench, Hyderabad ŵी रिवश सूद,Ɋाियक सद˟ एवं ŵी मधुसूदन साविड़या लेखा सद˟ समƗ | Before Shri Ravish Sood, Judicial Member A N D Shri Madhusudan Sawdia, Accountant Member आ.अपी.सं /ITA No.1209/Hyd/2025 (िनधाŊरण वषŊ/Assessment Year: 2018-19) M/s Sri Lakshmi Road Transport Company Hyderabad PAN:AATFS6596A Vs. Dy. CIT Circle 6(1) Hyderabad (Appellant) (Respondent) िनधाŊįरती Ȫारा/Assessee by: Shri C. Maheshwar Reddy, CA राज̾ व Ȫारा/Revenue by:: Dr. Sachin Kumar, Sr. DR सुनवाई की तारीख/Date of hearing: 24/11/2025 घोषणा की तारीख/Pronouncement: 26/11/2025 आदेश/ORDER Per Madhusudan Sawdia, A.M.: This appeal is filed by M/s. Sri Lakshmi Road Transport Company (“the assessee”), feeling aggrieved by the order passed by the Learned ADDL/JCIT (A)-1 NOIDA, (“Ld. First Appellate Authority”) dated 16.06.2025 for the A.Y.2018-19. 2. The assessee has raised the following grounds of appeal: Printed from counselvise.com ITA No 1209 of 2025 Sri Lakshmi Road Transport Co Page 2 of 10 “a. The order passed by the Ld. CIT(A) is erroneous in law as well as facts and not all valid; hence it is be deleted. b. The CPC cannot disallow the statutory payments of ESI/PF under section 143(1)(a) of the Income Tax Act, 1961 as the same is invalid. c. The CPC has initially erred in interpretation of the fact involved in the case of the Appellant and has been made continued to make addition of Rs.14,51,140/- as in consequent to disallowance of employee contribution of PF & ESI. Considering the same, the Ld. CIT (A) has been ignorant of the submission made has dismissed the appeal. d. The Ld. CIT(A) should have considered the fact that the CPC has no jurisdiction to disallow in respect of the statutory payment PF & ESI. e. That on the facts and in the circumstances of the case and in law, the Ld. CIT (A) -NFAC, Delhi erred in sustaining the addition of Rs. 14,51,140/- f. The Ld. CIT(A) has been ignorant of the fact that the ESI & PF are in the nature of business expenditure is allowable under the provision of Sec.37(1) as considering the ruling decision laid down in the case of M/S. Checkmate Services Pvt. Ltd. vs The Dy. CIT, CPC, Bangalore. g. Any other ground will be raised at the time of hearing”. 3. The assessee has also raised the following additional ground of appeal: “5 (a) In the light of the facts and circumstances of the case of the Appellant, the claim of employees contribution towards ESI and PF is alternatively to be allowed under section 37(1) when it is disallowed under section 36(1)(va) of the Act”. 4. The brief facts of the case are that the assessee is a partnership firm engaged in the business of transportation. It filed its return of income for AY 2018–19 on 02.10.2018 declaring total income of Rs.96,50,344/-. The return of income of the assessee was processed by the CPC, Bengaluru under section 143(1) of the Printed from counselvise.com ITA No 1209 of 2025 Sri Lakshmi Road Transport Co Page 3 of 10 Income Tax Act, 1961 (“the Act”) on 16.10.2019 by making an adjustment of Rs.14,51,140/- on account of delayed payment of employees’ contribution to PF and ESI, determining the total income of the assessee at Rs.1,11,01,484/-. The assessee thereafter filed a rectification application before CPC, but CPC passed an order under section 154 of the Act on 15.03.2022 reiterating the same adjustment and computing the same income at Rs.1,11,01,484/-. 5. Aggrieved with the intimation issued by CPC, the assessee filed an appeal before the Ld. First Appellate Authority. Although the assessee had raised a specific ground challenging the disallowance made by CPC towards employees’ contribution to PF and ESI amounting to Rs.14,51,140/-, it is observed that during the course of appellate proceedings, the assessee expressly accepted the disallowance before the Ld. First Appellate Authority. In view of such acceptance, the Ld. First Appellate Authority dismissed the appeal of the assessee. 6. Aggrieved with the order of the Ld. First Appellate Authority, the assessee is now in appeal before us. At the outset, the Learned Authorized Representative (“Ld. AR”) submitted that the assessee is withdrawing the additional ground of appeal raised in the appeal. Further, he submitted that the sole issue involved in the appeal of the assessee relates to the disallowance of Rs.14,51,140/- under section 36(1)(va) of the Act on account of employees’ contribution towards PF and ESI. He submitted that the intimation under section 143(1) of the Act was passed by the Printed from counselvise.com ITA No 1209 of 2025 Sri Lakshmi Road Transport Co Page 4 of 10 CPC on 16.10.2019, which was a period when the issue regarding allowability of employees’ contribution deposited beyond the statutory due dates was not finally settled. The Ld. AR explained that the law was first conclusively settled by the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs. CIT (448 ITR 518) on 12.10.2022, wherein it was held that employees’ contribution to PF/ESI must be deposited within the due dates prescribed under the respective statutes and that such payments are not protected by section 43B of the Act. The Ld. AR argued that prior to the Hon’ble Supreme Court judgment, the issue was debatable, and a debatable issue cannot be subject matter of adjustment under section 143(1) of the Act. Further, he relied upon the order of this Tribunal in the case of Dondapati Sudhakar Rao vs. ITO in ITA No. 701/Hyd/2025 dated 20.08.2025, which in turn relied on the judgment of the Hon’ble Chhattisgarh High Court in the case of Rajkumar Bothra vs. DCIT (Tax Case No. 56 of 2025 dated 08.05.2025), wherein under the similar facts, this Tribunal has allowed the appeal of the assessee. 7. Per contra, the Learned Departmental Representative (“Ld. DR”) inviting our attention to para no.6.2 of the order of the Ld. First Appellate Authority submitted that the assessee had categorically accepted the disallowance before the Ld. First Appellate Authority and therefore cannot now challenge the same before the Tribunal. He further relied on the judgment of the Hon’ble jurisdictional High Court in the case of Synergies Castings Ltd. vs. ACIT 173 taxmann.com 503 dated 16.12.2024. The Ld. Printed from counselvise.com ITA No 1209 of 2025 Sri Lakshmi Road Transport Co Page 5 of 10 DR submitted that the Hon’ble High Court has considered identical facts, including the timing of the intimation under section 143(1) of the Act, being prior to the decision of the Hon’ble Supreme Court in Checkmate Services Pvt. Ltd (Supra) and yet upheld the disallowance of employees’ contribution deposited beyond the statutory due date. He therefore submitted that the appeal of the assessee deserves to be dismissed. 8. We have considered the rival submissions and perused the material available on record. In this regard, we have gone through para no. 6 to 14 of the order of the Hon’ble jurisdictional High Court in Synergies Castings Ltd. (supra), which is to the following effect: “6. An intimation under Section 143(1) of the Act was issued to the assessee on 18.05.2020 by which a sum of Rs.1,85,76,482/- was disallowed on account of assessee's contribution under the ESI and PF and the total income of the assessee was determined at Rs.1,85,76,482/- and the tax payable on this income was computed at Rs.55,72,944/-. The credit of TDS of Rs.72,87,370/- was allowed and the refund was determined at Rs.11,61,797/-. 7. Being aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) (hereinafter referred to as 'CIT(A)'). The CIT(A), by order dated 18.12.2023, dismissed the appeal. The assessee thereupon approached the Tribunal. The Tribunal, by the impugned order dated 13.03.2024, inter alia held that the issue involved in the appeal is covered by a decision of the Supreme Court in Checkmate Services (P) Ltd. v. CIT [2022] 143 taxmann.com 178/290 Taxman 19/448 ITR 518 (SC) and held that since the assessee had not remitted the employees' contribution to PF and ESI within the statutory dates, the amount cannot be claimed as a deduction. It was further held that, admittedly, the assessee had not deposited the employees' PF and ESI within the statutory dates but has deposited the same beyond the statutory Printed from counselvise.com ITA No 1209 of 2025 Sri Lakshmi Road Transport Co Page 6 of 10 dates. Accordingly, the Tribunal dismissed the appeal preferred by the assessee. Hence, this appeal. 8. Learned counsel for the assessee submitted that the issue involved in the appeal has not attained finality and is debatable. Therefore, the appeal should be admitted. 9. We have considered the submission made by learned counsel for the assessee and have perused the record. 10. The Supreme Court, in Checkmate Services (P) Ltd. (supra), in paragraph 52, has held as under: \"When Parliament introduced Section 43B of the Income Tax Act, 1961, 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 desperate 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 stature) 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 Printed from counselvise.com ITA No 1209 of 2025 Sri Lakshmi Road Transport Co Page 7 of 10 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 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 outgoings forming part of the assessee’s 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.\" 11. The relevant portion of Para 54 is extracted below for the facility of reference: \"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.\" 12. Thus, from a perusal of the aforesaid relevant extracts of the decision of the Supreme Court in Checkmate Services (P) Ltd. (supra), it is evident that the assessee has to make payment of the contribution to PF and ESI before the statutory dates in order to claim the amount as deduction. Admittedly, the assessee has not paid the aforesaid amount on or before the statutory dates. The findings of fact has been recorded by the assessing officer, CIT(A) as well Printed from counselvise.com ITA No 1209 of 2025 Sri Lakshmi Road Transport Co Page 8 of 10 as by the Tribunal. The aforesaid finding of fact cannot, by any stretch of imagination, be said to be perverse. 13. It is not the case of the assessee that the aforesaid finding of fact is perverse. It is well settled in law that this Court, in exercise of powers under Section 260A of the Act, cannot interfere with the finding of fact until and unless the same is demonstrated to be perverse. (see Syeda Rahimunnisa v. Malan Bi by LRs (2016) 10 SCC 315 and Pr. CIT v. Softbrands India (P.) Ltd. [2018] 94 taxmann.com 426/406 ITR 513 (Karnataka)). 14. In view of the preceding analysis, no substantial question of law arises for consideration in this appeal. The same fails and is, hereby, dismissed. No costs.” 9. On a perusal of the above, we observe that the Hon’ble High Court, has dealt with a situation where the intimation under section 143(1) of the Act was passed on 18.05.2020 (para no. 6 of the order), i.e., before the decision of the Hon’ble Supreme Court in Checkmate Services Pvt. Ltd. (Supra) and the assessee before the Hon’ble High Court had also raised the debatable issue (para no. 8 of the order). The Hon’ble High Court nevertheless rejected the assessee’s argument and held that employees’ contribution to PF/ESI deposited beyond the statutory due dates is not allowable under section 36(1)(va) of the Act. We have also examined the order of this Tribunal in Dondapati Sudhakar Rao vs. ITO (supra) relied upon by the assessee. It is noticed that while deciding that matter, the Tribunal did not have the benefit of the binding jurisdictional High Court judgment in Synergies Castings Ltd. (supra). Therefore, the decision in Dondapati Sudhakar Rao (Supra) has been rendered without considering the authoritative pronouncement of the Hon’ble jurisdictional High Court and hence cannot prevail over the jurisdictional High Court’s judgment. It is Printed from counselvise.com ITA No 1209 of 2025 Sri Lakshmi Road Transport Co Page 9 of 10 a well-settled proposition that this Tribunal is bound to follow the judgment of the Hon'ble Telangana High Court. The Hon’ble Telangana High Court in Synergies Castings Ltd. (supra) under the similar circumstances has categorically held that employees’ contribution to PF and ESI deposited after the due dates specified under the respective Acts is not allowable, even if such contribution is made before the due date under section 139(1) of the Act. Accordingly, following the binding decision of the Hon’ble Jurisdictional High Court, we hold that the employees’ contribution deposited by the assessee beyond the statutory due date is not allowable under section 36(1)(va) of the Act. In view of the above, we find no infirmity in the order of the Ld. First Appellate Authority as well as the adjustments made by CPC under section 143(1) of the Act. 9. In the result, the appeal filed by the assessee is dismissed. Order pronounced in the Open Court on 26th November 2025. Sd/- Sd/- (RAVISH SOOD) JUDICIAL MEMBER (MADHUSUDAN SAWDIA) ACCOUNTANT MEMBER Hyderabad, dated 26th November 2025 Vinodan/sps Printed from counselvise.com ITA No 1209 of 2025 Sri Lakshmi Road Transport Co Page 10 of 10 Copy to: S.No Addresses 1 Sri Lakshmi Road Transport Company, Plot No.C-14 IDA Uppal Hyderabad 500039 2 Dy. CIT, Circle 6(1) Hyderabad 500004 3 Pr. CIT - Hyderabad 4 DR, ITAT Hyderabad Benches 5 Guard File By Order Printed from counselvise.com "