ZAHIR KASAM MEMON,MUMBAI V. ADDL-JCIT (A)-2, , MUMBAI

ITA 914/MUM/2024

AI Insights

The case involves Zahir Kasam Memon, a contractor providing manpower services to the Vasai Virar Municipal Corporation, who appealed against the order of the CIT(A) confirming the disallowance of certain deductions related to delayed payments of employees' contributions to PF/ESIC. The CPC had initially disallowed these deductions while processing the return under section 143(1) of the Income Tax Act. The main legal contention was whether the CPC could make such disallowances under section 143(1)(a)(iv) and whether the contributions, although paid before the filing of the return, but after the due dates specified under the respective Acts, were deductible. The Tribunal dismissed the appeal, agreeing with the CPC's interpretation and application of the law.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 473509 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 30-10-2024
• Assessment Year: 2019-2020
• Appeal Filed On: 29-02-2024
• Other Referred Cases: Checkmate Services Pvt. Ltd. Vs. CIT, Shand Pipe Industry Pvt Ltd vs DCIT, Kalpesh Synthetics Pvt Ltd vs DCIT, PR Packaging Services vs ACIT, Kotak Mahindra Bank Ltd vs. Add/Jt/Dep/ACIT, Everest Kanto Cylinder Ltd vs Union Of India, Diamour Jewels vs. CPC, Strides Pharma Science Ltd. vs DCIT, Satpal Singh Sandhu vs DCIT, Romy David vs DCIT, Gurmeet Singh Hora vs ACIT, Parv Buildcon vs DCIT, Mahindra And Mahindra Financial Services Ltd vs DCIT, Shri Kunj Bihari Agrawal vs ACIT/DCIT, ANI Integrated Services Ltd vs DCIT, Collector Land Acquisition Vs. Mst. Katiji & Ors.
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: BHANGEPATIL PUSHKARAJ RAMESH
• Assessee Lawyers: MURTAZA QURESH GHADIALI; SABEENA DARUKHANAWALA
• Keywords: Condonation of delay; Opportunity of being heard; Retrospective amendment; Reasonable cause
• Section: 201; 143(1); 139(1); 13; 43B; 20

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “G”, MUMBAI BEFORE SMT BEENA PILLAI, JUDICIAL MEMBER AND SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA No.914/M/2024 Assessment Year: 2019-20 Zahir Kasam Memon Memon Brothers, Pinjarwada, Kumbharwada, Zenda Bazar, Vasai (West).-401201. PAN:AEMPM1407R Vs. ADDL-JCIT (A) -2 Chennai, Tamil Nadu. (Appellant) (Respondent) Present for: Assessee by : Shri Murtaza Quresh Ghadiali- CA & Ms. Sabeena Darukhanawala- CA Revenue by : Shri Bhangepatil Pushkaraj Ramesh- Sr. AR Date of Hearing : 30.10.2024 Date of Pronouncement : 29.11.2024 O R D E R Per Beena Pillai, JM: Present appeal is filed by the assessee arises out of order dated 19.12.2023 passed by Ld. CIT(A), ADDL/JCIT (A)-2, Chennai ITA No.914/MUM/2024 Zahir Kasam Memon; A. Y.2019-20 Page | 2 (hereinafter referred to as “CIT(A)”) for Assessment Year 2019-20 on following grounds of appeal: 1. “On the facts and circumstances in law the CPC have passed the order without giving any opportunity of being heard. 2. The Auditor have by mistakenly putted the total amount of PF and ESIC whereas as per section 36(1)(va) only the Employee Contribution towards PF and ESIC is to be reported. 3. Without understanding the nature of Business and the CPC has erred in adding the total amount of PF and ESIC to the income of the assessee. 4. The appellant is the contractor appointed by the Vasai Virar Municipal Corporation for providing manpower services. 5. ASSESSING OFFICER AO (CPC), while processing the return of income of the assessee company, made adjustment on account of disallowance of expenditure indicated in the Audit Report u/s 143(1)(a)(iv). 6. The adjustment made while processing the return of income is illegal because the case of the assessee company does not fall under 143(1)(a)(iv). [Case Laws will be submitted along with written Submissions] 7. The appellant request to delete the additions made by the CPC to the tune of Rs.2,08,26,668/-. 8. The appellant reserves the right to alter, delete or amend any grounds of appeal.” I. Delay of 12 days to be condoned. A. At the outset, the Ld.AR submitted that the assessee filed the present appeals before this Tribunal with a delay of 12 days in both the appeals. He has filed the affidavit of the assessee stating as under: “Affidavit for Condonation of Delay in Filing The Appeal Against Assessment Order Of Commissioner of Income Tax Ward/Range - ADDL/JCIT (A)-2 CHENNAI 1) I. ZAHIR KASAM MEMON aged about 49 years, holder of Income Tax PAN - AEMPM1407R, an adult inhabitant residing at Memon Brothers, Pinjarwada, Kumbharwada, Zenda ITA No.914/MUM/2024 Zahir Kasam Memon; A. Y.2019-20 Page | 3 bazar. Vasai West, Mumbai-401 201 do solemnly affirm and state on oath as under: 2) That I received an Intimation for the Assessment Year 2019- 20 under section 143(1) of the Income Tax Act 1962 on Date 20 February 2020. 3) That as per the said intimation I found that CPC has disallowed the amount of Rs. 2,08,26,668/-. The additions made by the CPC were on account of Disallowance of expenditure indicated in the audit report but not considered in computing the total income in the return. 4) That I was advised by my legal consultant that the said intimation is factually incorrect and an application for Appeal before CTT(A) shall be filed. 5) The Hon'ble CIT(A), in his order dated 19th December 2023, confirmed the adjustment of Rs.1.11,01,285/- towards delayed contribution of PF/ESIC under section 36(1)(va). Thus, Rs. 97.25.003/- towards Employer's contribution was fully allowed as it was paid before due date of filing the return of income. 6) Further, I was advised by the legal consultant to file an appeal before the Hon'ble ITAT for relief. The appeal was filed before this Hon'ble ITAT on date 22nd February 2024. 7) It may be noted that as per section 253(3) of Income Tax Act 1961, appeal shall be filed withing Sixty days of the date of Order, whereas we have filed is after Sixty-Five days and that there is a minor delay of 05 days for which an application for condonation of delay has been filed as provided under section 253(5) of the Income Tax Act, 1961. 8) That delay in filing the appeal is bona fide and that there is has been a minor delay, due to the time taken for selecting and appointing an Authorized Representative. 9) That I had no intention to jeopardize the interest of the revenue by delaying the filing of the appeal. VERIFICATION I, ZAHIR KASAM MEMON, the above-named deponent, do hereby verify and solemnly state that the contents of para 1 to 6 are true to the best of my knowledge and the contents of para 7 to 9 are true to the best of my belief. Nothing material has been concealed.” B. The Ld.AR submitted that in view of the above, the assessee could not file the appeals before this Tribunal well in time and ITA No.914/MUM/2024 Zahir Kasam Memon; A. Y.2019-20 Page | 4 by the time the appeal papers were prepared for filing, there arose delay of 12 days in filing these present appeals before this Tribunal. The reason for the delay in filing the present appeals were due to reason beyond the control of the assessee. He thus prayed for the delay to be condoned. C. The Ld.DR though objected, however could not controvert the reasoning given by the Ld.AR for the delay that was caused in filing the present appeals. We have perused the submissions advanced by both sides in the light of records placed before us. D. We note that there is a delay of 12 days in filing the present appeal which was due to wrong understanding of the result of the impugned order. We do not find any reason to reject the application for condonation, as justice must not seem to be rendered but it must be rendered. Assessee cannot be denied the opportunity of being heard which is the basic principles of natural justice. E. It is also noted that there is no malafide intention on behalf of assessee in not filing the present appeals within limitation. It is noted that, there is no malafide intention on behalf of assessee in not filing the present appeals within time. In our opinion, sufficient and reasonable cause has been made out by the assessee for condoning the delay as observed by Hon’ble Supreme Court in case of Collector Land Acquisition ITA No.914/MUM/2024 Zahir Kasam Memon; A. Y.2019-20 Page | 5 Vs. Mst. Katiji & Ors., reported in (1987) 167 ITR 471 in support of his contentions, wherein, Hon’ble Court observed as under:- “The Legislature has conferred the power to condone delay by enacting section 51 of the Limitation Act of 1963 in order to enable the courts to do substantial justice to parties by disposing of matters on de merits \". The expression “sufficient cause” employed by the Legislature is adequately elastic to enable the courts to apply the law in a meaningful manner which subserves the ends of justice that being the life-purpose of the existence of the institution of courts. It is common knowledge that this court has been making a justifiably liberal approach in matters instituted in this court. But the message does not appear to have percolated down to all the other courts in the hierarchy. And such a liberal approach is adopted on principle as it is realized that : 1. Ordinarily, a litigant does not stand to benefit by lodging an appeal late. 2. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. ......................................................1.Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908, may be admitted after the prescribed period if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period.” F. Considering the above observation by Hon’ble Supreme Court, we find it fit to condone the delay caused in filing the present appeals. Respectfully following the above view, the delay of 12 days is condoned in the appeal.” ITA No.914/MUM/2024 Zahir Kasam Memon; A. Y.2019-20 Page | 6 II. Admission of Additional Grounds:- A. The Ld.AR submitted that the assessee has filed an application for admission of additional grounds that reads as under: 1. “Your honor the assesse filed appeal late as there was confusion whether the appeal can be filed against Intimation u/s 143(1) and for the amount mistakenly written by the auditor. 2. As during Covid-19 the assesse was busy as he had to provide manpower supply to Vasai Virar Municipal Corporation and couldn't consult on time for filing appeal on time. 3. Your honor the assesse hereby request you to condone the delay in filing appeal.” B. The Ld.AR submitted that the above grounds are related to the main grounds raised in form 36 and that no new records needs to be looked into for disposing off the issue raised herein. The Ld.DR though could not object to the submissions of the assessee did not support the admission of additional ground. We have perused the submissions advanced by both sides in the light of records placed before us. C. We note that the issue raised by assessee in the additional grounds do not require to delve into any new facts. Accordingly, the additional grounds filed by assessee stands admitted. Brief facts of the case are as under: 2. The assesee is an Individual doing his business in the name of Reliable Agencies, by providing manpower supplies to Vasai Virar Municipal Corporation. He filed his return of income for the year ITA No.914/MUM/2024 Zahir Kasam Memon; A. Y.2019-20 Page | 7 under consideration on 30.09.2019 declaring total income of Rs.1,33,67,203/-. The Central Processing Centre (hereinafter referred to as „CPC‟) while processing the return u/s. 143(1) of the Act calculated total income of assessee at Rs.3,41,93,915/- on account of amount debited to profit & loss Account to the extent disallowable u/s. 137 of the Act. Aggrieved by the disallowance made u/s. 143(1) intimation, the assessee preferred appeal before the Ld. CIT(A). 3. The Ld. CIT(A) vide impugned order sustain the addition u/s. 36(1)(va) of the Act towards ESI/PF. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before this Tribunal. 4. The Ld.AR vehemently argued that CPC do not have jurisdiction to make any disallowance in the income in respect of delayed payments of ESI/PF prior to the decision of Hon'ble Supreme Court in case of Checkmate Services Pvt. Ltd. Vs. CIT reported in [2023] 290 taxmann 19. He submitted that, it is only after the decision of Checkmate Services Pvt. Ltd. Vs. CIT(supra) by Hon'ble Supreme Court, the amendment was made to section 143(1)(A)(iv), and therefore has to be construed to be prospective in nature. 4.1. The Ld.AR submitted that assessee‟s auditor in clause 20B of the audit report provided details of contribution received from employees from various funds as referred in section 36(1) (va). He submitted that, no disallowance could be made based on the dates ITA No.914/MUM/2024 Zahir Kasam Memon; A. Y.2019-20 Page | 8 of payments of employees contribution that have been reported therein. The Ld.AR reiterated his arguments made before the first appellate authority that the CPC simply matched due dates of payments and actual dates of payments while processing the return of income, and the difference between the dates has been assumed to be the reason for disallowance. 4.2. The Ld.AR submitted that in actual scenario there is no disallowance but only difference in the due date and actual date of payment. The Ld.AR thus vehemently argued that no disallowance on such reason can be allowed u/s. 143(1) (iv) of the Act. He placed reliance on the following decision in support of these contentions. i. Shand Pipe Industry Pvt Ltd vs DCIT, Bangalore ITAT dt. 27th Dec 2021 ii. Kalpesh Synthetics Pvt Ltd vs DCIT, Mumbai ITAT dt. 27th Apr 2022 iii. PR Packaging Services Packaging Service vs ACIT, Mumbai ITAT dt. 7th Dec 2022 iv. “Kotak Mahindra Bank Ltd vs. Add/Jt/Dep/ACIT Mumbai Trib. Dtd. 08 August 2024] v. Everest Kanto Cylinder Ltd vs Union Of India (Bombay) 29 January 2024 vi. Diamour Jewels vs. CPC, Mumbai ITAT dt.25th Jan 2024 vii. Strides Pharma Science Ltd. vs DCIT 15 January 2024 viii. Satpal Singh Sandhu vs DCIT, Raipur ITAT dt. 11th May 2023 ix. Romy David vs DCIT, Raipur ITAT dt. 5th Jan 2024 x. Gurmeet Singh Hora vs ACIT, Raipur ITAT dt. 3rd Aug 2023 xi. Parv Buildcon vs DCIT, Raipur ITAT dt. 11th Jan 2024 xii. Mahindra And Mahindra Financial Services Ltd vs DCIT, Mumbai ITAT dt. 12th May 2023 xiii. Shri Kunj Bihari Agrawal vs ACIT/DCIT, Raipur ITAT dt. 31 Jan 2024 xiv. ANI Integrated Services Ltd vs DCIT, Mumbai ITAT dt. 29th May 2024 4.3. On the contrary, Ld.DR relied on the orders passed by the first appellate authority. He submitted that the NFAC/Ld. CIT(A) deleted ITA No.914/MUM/2024 Zahir Kasam Memon; A. Y.2019-20 Page | 9 the additions in respect of all contributions made towards the specified funds on behalf of the employer u/s. 36(1) (va) by observing as under:- “Regarding the employer contribution of Rs.97,25,003/-, the appellant asserted that these contributions were made within the stipulated due date specified under section 139(1) of the Income Tax Act. The appellant explained that, in reporting the employees' contribution in Form 3CD, column no. 20(b), the auditor inadvertently included the entire sum of Rs.2.08,26,288/- as employees' contribution. Consequently, the appellant requested the removal of the disallowance related to the employer contribution, supporting this plea with copies of PF/ESIC payment challans. The appellant's argument carries weight, contending that the disallowance of employer contributions under section 36(1) (va) lacks justification since these contributions were settled well before the due date specified in section 139(1). Therefore, the Jurisdictional Assessing Officer (JAO) is instructed to delete the amount of Rs.97,25,003/- following the necessary verification of the challans.” 4.4. He further brought to our notice observations of the Ld. CIT(A) regarding employees contribution, that was confirmed to be disallowed which is as under:- “6.3 With regard to the disallowance of employees' contribution amounting to Rs.1,11,01,285/-, the appellant has raised two key questions. Firstly, whether amounts paid after the due date under the PF or ESIC Act but before the due date of filing a return are eligible for deduction. Secondly, whether the Deputy Commissioner of Income Tax, CPC, is authorized to make any prima facie adjustments under section 143(1)(a) on debatable issues. 6.4 In addressing the first question, Section 36(1)(va) of the Income Tax Act stipulates that for an employer to claim a deduction, any sum received from employees, falling under sub-clause (x) of clause (24) of section 2, must be credited to the employee's account in the relevant fund or funds on or before the due date. The CPC made adjustments under section 36(1) (va) in the appellant's case, asserting that employees' contributions towards PF/ESIC were paid after the due date specified in the relevant Acts but before the filing of the income tax return. It is crucial to note that the timely ITA No.914/MUM/2024 Zahir Kasam Memon; A. Y.2019-20 Page | 10 deposit of employees' contribution by the employer is a primary legal obligation, as per Section 36(1)(va), and it is the employer's responsibility to deposit the amounts received or deducted. Employees' contribution is treated as income under Section 2(24)(x), and for claiming a deduction, the deposit must occur on or before the due date as specified in the respective Acts. 6.5 Furthermore, the components involved in contributions are clarified: one is the employer's contribution paid from the employer's income, while the other is the employee's contribution deemed as income in the hands of the employer. The appellant's assertion that the payment of employees' contribution before filing the return of income entitles them to claim a deduction under section 36(1)(va) is not acceptable. The recent decision by the Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. supports the view that delayed payment of employees' contribution after the due date, even if made before filing the return of income, is not an allowable deduction. This decision, based on the amendments made by Finance Act 2021, has retrospective effect for all past tax years. 6.6 Concerning the second question, it is emphasized that the CPC can make necessary adjustments under section 143(1) for errors or incorrect claims apparent from the return of income. The Hon'ble Madras High Court decision in the case of AA520 Veerappampalayam Primary Agricultural Cooperative Credit Society Ltd. vs. DCIT (2022) 138 taxmann.com 571 supports the broad scope of 'intimation' under Section 143(1)(a), allowing adjustments based on errors apparent from the return of income. Therefore, the appellant's argument that the CPC cannot make such adjustments is not valid. Considering the legal position and the facts presented, the adjustment of Rs.1,11,01,285/- towards delayed contribution of PF/ESIC under section 36(1)(va) by the CPC is confirmed.” 4.5. The Ld.DR thus emphasized that CPC is bound to make necessary arrangements u/s. 143(1) for any errors or incorrect claims, which are apparent from return of income. In response, he placed reliance on the provision u/s. 143(1) that reads as under: (a)(ii) of the Act that treated as under:- u/s. (143)…………. (1)………………….. (a)………………….. (ii)……................. ITA No.914/MUM/2024 Zahir Kasam Memon; A. Y.2019-20 Page | 11 incorrect claim, if such incorrect claim is apparent from any information in return. ………………” 4.6. The Ld.DR also placed reliance on the decisions of Hon'ble Bangalore Tribunal and decision of Hon'ble Ahmedabad Tribunal in support which were passed for assessment year 2018-19 and 2019- 20 as under:- i) Checkmate Services Pvt. Ltd. Vs. ADIT, CPC, reported in [2024] 164 taxmann.com 498(Ahmedabad- Trib.) ii) Ramakrishnappa Nagaraj vs. Deputy Commissioner of Income Tax, reported in [2023] 147 taxmann.com 400(Bangalore-Trib.) 4.7. He submitted that the above decisions considered the arguments raised by the assessee herein by way of various grounds on first principles of law. We have perused the submissions advanced by both sides in light of records placed before us. 5. The issue raised by the assessee before us for consideration is, whether the authorities were justified in upholding the addition of Rs.1,11,01,285/-, being the employees contribution, towards delayed payment to the respective funds of PF/ESI u/s. 36(1)(va) by the CPC. 5.1. At this moment, it is relevant to note that the revenue is not in appeal against addition deleted by the first appellate authority in respect of the employers contribution. ITA No.914/MUM/2024 Zahir Kasam Memon; A. Y.2019-20 Page | 12 5.2. The Ld.AR has filed following summary of his arguments in respect of the grounds raised before us: i. The appellant asserts that the disallowance of employees' contributions to PF and ESIC, as undertaken by the CPC under section 143(1)(a)(iv), is void ab initio and based on an erroneous interpretation of the tax audit report, which purportedly contains clerical inaccuracies. The appellant further argues that the contributions were deposited before the due date for filing the return under section 139(1), thus qualifying for deduction. ii. The appellant contends that the CPC and CIT(A) failed to consider that the contributions were made within the extended filing due date under section 139(1) and argues procedural deficiency in the application of section 143(1). iii. The appellant claims that delayed payments from the Vasai Virar Municipal Corporation (VVMC), a state entity, caused a corresponding delay in depositing employees' PF/ESIC contributions. And the revenue in counter argued and submitted as under:- a. Legal Distinction in Contributions: The Revenue highlights that section 36(1)(va) distinctly regulates employees' contributions, which must be deposited within the due dates specified under the Provident Fund Act and ESIC Act. The Supreme Court in Checkmate Services (P.) Ltd. v. Commissioner of Income-tax-1 [2022] 143 taxmann.com 178 (SC) elucidated this principle, underscoring that the non obstante clause under section 43B does not apply to employees' contributions held by an employer in trust. b. CPC's Compliance in Adjustment: The adjustments made by the CPC under section 143(1)(a)(iv) adhered strictly to statutory mandates. The CPC rightly adjusted the claimed deductions based on data within the audit report, a legally justifiable action where delayed contributions are apparent. The ITAT's ruling in Checkmate Services (P.) Ltd. v. ADIT, CPC [2024] 164 taxmann.com 498 (Ahd - Trib.) explicitly upholds CPC's right to make such adjustments, thus affirming the action in this case. c. CIT(A)'s Decision: The CIT(A) upheld this disallowance, highlighting the established legal distinction between employer and employee contributions, reiterating that delayed employee contributions, irrespective of eventual deposit before the return filing date, fail to qualify for deduction under section 36(1)(va). d. Relevant Judicial Doctrine and Compliance: The doctrine of statutory interpretation mandates strict adherence to provisions as ITA No.914/MUM/2024 Zahir Kasam Memon; A. Y.2019-20 Page | 13 expressly framed by the legislature. In Checkmate Services (P.) Ltd. v. CIT (2022) 143 taxmann.com 178 (SC), the Supreme Court unequivocally held that \"employee contributions must be deposited within the statutory due dates of the Provident Fund and ESI Acts, or disallowance would ensue.\" This interpretation, now binding across all judicial forums, eliminates ambiguity about the applicability of section 43B in cases concerning employee contributions. e. Absence of Procedural Deficiency: The Revenue asserts that the CPC's adjustment, based on clear information within the appellant's tax audit report, complies with the automated intimation procedure, validly within its rights under section 143(1). The ITAT ruling in Checkmate Services (P.) Ltd. v. ADIT, CPC [2024] 164 taxmann.com 498 (Ahd - Trib.) further affirmed that \"where an incorrect claim is evident from the return itself, CPC is obligated to correct it without additional procedural requirements\". f. Legal Principle of Strict Compliance: Statutory compliance is paramount. Sections 2(24)(x) and 36(1)(va) are specific in their requirements for timely deposit of employee contributions, with Checkmate Services (P.) Ltd. v. Commissioner of Income-tax-1 [2022] 143 taxmann.com 178 (SC) firmly establishing that \"business exigencies or external delays do not mitigate statutory obligations\" [12]. The appellant's reliance on business contingencies does not alleviate the mandatory nature of section 36(1)(va), as compliance is unaffected by the appellant's contractual dynamics with VVMC.” 5.3. We have also perused the decisions relied by both sides which has been referred to and relied upon herein above. The provisions and section applicable to the issue has also been analysed as applicable to the year under consideration. Firstly we agree with the Ld.DR that prima facie adjustments could be made by the CPS as per section 143(1)(a)(ii) of the act. Admittedly there is no doubt that section 36(1)(va) and section 43(b) operates on different techniques and different parameters to determine the due date. When the provision of section 43B was first introduced into the statute, it was only concerned of the employees contribution having reference to section 34(1)(iv) of the Act. At that point of time, the question of ITA No.914/MUM/2024 Zahir Kasam Memon; A. Y.2019-20 Page | 14 employees contribution being considered as a part of employees earning was not there. 5.3.1. Subsequently, when the parliament introduced by way of amendment in 1998-99 section 36(1)(va), simultaneously a second proviso to section 43B was inserted to ensure timely payments were made by the employer to the concerned funds and to avoid mischief of employer retaining amounts for long periods. 5.4. Thus the intention of the parliament to retain the character and nature of employers contribution and the employees contribution to the respective funds the evident from the language used there. 5.5. Further section 2(24)(x) is a deeming section, wherein, the amount received from the employees (whether the amount is received from the employee or by way of deduction authorised by statute), assumes the character of income though not earned. Thus, amounts retained by the employer out of employees income by way of deduction or any other mode, were to be treated as income in the hands of the employer. 5.6. Per contra section 43B covers all deduction that are permissible as expenditure or outgoings forming part as assessee‟s eligibility that includes cess dues, taxes dues or any interest as the case may be. Section 43B requires that timely payment of these expenditure or eligibilities alone would entitle the assessee to have claim the deduction from total income. ITA No.914/MUM/2024 Zahir Kasam Memon; A. Y.2019-20 Page | 15 5.7. This difference in the two provisions of the statute referred to herein above stands categorically noted by Hon'ble Supreme Court in case of Checkmate Services Pvt. Ltd. Vs. CIT(supra). We refer to the specific observation of Hon'ble Supreme Court which is are as under:- “57. 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 bome 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 ITA No.914/MUM/2024 Zahir Kasam Memon; A. Y.2019-20 Page | 16 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.” We therefore do not find any merit in the arguments advanced by the Ld.AR and all the decisions relied by the Ld.AR are distinguishable on facts. Accordingly, the Ground No. 1, 2 & 4 stands dismissed. 6. The assessee has raised additional grounds vide application dated 27/08/2024 that reads as under:- Ground No. 5 & 6 5. ASSESSING OFFICER AO (CPC), while processing the return of income of the assessee company, made adjustment on account of disallowance of expenditure indicated in the Audit Report u/s 143(1)(a)(iv). 6. The adjustment made while processing the return of income is illegal because the case of the assessee company does not fall under 143(1)(a)(iv). [Case Laws will be submitted along with written Submissions] 7. Ground No. 5 is regarding wherein even after the partial relief granted by the Ld. CIT(A) by deleting the employees contribution and disallowing the employees contribution u/s. 36(1)(va) of the Act. We have already considered this issue herein above and therefore we do not find any merit in this ground. Accordingly additional Ground No. 5 raised by assessee stands dismissed. 8. In respect of additional Ground No. 6, the Ld.AR submits that assessee has not received the remuneration to be disbursed to the ITA No.914/MUM/2024 Zahir Kasam Memon; A. Y.2019-20 Page | 17 employees from the Vasai Virar Municipal Corporation. He submitted that assessee is contractor on behalf of the Vasai Virar Municipal Corporation as per the Solid Waste Management Rules, 2016 within 20 zones of vasai & virar for waste management. 8.1. He submitted that during the relevant financial year the Vasai Virar Municipal Corporation had failed to clear their dues on time that was pending towards the assessee, which in turn lead to the delayed payment of PF/ESI to the employees who were on Vasai Virar Municipal Corporation duty. The Ld.AR thus submitted that due to the failure on behalf of the State Government to make payment on the time to the assessee, the delay in contribution to the respective funds by the assessee may not be attributed to the assessee. 8.2. He thus submitted that, the assessee may not be treated as a defaulter and disallowance retained by the Ld. CIT(A) to the extent of employees contribution may be deleted. 8.3. On the contrary, the Ld.DR submitted that provision as per section 36(1) (va) of the Act do not distinguish between who is the ultimate payee to the employees on behalf of whom the contribution is to be deposited into specified funds. He submitted that the section simpliciter speaks of an employer who is duty bound to deduct and make the contribution to the respective funds within the due date as specified in the respective Acts. In the present facts of the case, assessee is an employer, in so far as the employees in respect of whom the contribution are to be deposited to the ITA No.914/MUM/2024 Zahir Kasam Memon; A. Y.2019-20 Page | 18 respective fund are concerned. The argument advanced by the assessee therefore does not have any merit. He thus relied on the view taken by the Ld. CIT(A)/NFAC. We have perused the submissions advanced by both sides in light of records placed before us. 9. We agree with the arguments advanced by the Ld.DR in this respects. Section 36(1)(va) do not envisage or grant any benefit to a situation expressed by the assessee in the present facts of the case. The provisions are very clear, in so far as the employer - employee contributions are concerned and therefore we reject this argument advanced by the Ld.AR as there is not merit in respect of the additional ground number that is raised. Accordingly the additional ground no. 6 raised by the assessee stands dismissed. In the result the appeal filed by the assessee stands dismissed. Order pronounced in the open court on 29.11.2024. Sd/- Sd/- PRABHASH SHANKAR BEENA PILLAI ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated: 29.11.2024. Snehal C. Ayare, Stenographer/Dragon Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai ITA No.914/MUM/2024 Zahir Kasam Memon; A. Y.2019-20 Page | 19 4. 5. Guard File CIT //True Copy// BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai "