ITAT has upheld the disallowance pertaining to the late deposit of employees

The Income Tax Appellate Tribunal (ITAT) Delhi Bench has affirmed the disallowance of late deposits of employees' contributions to Provident Fund or Employees State Insurance Corporation (PF/ESIC) under Section 36(i)(va) of the Income Tax Act, 1961.

During the processing of the income tax return, the Central Processing Centre (CPC) made adjustments to the reported income of the taxpayer, Naveen Chandra Bhatt, due to the delayed deposit of employees' contributions to the Provident Fund/ESIC.

ads1

The taxpayer, in this case, had contested the disallowance of employees' contribution to Provident Fund/ESIC under the provisions of Section 36(i)(va) read with Section 43B of the Income Tax Act.

The disallowance made by the Revenue regarding the late deposit of employees' contribution to Provident Fund/ESIC was justified and supported by the judgment rendered in the case of Checkmate Services (P.) Ltd. vs CIT.

Om Prakash, representing the revenue, argued that even for Assessment Years preceding Assessment Year 2021-22, the delayed deposit of employees' contribution held in Trust by the employee assessee should be considered as taxable income under Section 2(24)(x) in conjunction with Section 43B of the Income Tax Act.

ads2

Additionally, it was contended that deductions under Section 36(i)(va) of the Income Tax Act would not be permissible for belated payments in such cases.

He argued further that the delayed deposit of employees' contribution, as indicated in the Audit Report, could be adjusted under Section 143(1) of the Income Tax Act, based on the decision made by the Pune Bench of the Tribunal in the case of Cemetile Industries vs ITO.

Chandra Mohan Garg, a Single Bench Judicial Member, upheld the revenue's action, stating that the issue of the taxability of belated employees' contribution to Provident Fund/ESIC was no longer a matter of first impression in light of the Supreme Court's judgment in the case of Checkmate Services (P.) Ltd. vs CIT.

Also, Read: "E-Invoice Verifier App by GSTN – Important Advisory".

Leave a reply