The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) held that if the payment has been made with respect employees’ contribution after the due date of the Income Tax Act, 1961, the same has to be disallowed and cannot be allowed as deduction and therefore, adjustment has rightly been made and the Assessing Officer (AO) is directed to restrict the disallowance to the extent of employee contribution.
The assessee Rishabh Metals and Chemicals Private Limited in the return of income filed had declared total income of ₹2,04,98,240. The said return was processed online by CPC (Central Processing cell) Bangalore and accordingly, adjustment of ₹4,00,168/- was made in the intimation under Section 143(1) of the Income Tax Act,1961 on account of late payment of employee contribution towards PF (Provident Fund) & ESI (Employees State Insurance).
Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT (A)]. The first appeallate tribunal dismissed the appeal filed by the assessee.
The assessee filed an appeal before the ITAT,and contended that the payments have not been made within the due date of 15 day of next months as per the PF & ESI Act, but made much before the due date of filling of return income.
The Departmental Representative relied on orders of the CIT(A).
The bench comprising of Aby T. Varkey, Judicial Member and S. Rifaur Rahman, Accountant Member observed that it is undisputed fact that payment of PF & ESI amounting to ₹ 4,00,168/- was not made within the due date prescribed under the PF & ESI Act, but payment has been made much before the due date of filing the return of income.
Further, the Tribunal relied on the decision of Supreme court in Checkmate Services Private Limited vs. CIT, where it was held that “if the payment has been made with respect employees contribution after the due date of the respective acts, the same has to be disallowed and cannot be allowed as deduction and therefore, adjustment has rightly been made”.
Thus, adjustment is permissible under the scope of Section 143(1) of the Income Tax Act. However, the adjustment has to be to the extent of employees’ contribution. Therefore, AO was directed to restrict the disallowance to the extent of employee contribution.
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