Deduction u/s 36(1)(va) of Income Tax Act is not allowable if Employees' Contributions are not Paid within Due Dates Specified under PF Act: ITAT [Read Order]

In a recent case, the Bangalore bench of the Income Tax Appellate Tribunal(ITAT) held that deduction under section 36(1)(va) of the Income Tax Act, 1961 is not allowable if employees' contributions are not paid within due dates specified under Provident Fund (PF) Act.

Shri. Trimbak Konher Patil, the Assessee is a proprietary concern deriving income from labour contracts. Consequent to the filing of its return, an intimation was issued by CPC of at total income computed at Rs.92,46,580/- as against the declared income of Rs.14,04,220/-. In the said intimation, a solitary addition of Rs.78,42,360/- was made by disallowing the payments of employees' contribution to the PF and ESI accounts for the reason that the said amounts were not paid within the due date specified under respective Acts. On appeal, the CIT(A) took note of the retrospective amendment brought into section 36(1)(va) and 43B of the Act.

The Bench noted that for the Assessment Years 2018-19 and 2019-20, admittedly assessee had not paid the employees' contribution to PF and ESI account within the due dates specified under the respective Acts.

The two-member Bench of George George K (Vice President) and Laxmi Prasad Sahu (Accountant Member) affirmed with the Apex Court wherein it was held that “if the employees' contributions are not paid within the due dates specified under the respective Acts, assessee will not be entitled to deduction under section 36(1)(va) of the Act”.

The ITAT remitted the matter to Adjudicating authority to decide on the question raised by the assessee as to when a contractor is not paying the dues to EPF, how the EPF contribution of contract employees are protected.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates