The Income Tax Appellate Tribunal (ITAT) Mumbai bench upheld the disallowance made by the lower authority towards the delayed remittance of employees contribution by reason of mis-utilization of funds.
Assessee, Krystal Integrated Services Pvt Ltd filed the appeal before the tribunal by challenging the disallowance towards delayed remittance of employees’ contribution by the assessee under ESI Act by the lower authorities.
The Assessee company is engaged in the business of Providing Facility Management Services, Security Agency Services, Housekeeping Services and Supply, Installation, Testing and Commissioning Services.
Assessee’s returns for assessment year 2017-18 & 2018-19 were processed under Section 143(1) by the Central Processing Unit at Bengaluru where disallowance is made under Section 143(1)(iv) of the Income Tax Act towards delay in remittance of employees’ contribution towards ESI amounting to Rs.8,39,53,960/- for assessment year 2017-18 and Rs.5,18,55,125/- for assessment year 2018-19.
During the proceedings, Krunal Gaglani counsel for assessee submitted that There is considerable time lag in recovery of dues from the Government entities, which affects the cash flow position of the assessee . The same is the primary reason for delay in depositing the statutory dues with relevant government authority.
Prakash Kishinchandani, Counsel for the revenue, submitted that the issue of disallowance towards delayed remittance of ESI / PF dues are settled by the judgment of Supreme Court in the case of Checkmate Services P Ltd vs CIT.
The tribunal during the proceedings observed that the assessee has deducted the PF/ESI from the salary paid to the employees and has utilized the amount deducted towards its business purpose i.e. payment of salary to laborers. Hence it was presumed that the assessee misutilized the fund.
After considering the facts submitted by both parties, the two member bench of Padmavathy S (Accountant Member) and Vikas Awasthy (Judicial Member) held that assessee is not entitled for claim of deduction qua the amount deposited towards employees contribution on account of provident fund / ESI after due date prescribed under the respective Act.
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