Due date for Payment of PF/ESI on Public Holiday shall not result in Disallowance: ITAT sets aside Order of CIT(A) [Read Order]

The Chennai bench of the Income Tax Appellate Tribunal (ITAT) held that the due date for payment of Provident Fund (PF)/Employee State Insurance (ESI) on a public holiday shall not result in disallowances.

The assessee filed its return of income declaring a total income of Rs.16,56,46,438/. The return was subsequently processed by Central Processing Unit (CPC) proposing disallowance of employees’ contribution to Provident Fund (PF) and Employee State Insurance (ESI) paid beyond the due date as per respective acts under Section 36(1)(va) of the Income Tax Act, 1961.

The assessee disagreeing with the proposed adjustment has responded to the communication of the CPC stating that several High Courts have taken the view that even the employee’s contribution paid before the due date of filing of the return of income is also an allowable deduction.

The CPC finds no favour in the arguments of the assessee and has proceeded to complete the assessment under Section 143(1) read with Section 144 of the Income Tax Act, with the proposed disallowance.

The disallowance made in the case of the assessee for Rs.16,45,141/- pertains to the employee’s contribution to PF for the month of July 2017. The due date for payment of the impugned contribution was on 15.08.2017 i.e. Independence Day (National /Public Holiday).

The said amount was remitted and debited from the bank account of the assessee on the next day of the due date under the respective statutes. This fact was undisputedly reported in Form No.3CA & 3CD, clause 20(b).

It was submitted by the Authorized Representative that as per provisions of Section 10 of the General Clauses Act, 1897, pertains to the definition/mode of computation of time. The copy of the Tax Audit Report in Form No.3CA was placed in the paper book of the assessee.

The Departmental Representative controverting the submissions of the Authorized Representative has submitted that Section 10 of the General Clauses Act, 1897 shall not be applied in the present case since all the payments under respective statutes are made in the electronic mode and whether the Office of the Department or the assessee are closed on a certain date, cannot be the reason for the delay in payments.

The two-bench member of V. Durga Rao (Judicial member) and Arun Khodpia (Accountant member) held that since the deposit of contribution received from the employees was covered by the provisions of the General Clauses Act.

Therefore, the same shall be treated as payment within the due date, thus no disallowance on this count was called for. The order of the Commissioner of Income Tax (Appeal) has been set aside and the additions made by the assessing officer were deleted.

Thus, the appeal filed by the assessee was allowed.

To Read the full text of the Order CLICK HERE

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