The Surat Bench of the Income Tax Appellate Tribunal ( ITAT ) rejected the assessee’s plea to condone the one-day delay in PF and ESI contribution and upheld the lower authorities’ decision of disallowance.
Mohmed Hasib Tejamul Shaikh, the assessee challenged the Commissioner of Income Tax (Appeals) [CIT(A)] order regarding the disallowance of Rs. 2,74,781 under Section 36(1)(va) of the Income Tax Act, for delayed deposit of employees’ provident fund (PF) and employee state insurance (ESI) contributions.
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The assessee appeared before the Surat Bench of ITAT arguing that the delay in depositing the employees’ provident fund (PF) and employee state insurance (ESI) contributions was only for a single day and should be condoned.
The assessee’s counsel argued that the CPC’s disallowance was unconstitutional as no loss had occurred to the employee in depositing by one day delay. Such disallowances are unreasonable and a violation of Articles 14, 19(1)(g), and 20(2) of the Constitution of India.
On the contrary, the revenue’s counsel argued that this issue was already settled by the Supreme Court in the case of Checkmate Services Pvt. Ltd. vs. CIT, where it was held that delayed payments of employees’ contributions to employees’ provident fund (PF) and employee state insurance (ESI) contributions cannot be allowed as deductions.
A single bench led by Judicial Member, Pawan Singh noted that the issue was already settled by the Supreme Court in Checkmate Services Pvt. Ltd. vs. CIT, where it was held that the employer cannot claim a deduction for delayed contributions, even if the delay is minimal.
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As there was an admitted delay in the deposit of employees’ PF and ESI contributions, the tribunal upheld the disallowance. Thus, the appeal regarding the disallowance under Section 36(1)(va) of the Income Tax Act for delayed payment of employees’ provident fund (PF) and employee state insurance (ESI) contributions was dismissed.
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