ITAT upholds Disallowance of Belated Payment of Employees’ Contribution to Provident Fund/ESIC [Read Order]

The Income Tax Appellate Tribunal (ITAT) Delhi Bench upheld the disallowance of belated payment of employees’ contribution to provident fund and ESIC.

The assessee, S K G Traders P. Ltd. filed the appeal against the order of National Faceless Appellate Center. The assessee has challenged the disallowance of employees contribution to Provident Fund/ESIC under Section 36(i)(va) read with Section 43B of the Income Tax Act, 1961.

Anil Chopra, the assessee representative submitted that the authorities below have not considered the fact that the assessee has paid the contribution towards ESIC and EPF after the due date prescribed under the relevant provisions but the same was paid before the due date of filing of return under Section 139(1) of the  Income Tax Act, and such additions could not  be made in the intimation under Section 143(1) of the Income Tax Act.

Om Prakash, Departmental representative, contented that  Central Processing Centre (CPC) has made additions to the returned income of the assessee on account of late deposit of employees contribution to Provident Fund/ESIC deferred while processing the return of income.

Further, relying upon the decision of Checkmate Services (P.) Ltd. vs CIT,  theDepartment contented that “even for Assessment Years prior to Assessment Year 2021-22, belated deposit of employees contribution held in trust by the employee assessee are to be reckoned as taxable income of the assessee under Section 2(24)(x) read with Section 43B of the Income Tax Act  and the deduction under Section  36(i)(va) of the Income Tax Act would not be permissible thereon in case of belated payments”.

The tribunal while considering the appeal observed that the issue towards taxability of belated payment of employees’ contribution to Provident Fund/ESIC is no longer res integra in the light of the judgement of the Supreme Court in the case of Checkmate Services (P.) Ltd. vs CIT.

After reviewing the facts and taking into account the decision of the Supreme Court in the case of Checkmate Services (P.) Ltd. vs CIT, the two-member bench comprising Chandra Mohan Garg (Judicial Member) and Pradip Kumar Kedia (Accountant Member) affirmed the disallowance of employees' contributions to Provident Fund/ESIC under Section 36(i)(va) in conjunction with Section 43B of the Income Tax Act.

To Read the full text of the Order CLICK HERE

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