The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that the deposition of Employees contribution to Provident fund (PF) or Employee State Insurance (ESI) after the due date would trigger disallowance under section 36(1)(va) of the Income Tax Act,1961.
P A Zaveri, the appellant assessee had claimed a deduction for Employees’ Contribution for Provident Fund (PF) and Employee State Insurance (ESI) deposited after the due date but before the expiry of times specified under Section 139(1) of the Income Tax Act for filing return of income on payment basis under Section 43B of the Income Tax Act.
The assessor appealed against the order passed by the Commissioner of Income Tax (Appeals) for confirming the rejection of the claim of deduction by the assessing officer.
Bhadresh Doshi, the counsel for the assessee contended that the disallowance made by the assessing officer was outside the scope of provisions contained in Section 143(1)(a) of the Income Tax Act and therefore, no adjustment or disallowance could have been made at the time of processing of return of income (ROI).
It was also submitted that the adjustments or additions in respect of Employees’ Contributions to ESI/PF fell outside the scope of Section 143(1)(a)(iv) of the Income Tax Act which provides for adjustment in the return of income in case a disallowance of expenditure as indicated in the audit report but not taken into account in computing the total income in the return of income.
Naina K. Kumar, the counsel for the revenue contended that an assessee failed to deposit Employees’ Contributions towards PF/ESI within the due date prescribed in respective statutes, deduction under Section 36(1)(VA) of the Income Tax Act was not allowable and the m adjustment or addition was made while processing the return of income under Section 143(1) of the Income Tax Act was as per the law.
The bench observed that the Employees’ Contribution to ESI/PF had been deposited after the expiry of the due date as specified in the applicable statute would trigger disallowance under Section 36(1)(va) read with Section 2(24(x) of the Income Tax Act.
The two-member panel comprising B.R. Baskaran (Accountant) and Rahul Chaudhary (Judicial) held that disallowance made by the assessing officer while processing the return of income under Section 143(1) of the Income Tax Act was as per the law while dismissing the appeal filed by the assessee.
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