The Surat Bench of Income Tax Appellate Tribunal(ITAT) upheld the disallowance of deductions for delayed employee contributions to the Employees’ State Insurance Corporation (ESIC) and provident fund (PF) under Section 36(1)(va) of Income Tax Act,1961.
Mohmed Hasib Tejamul Shaikh,the appellant-assessee,contested the addition under Section 36(1)(va) regarding delayed employee contributions totaling Rs. 2,74,781. He asserted that the disallowance stemmed from a mere one-day delay in depositing the employees’ share of contributions to the provident fund (PF) and Employees’ State Insurance Corporation (ESIC).
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The assessee argued that such a minor delay should be condoned and claimed that the provision was unreasonable and arbitrary, leading to a permanent loss of the right to claim deductions for the employees’ share of contributions.
Moreover, the assessee contended that there was no separate provision in the Employees’ Provident Fund (EPF) Act requiring separate deposits for the employer and employee shares, which often led to situations where employers, despite their willingness to fulfill obligations, faced challenges due to cash flow crises.
He asserted that this practice was discriminatory and violated Article 14 of the Constitution of India, as it subjected the assessee to double jeopardy—being penalized under both the Income Tax Act and the EPF Act for the same offense, thereby violating Article 20(2).
Despite the assessee’s arguments emphasizing the lack of harm to employees due to the delay and the seamless flow of credit for employee contributions, the Senior Departmental Representative (Sr. DR) for the revenue countered that the issue was settled by the Supreme Court in the case of Checkmate Services Pvt. Ltd. vs. CIT, which ruled that no deduction could be allowed for delays in depositing employees’ contributions.
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After considering both parties’ submissions and reviewing the relevant legal precedents, the Tribunal concluded that the appellant’s arguments lacked merit. It emphasized that the Supreme Court’s ruling in Checkmate Services Pvt. Ltd. vs. CIT clearly established that delays in the deposit of employees’ contributions do not permit deductions under Section 36(1)(va) of the Act.
A single member bench of Pawan Singh(Judicial Member) confirmed the disallowance of the deduction for delayed employee contributions, resulting in the dismissal of appeal.
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