No deduction shall be allowable if Payment of Employee Contribution towards PF & ESI not made due Date As per PF & ESI Act :ITAT [Read Order]

The Mumbai  Bench of Income Tax Appellate Tribunal (ITAT) has held that no deduction should be allowed if payment of employee contribution towards Provident Fund (PF)  and Employee State Insurance (ESI) is not made due date as per PF and ESI Act .

The assessee  Mahabir Dyeing and Printing Mills Pvt.  in the return of income filed on 27.10.2018 had declared total income of ₹.1,38,52,870/-. The said return was processed online by CPC Bangalore and accordingly, adjustment of ₹.4,37,188/- was made in the intimation under Section 143(1) of Income Tax Act on account of late payment of employee contribution towards PF & ESI.

Assesee contended that payments have not been made within the due date of 15 days of next months as per the respective Act but made much before the due date of filing of return income.

Aggrieved by the order assesee filed an appeal before the CIT(A), who dismissed the appeal. Thus the assessee filed a second appeal before the tribunal.

Ryan Saldanha, Counsel for the assessee submitted that payment of employees’ contribution towards EPF and ESIC includes both employer and employee contributions and  assessee has paid contribution towards EPF and ESIC before due date of filing return of income

Rajesh Meshram, the counsel for revenue, supported the decision of lower authorities.

It was observed by the tribunal  that the payment of PF & ESI for sums amounting to ₹.4,37,188/- was not made within the due date prescribed under the PF & ESI Act, but has been filed much before the due date of filing the return of income

Relied upon the decision of the supreme court  in Checkmate Services Private Limited vs. It was determined that if the payment has been made with respect to employees contribution after the due date, the same has to be disallowed and cannot be allowed as deduction and therefore, adjustment has rightly been made.

The two member bench of Vikas Awasthy (Judicial Member) and S. Rifaur Rahman, (Accountant Member) observed that the auditor in the audit report specifies the due date as prescribed under Section 36(1)(va) of the Income Tax Act and the date on which deposit has been made, then in the computation of income, the same cannot be claimed as deduction, because the law envisages that such payment is disallowable, because it has not been paid within the due date.

To Read the full text of the Order CLICK HERE

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