The Raipur bench of the Income Tax Appellate Tribunal (ITAT) dismissed an appeal upholding the disallowance of ₹25.81 lakh claimed as a deduction for Employees’ Provident Fund (PF) and Employees’ State Insurance Corporation (ESIC) contributions deposited after the statutory due date but before filing the return, relying upon the Supreme Court ruling in Checkmate Services P. Ltd. v. Commissioner of Income Tax-1, (Civil Appeal No. 2833 of 2016)

The appellant Shree Shivam Attires Pvt. Ltd., filed its return of income for Assessment Year(AY) 2018-19, declaring total income at ₹6,81,34,000 after claiming deduction of ₹25,81,110 under Section 36(1)(va) read with Section 43B of the Income Tax Act, 1961 with respect to the amount deposited towards the PF/ESIC.

Centralized Processing Centre (CPC) processed the return and disallowed the deduction, on the ground that the contributions were not credited to the relevant fund on or before the statutory due date.

The assessee filed a rectification application under Section 154 of the Income Tax Act, contending that the disallowance was based on a mistake apparent from the record.

However, the Deputy Commissioner of Income Tax, rejected the application, and the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), upheld this rejection.

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The matter was first brought before the ITAT Raipur, which dismissed the appeal, holding that rectification under Section 154 can only be invoked for glaring and apparent mistakes, and that the issue in question involved a debatable question of law, hence not rectifiable.

The assessee challenged this finding before the Chhattisgarh High Court, submitting that taxation on such disallowed amounts, when not legally permissible, amounted to a mistake on merits.

The High Court, remanded the matter back to ITAT for fresh adjudication on merits, directing the tribunal to reconsider the claim substantively.

The ITAT Raipur Bench, comprising Ravish Sood (Judicial Member) and Arun Khodpia (Accountant Member),after hearing C. Subrahmanyam, Authorized Representative for the assessee, and Dr. Aparna Villuri, Senior Authorized Representative for the Revenue, dismissed the appeal holding that the payments qua the employees’ contribution to PF made after the due date under the relevant statutes shall be liable to be disallowed, even if the ITR is processed prior to the pronouncement of judgment rendered by the Supreme Court in the case of Checkmate Services Pvt. Ltd.

Further relying on the Chhattisgarh High Court’s ruling in BPS Infrastructure vs ITO BPS Infrastructure vs ITO in TAXC No. 87 of 2024, which followed Checkmate services, the tribunal reiterated that such contributions are deemed income under Section 2(24)(x) and deductible under Section 36(1)(va) of the Act, only if deposited on or before the statutory due date.

Finding the order of the CIT(A) to be justified, well-reasoned and acceptable, the tribunal concluded that the issue raised by the assessee cannot be accepted and allowed.

Thereby the appeal of the assessee was dismissed.

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