2019 (7) TMI 1635 - AT - Income Tax

Disallowance u/s.36(1) (va) r.w.s. 2(24)(x) - contribution by the employees towards welfare funds remitted after due date prescribed in the respective enactments - HELD THAT - In the present case admittedly the contribution received from employees for PF and ESI are not credited by the respondent to the employee s account within due date stipulated under the relevant statute but before the due date of filing of return. We find that the decision of the Hon ble Madras High Court in the case of Unific Management Services (India) Ltd. Vs. DCIT 2018 (10) TMI 1386 - MADRAS HIGH COURT is by a single judge however a contrary view was taken by the Division Bench of Hon ble Jurisdictional High Court in the case of Industrial Security Intelligence India Pvt Ltd. 2015 (7) TMI 1063 - MADRAS HIGH COURT wherein held assessee had remitted the employees contribution beyond the due date for payment but within the due date for filing the return of income - Decided against revenue.

Summary

Issues:
1. Disallowance of employees' contribution towards EPF and ESI under Section 36(1)(va) r.w.s. 2(24)(x) of the Income Tax Act.
2. Interpretation of the due date for crediting employees' contributions to EPF/ESI under Section 36(1)(va) of the Act.
3. Conflict between single judge and Division Bench decisions of the High Court regarding the deductibility of belatedly remitted employees' contributions.

Detailed Analysis:
Issue 1:
The case involved an appeal by the Revenue against the CIT(A)'s order deleting the addition of employees' contribution towards EPF and ESI under Section 36(1)(va) r.w.s. 2(24)(x) of the Act. The Revenue contended that contributions remitted after the due date should be disallowed. However, the CIT(A) relied on the High Court's judgment and allowed the deduction, leading to the appeal.

Issue 2:
The key question was whether the employees' contributions credited by the assessee before the due date of filing the return, but after the statutory due date, were eligible for deduction under Section 36(1)(va). The Tribunal analyzed conflicting decisions and the interpretation of the due date for crediting such contributions under the relevant statute.

Issue 3:
A significant aspect was the conflict between a single judge's decision and a Division Bench's decision of the High Court regarding the deductibility of belatedly remitted employees' contributions. The Tribunal noted that the Division Bench's decision overruled the single judge's decision, emphasizing the binding nature of the Division Bench's ruling. Consequently, the Tribunal upheld the CIT(A)'s order based on the Division Bench's decision.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to delete the addition of employees' contributions towards EPF and ESI. The judgment highlighted the importance of following the Division Bench's decision over a single judge's decision, providing clarity on the deductibility of belatedly remitted contributions based on the due date for filing the return.