2019 (10) TMI 704 - AT - Income Tax

Additions towards Employees contribution on account of PF ESI delayed payment - HELD THAT - Hon ble jurisdictional High Court in case of CIT vs. Bharat Hotels Ltd. 2018 (9) TMI 798 - DELHI HIGH COURT decided the identical issue qua delayed deposit of employees contribution on account of PF ESI against the assessee by holding that assessee would be entitled to deduction in terms of section 36(1)(va) of the Act to the extent if the employees contribution on account of PF ESI is deposited on or before the due date and the employees contribution on account of PF ESI deposited beyond the stipulated period would not make the assessee company entitled to claim deduction from its return. Assessee company is not entitled for deduction u/s 36(1)(va) claimed on account of depositing the employees contribution towards ESI PF as per provisions contained u/s 2(24)(x) read with section 36(1)(va) after due date which is evident from table extracted in preceding para no.5. So the case laws relied upon by the ld. AR for the assessee is not applicable to the facts and circumstances of the case.

Summary

Issues:
1. Whether the addition under section 36(1)(va) for employees' contribution to PF & ESI, deposited after the due dates, is justified.
2. Whether the assessee is entitled to deduction under section 36(1)(va) for delayed deposits of employees' contributions to PF & ESI.

Analysis:

Issue 1:
The appellant, M/s. Eagle Trans Shipping & Logistics, contested the addition of Rs. 4,29,110 under section 36(1)(va) by the Assessing Officer (AO) and CIT(A) for employees' contribution to PF & ESI deposited after due dates. The appellant argued that deductions are permissible if payments are made before the due date for filing the return under section 139(1) of the Income-tax Act. The Tribunal examined the relevant provisions of section 36(1)(va) which require timely crediting of employees' contributions to the relevant funds. The Tribunal found that the appellant failed to deposit the entire amount towards employees' contributions within the prescribed due dates, thus disallowing the deduction.

Issue 2:
The appellant relied on the decision of the Hon'ble Delhi High Court and the Supreme Court to support their claim for deduction under section 36(1)(va) for delayed deposits of employees' contributions to PF & ESI. However, the Tribunal distinguished the cited cases and referred to the judgment of the Hon'ble jurisdictional High Court in a similar matter. The High Court held that deductions are only allowed if the employees' contributions are deposited on or before the due date, and delayed deposits do not entitle the assessee to claim deductions. Following this precedent, the Tribunal dismissed the appeal, stating that the appellant was not entitled to the claimed deduction due to delayed deposits of employees' contributions.

In conclusion, the Tribunal upheld the addition of Rs. 4,29,110 under section 36(1)(va) for employees' contribution to PF & ESI, deposited after the due dates, based on the provisions of the Income-tax Act and relevant judicial precedents. The appellant's appeal was dismissed, emphasizing the importance of timely deposits for claiming deductions under section 36(1)(va).