Feedback   New User   Login      
Tax Management India. Com TMI - Tax Management India. Com
Acts / Rules Notifications Circulars Tariff/ ITC HSN Forms Case Laws Manuals Short Notes Articles SMS News Highlights
        Home        
Extracts
Home List
← Previous Next →

DCIT, Circle-1 (1) , Gurgaon Versus M/s. Leaseforces Staffing India Pvt. Ltd.

2017 (11) TMI 512 - ITAT DELHI

Addition in respect of ESI payment - whether the payment of ESI made after the due date prescribed under the ESI, is allowable as deduction or not? - Held that:- Assessee was entitled to claim the benefit in Sec.43-B for that period particularly in view of the fact that he has contributed to provident fund before filing of the return. See CIT Vs. Vinay Cement limited [2007 (3) TMI 346 - Supreme Court of India] - Decided against Revenue. - ITA Nos. 6266 And 6267/Del/2014 - Dated:- 6-11-2017 - SH. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

onsolidated order, for the sake of convenience and brevity. ITA No. 6266/Del/2014 for AY: 2010-11 2. First we take up the ground raised in ITA No. 6266/Del/2014 for assessment year 2010-11, which are reproduced as under: 1. Whether Ld. CIT(A) is justified in deleting the disallowance of ₹ 29,95,149/- ignoring the fact that employees contribution to PF and ESI received by the employer is income in his hands as per section 2(24)(x) and it is deductible only if it is paid within the due date .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ing words of section 43B make it clear that the said section would have overriding effect and apply only when a deduction is otherwise allowable under the I.T Act, 1961? 4. Whether Ld. CIT(A) is justified in deleting the disallowance of ₹ 29,95,149/- without considering and commenting upon the facts mentioned in the various cases-laws cited by the AO in his assessment order? 5. Whether Ld. CIT(A) is justified in deleting the disallowance without appreciating the fact that in the present ca .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

43B of the Act, which entitled the employer to a deduction in the relevant year if the employer s contribution was deposited on or before the due date of filing of tax return, would not be applicable with respect to the employees contribution as there is no corresponding amendment in section 36(l)(va) of the Act in relation to deposit of the employee s contribution? 7. That the appellant craves for the permission to add, delete or amend the grounds of appeal before or at the time of hearing of a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

date prescribed under the ESI Act, which according to him, was not allowable in terms of section 36(1)(va) of the Act. The assessee contended that said payment was made before the due date of filing of return of income and therefore, same was allowable under section 43B of the Act in terms of the decision of the Hon ble Supreme Court in the case of CIT Vs. Vinay Cement Ltd. However, the Ld. Assessing Officer was of the view that employees contribution to the provident fund/ESI paid after due dat .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

eal of the assessee. Aggrieved, the Revenue is in appeal before the Tribunal raising the grounds as reproduced above. 4. The sole issue raised in the grounds of the appeal is related to addition in respect of ESI payment, deleted by the Ld. CIT-(A). 5. Before us, the Ld. Sr. DR relied on the order of the Assessing Officer and argued that in terms of section 36(1)(va) of the Act, employees contribution deposited after due date of the relevant Act, is not allowable. 6. On the other hand, Ld. couns .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

R is that deduction of employees contribution to ESI or provident fund after the due date prescribed under the relevant Act is governed by the provisions of section 36(1)(va) of the Act and not governed by the provisions of section 43B of the Act. 8. We find that the learned CIT-(A) has discussed the issue in detail and after referring judicial pronouncement on the issue in dispute allowed the appeal in favour of the assessee. The relevant finding of the learned CIT-(A) on the issue in dispute i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

section 2(24)(x) read alongwith Section 36(l)(va) of the IT Act. Another important ground for making the addition was that provisions of section 43B (b) are not applicable in respect of employees' contributions to PF and ESI which were deposited by the appellant beyond the due date specified in the respective Acts. In order to understand the issue of applicability of section 43B to employees' contribution of Provident Fund/ESI, it is important to analyze the genesis of the inclusion of p .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

for such employees. Since, employees' contribution constituted income, Section 36(l)(va) of the IT Act allowed for its deduction provided a provision was made to that effect in the books of account. In this situation it was possible for an employer to collect employees' contribution to Provident Fund/ESI and make a provision in the books of account and claim the same amount as deduction without even making the payment to the Government. In order to take care of this problem the Second Pr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ame crystal clear that an employer had to make payment of employees' contribution in order to enable a deduction from its income. As regards the due date for making the payment, it was specified that the due date would be the same as given in section 36(l)(va) of the I. T. Act, 1961. This due date was the date by which the assessee was required as an employer to credit the employees' contribution to the employees account in the relevant fund. Thus, as a result of this amendment, it becam .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

.4.2004. As per this amendment, the aforesaid Proviso was withdrawn and payment of contribution to ESI/EPF was brought within the purview of first Proviso to Section 43B of the IT Act. After this amendment, it was sufficient for the employer to deposit the contribution from employees by the due date for filing the return in order to enable it to claim the deduction under the Act. The two obvious inferences which can be derived from the above facts are as under: (i) Section 43B of the I. T. Act, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the employees' contribution to ESI/EPF was disallowable on the basis of nonpayment by the due dates specified in the respective Acts. However, with effect from 1-4- 2004, no disallowance can be made as per law on account of employees' contribution to ESI/EPF if the same is paid by the due date for filing the return. The position of law existing as on date in totally unambiguous on this issue and any disallowance reflects lack of appreciation of the provisions of law and various judicial .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the introduction of Section 43B(b) and its Second Proviso that the assessing officer started making disallowance on account for employees' contribution to provident fund since that section made it obligatory for them to make payment of employees' contribution by the due date specified in the respective Acts in order to claim it as a deduction. It was only when the Government found that the provision was too harsh that amendment was brought about by Finance Act 2003 with effect from 1-4- .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

fund breaks down, then it follows that employees' contribution to Provident Fund and ESI paid by the due date for filing the return of income would be eligible for a deduction. Taking the same logic forward, a number of judicial pronouncements on this issue have held that if the employees' contribution to PF and ESI is paid by the due date for filing the return of income, no disallowance is called for on this issue. The most prominent judicial pronouncement is the judgment of Hon'ble .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

for filing the return of income. The relevant extracts of the said order are reproduced hereunder: If the employees' contribution is not deposited by the due date prescribed under the relevant facts Acts and is deposited late, the employer not only pays interest on delayed payment but can incur penalties also, for which specific provisions are made in the Provident Fund Act as well as in the ESI Act. Therefore, the Act permits the employer to make the deposit with some delay, subject to the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sessee has deposited contribution deducted from employees' salary towards PF and Employees' State Insurance before due date for filing the return of income it would be entitled to deduction of said payments under section 43B of the I.T. Act. The relevant extracts of the said order are given hereunder: 11. Before we delve into this discussion, we may take note of some more provisions of the Act. Section 2(24) of the Act enumerates different components of income. It, inter alia, stipulates .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

reated as 'income' at the hands of the assessee. It clearly follows therefrom that if the assessee does not deposit this contribution with provident fund/ESI authorities, it will be taxed as income at the hands of the assessee. However, on making deposit with the concerned authorities, the assessee becomes entitled to deduction under the provisions of section 36(l)(va) of the Act. Section 43B(b), however, stipulates that such deduction would be permissible only on actual payment. This is .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r with the same. In the result, we do not perceive any merit in this appeal and accordingly the same stands dismissed. 4.8. In addition to the aforesaid judgment, there are number of prominent judicial pronouncements as per which employees' contribution to PF and ESI is entitled to deduction if the same was paid by the due date for filing the return as given in Section 139(1) of the I.T. Act. Some of the prominent judicial pronouncements are given hereunder: 1. CIT Vs. PM ELECTRONICS LIMITED .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e return of income, no disallowance is called for. The relevant extracts of the said order are reproduced hereunder: Adverting to question (B), learned counsel for the appellant could not dispute that the issue raised herein finally stands settled by the Apex Court judgment in CIT v. Alom Extrusions Ltd. 120091 319 ITR 306/185 Taxman 416 (SC) and decision of this Court in CIT v. Rai Agro Industries Ltd. [20111 334 ITR 122/120121 207 Taxman 10 (Maa.)/20 taxmann.com 194. wherein it has been held t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

iling bf the return under Section 139 (1) of the Act. Thus, question (B) stands answered against the revenue and in favour of the assessee. 4.10 In addition, there is the latest judgment of the Karnataka High Court as per which employees' contribution to PF and ESI is allowable as a deduction provided the same is paid before the due date for filing the return of income. The judgment is Essae-Teraoka Private limited Vs. DCIT (2014) 43 Taxmann.com 33 (Karnataka). The relevant extracts of the s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f Section 43B of the IT Act means the contribution of the employer and the employee. That being so, if the contribution is made on or before the due date for furnishing the return of income under sub-section(l) of Section 139 of the IT Act is made, the employer is entitled for deduction. 21. The submission of Mr. Aravind, learned counsel for the revenue that if the employer fails to deduct the employees' contribution on or before the due date, contemplated under the provisions of the PF Act .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of late payment of employees' contribution to ESI and EPF by the appellant. Since the same was paid before the due date for filing the return of income, I do not agree with the Assessing Officer that Section 43B is not applicable to employees' contribution to Provident Fund and ESI. The only section which links payment with the deduction on account of employees contribution to PF and ESI is section 43B rather than 36(1)(va) which has been relied upon by the appellant. Coming back to the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of CIT Vs. AIMIL Ltd., (2010) 321 ITR 508 has considered the employee s contribution deposited after due dates prescribed under the relevant acts, and allowed the benefit of the deduction to such contribution, if paid before the return is filed. The relevant finding of the Hon ble jurisdictional High Court is reproduced as under: 17. We may only add that if the employees contribution is not deposited by the due date prescribed under the relevant Acts and is deposited late, the employer not only .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

risdictional High Court has allowed deduction of payment of employee s contribution before the due date of filing of return of income after considering the decision of the Hon ble Supreme Court in the case of CIT Vs. Vinay Cement limited (supra). In the instant case, identical issue in dispute is before us. The decision of the jurisdictional High Court is binding on the Tribunal and first appellate authority working within the jurisdiction of the High Court. In our considered opinion, the findin .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

contribution to PF and ESI received by the employer is income in his hands as per section 2(24)(x) and it is deductible only if it is paid within the due date as per the respective Act as specified in section 36(l)(va) of the I.T. Act, 1961? 2. Whether Ld. CIT(A) is justified in deleting the disallowance of ₹ 42,88,215/- ignoring the fact that the provisions of section 43B which is applicable in respect of employees contribution is different from the provisions of section 36(1 )(va) which .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

Discussion Forum
what is new what is new
 


Share:            

|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version