TMI Blog2021 (3) TMI 810X X X X Extracts X X X X X X X X Extracts X X X X ..... ESI/EPF. If contribution of the employee is deducted out of his salary and not paid to the respective department, it is the employer who enjoys the funds of the employee for his benefit in the business and the employee is deprived of interest accrued on said contribution. The employer hold the payment as a trustee till the due date of deposit provided in respect of enactment. The respective enactment has although provided deterrent to the employer in the form of interest and penalty after late payment, however the employee will be still deprived of the interest if the contribution is paid after the due date of deposit. In view of provision of section 36(1)(iv) Act, the employer is discouraged to make deposit of employees contribution to ESI/EPF after the due date prescribed in respective enactment. Thus, respectfully following the decision of Bharat Hotels Ltd [ 2018 (9) TMI 798 - DELHI HIGH COURT] the finding of the Ld. CIT(A) on the issue in dispute is upheld. The ground No. 2 of the appeal of the assessee is accordingly dismissed. - ITA No.978/Del./2018 - - - Dated:- 2-3-2021 - Shri Bhavnesh Saini, Judicial Member And Shri O.P. Kant, Accountant Member For the Appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue in dispute are that, in the profit and loss account, the assessee claimed expenses of ₹ 29,17,36,148/- on account of wages and salary, however, on being asked by the Assessing Officer, the assessee could not substantiate the expenses with adequate/supporting bills or vouchers. The Assessing Officer also noticed that most of the expenses were paid in cash, which were not fully vouched. Accordingly, the Assessing Officer made an ad-hoc addition of ₹ 10 lakh to cover unverifiable wages and salary. The Ld. CIT(A) in corrigendum dated 10/12/2017 observed that similar addition were made in assessment year 2011-12 and 2012-13, wherein the Assessing Officer added 1% of the total direct expenses, which were further confirmed by the Ld. CIT(A), however the addition of 1% was restricted to 0.5% by the Learned CIT in assessment year 2012-13. The Ld. CIT(A) in view of the past history, restricted the disallowance to ₹ 5 lakh. 4.2 Before us, the Learned Counsel of the assessee admitted that addition of ₹ 10 lakh was made by the Assessing Officer purely an ad-hoc basis and Ld. CIT(A) has also upheld disallowance of ₹ 5 lakh on ad-hoc basis without po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut assigning any reasons is not justifiable. In view thereof, we are inclined to delete the ad hoc disallowance as upheld by CIT(A). Assessee's grounds in this behalf are allowed. 4.6 We find that the Learned CIT(A) herself has accepted that there is increase in profit during the year as compared to preceding year and also the Assessing Officer has not pointed out any specific instance of the defect. She also taken note of the decisions cited by the authorized representative of the assessee. In such circumstances, when no specific defect in bills or voucher has been pointed of by the Assessing Officer, no addition on adhoc basis can be sustained in view of the decisions above. Accordingly, we delete the addition of ₹ 5 lakh, which was sustained by the Learned CIT(A). The ground No. 1 of the appeal of the assessee is accordingly allowed. 5. In ground No. 2, the assessee has challenged disallowance of ₹ 6,12,210/- for late payment of employees contribution to ESI and PF. 5.1 In the assessment order, the Assessing Officer has listed payments of ₹ 6,12,210/- for Employees State Insurance (ESI) and Employees Provident Fund (EPF), which were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Employees' State Insurance Act, 1948 (34 of 1948), or any other fund for the welfare of such employees ; 5.5 Deduction for payment of Employees Contribution to the ESI/PF is governed by section 36(1)(iv) of the Act which reads as under: 36(1) the deduction provided for in following clauses shall be allowed in respect of the matters dealt with therein in computed the income referred to in section 28- (i) . (ii) . (iia) [Omitted by the Fiance Act, 1999, w.e.f. 1-4-200] (iii) (iv) any sum paid by the assessee as an employer by way of contribution towards a recognised provident fund or an approved superannuation fund, subject to such limits as may be prescribed for the purpose of recognising the provident fund or approving the superannuation fund, as the case may be; and subject to such conditions as the Board may think fit to specify in cases where the contributions are not in the nature of annual contributions of fixed amounts or annual contributions fixed on some definite basis by reference to the income chargeable under the head Salaries or to the contributions or to the number of members of the fund; 5.6 Thus, as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not correct. The assessee undoubtedly was entitled to claim the benefit and properly treat such amounts as having been duly deposited, which were in fact deposited within the period prescribed (i.e. 15 + 5 days in the case of EPF and 21 days + any other grace period in terms of the extent notification). As far as the amounts constituting deductions from employees ‟ salaries towards their contributions, which were made beyond such stipulated period, obviously the assessee was not entitled to claim the deduction from its returns. 5.8 There is a distinction between employer and employee contribution to ESI/EPF. If contribution of the employee is deducted out of his salary and not paid to the respective department, it is the employer who enjoys the funds of the employee for his benefit in the business and the employee is deprived of interest accrued on said contribution. The employer hold the payment as a trustee till the due date of deposit provided in respect of enactment. The respective enactment has although provided deterrent to the employer in the form of interest and penalty after late payment, however the employee will be still deprived of the interest if th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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