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TMI Blog2023 (5) TMI 626X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld. CIT(A), NFAC. As per the Ld. CIT(A), the employees' contribution can be allowed as deduction only where it had been paid within the prescribed due date under the relevant welfare funds and this is the position of law and has always been the case, as apparent from the clarification brought in by the amendment to the provisions which apply retrospectively. It was accordingly held that the disallowance of Rs. 3,46,006/- made under section 143(1) by the CPC on account of assessee's failure to pay the employees contribution of PF / ESI within the prescribed due date as per Section 36(1)(va) of the Act is strictly in accordance with law and clearly comes under the prima facie adjustment as envisaged under section 143(1)(a)(iv) of the Act and therefore the order passed under section 143(1) by the CPC was confirmed. 3. Against the said findings and the direction of the Ld. CIT(A), NFAC, the assessee is in appeal before us. 4. We have considered the rival submissions and perused the material available on the record. We find that the matter is squarely covered by the decision of the Coordinate Chandigarh Bench in the case of 'Emson Tools Mfg. Corp. Ltd. Vs. DCIT, Ludhiana' (ITA No.1/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curred as aforesaid and the evidence of such payment is furnished by the assessee along with such return.' The main provision of section 43B, providing for the deduction only on actual payment basis, has been relaxed by the proviso so as to enable the deduction even if the payment is made before the due date of furnishing the return u/s 139(1) of the Act for that year. The claim of the assessee is that the deduction becomes available in the light of section 36(1)(va) read with section 43B on depositing the employees' share in the relevant funds before the due date u/s 139(1) of the Act. This position was earlier accepted by some of the Hon'ble High Courts holding that the deduction is allowed even if the assessee deposits the employees' share in the relevant funds before the date of filing of return u/s.139(1) of the Act. This was on the analogy of treating the employee's share as having the same character as that of the employer's share, becoming deductible u/s 36(1)(iv) read in the hue of section 43B(b). Recently, the Hon'ble Supreme Court in Checkmate Services P. Ltd. & Ors. VS. CIT & Ors. (2022) 448 ITR 518 (SC) has threadbare considered this issue and drawn a distinction betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e processed in the following manner, namely:- (a) the total income or loss shall be computed after making the following adjustments, namely:- (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; (iv) disallowance of expenditure or increase in income indicated in the audit report but not taken into account in computing the total income in the return' 8. Sub-section (1) of section 143 states that a return shall be processed to compute total income by making six types of `adjustments' as set out in subclauses (i) to (vi). As noted supra, we are concerned only with the examination of two sub-clauses, viz., (ii) and (iv). Sub-clause (ii) talks of 'an incorrect claim, if such incorrect claim is apparent from any information in the return". The expression "an incorrect claim apparent from any information in the return" has not been generally used in the provision. Rather, it has been specifically defined in Explanation (a) to section 143(1) as under: `Explanation.-For the purposes of this sub-section,- (a) "an incorrect claim apparent from any information in the return" shall mean a claim, on the basis of an entry, in the retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd; Sum received from employees; Due date for payment; The actual amount paid; and The actual date of payment to the concerned authorities. A copy of audit report in one of the cases under consideration, namely, S.M. Auto Stamping Pvt. Ltd. (ITA No.521/PUN/2022) has been placed on record. Point 20(b) of the audit report gives the `Sum received from employees' at Rs.21,800/-. `Due date for payment' has been reported as 15-07-2017 and `The actual date of payment to the concerned authorities' has been given as 20-07-2017. Similar is the position regarding other items disallowed u/s.36(1)(va) having `The actual date of payment' after the `Due date for payment'. Thus, it is manifest that the audit report clearly points out that as against the due date of payment of the employees' share in the relevant fund on 15.7.2017 for deduction u/s 36(1)(va), the actual payment is delayed and deposited on 20.7.2017. The legislature, for the disallowance under sub-clause (iv) of section 143(1)(a), has used the expression `indicated in the audit report'. The word `indicated' is wider in amplitude than the word `reported', which envelopes both the direct and indirect reporting. Even if there is some i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a manner that no part of the Act is rendered nugatory. Distinction in the scope of the two aspects can be understood with the help of the present context only. We have noted that point no. 20(b) of the audit report, dealing with section 36(1)(va), has columns, inter alia, (i) `Sum received from employees'; (ii) `Due date for payment'; and (iii) `The actual date of payment to the concerned authorities'. The column (i) having details of the amounts received from employees indicates about the `increase in income' as per sub-clause (iv) of section 143(1)(a) if the assessee does not take this sum in computing total income. The columns (ii) and (iii) having details of due date for payment and the actual date of payment indicate about `disallowance of expenditure' if the assessee does not make suo motu disallowance in computing total income. Right now, there is no case of `increase in income' because the AO did not make adjustment for non-offering of income of the `Sums received from employees', but made the adjustment for `disallowance of expenditure' with the remarks that `Amounts debited to the profit and loss account, to the extent disallowance under section 36 due to non-fulfillment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employees' share in the relevant funds with the date of payment of wages. Section 5 of the Payment of Wages Act simply deals with the 'Time of payment of wages'. It does not stipulate any time limit for deposit of the employees share in the relevant funds. For that purpose, the relevant Acts give a window for depositing the contribution within 15 days of the last month's salary. Thus, contribution to the relevant fund towards the salary for the month of October-ending should be deposited before 15th November. 15. In view of the foregoing discussion, we are satisfied that the ld. CIT(A) was justified in sustaining the adjustment u/s 143(1)(a) by means of disallowance made in these cases for late deposit of employees' share to the relevant funds beyond the date prescribed under the respective Acts." 6.2. In light of aforesaid discussions and in the entirety of facts and circumstances of the case, and respectfully following the decisions referred supra, we are of the considered opinion that the ld. CIT(A) was justified in sustaining the adjustment u/s 143(1)(a) by means of disallowance made for late deposit of employees' share of PF/ESI contribution to the relevant funds bey ..... X X X X Extracts X X X X X X X X Extracts X X X X
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