TMI Blog2023 (2) TMI 1159X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 36(1)(va) - payment was made beyond the due date of filing the return - HELD THAT:- The issue is squarely covered against the assessee in view of the recent judgment in the case of Chekmate Services Pvt. Ltd.[ 2022 (10) TMI 617 - SUPREME COURT ] wherein it has been held that deduction u/s 36(1)(va) in respect of delayed deposit of amount collected towards employees contribution to PF cannot be claimed when deposited within the due date of filing of return even when read with Section 43B. Decided against assessee. - ITA Nos. 320 & 321/KOL/2021 - - - Dated:- 28-2-2023 - Shri Rajpal Yadav , Vice-President (KZ) And Shri Girish Agrawal, Accountant Member For the Revenue : Shri G. Hukugha Sema, CIT For the assessee : Shri N.S. Saini, A.R., ORDER Per Girish Agrawa l, Accountant Member: Revenue is in appeals before the Tribunal against the orders of ld. Commissioner of Income Tax (Appeals), Kolkata-22, both dated 29.06.2021, against assessment order passed by ld. DCIT/TPO-II, Kolkata u/s 143(3) rws 144C of the Income-tax Act, 1961 (hereinafter referred to as the Act ) dated 31.12.2018 for AY 2015-16 and by ACIT-5(1), Kolkata dated 28.11.2019 for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Enterprise (in short AE ), and the second relating to disallowance towards deposit of employee PF ESI contribution claimed under section 36(1)(va) of the Act since payment was made beyond the due date of filing the return. 5. On the second issue relating to disallowance under section 36(1)(va) of the Act which has been raised only in appeal for AY 2015-16 , ld. Counsel for the assessee fairly submitted that the issue is squarely covered against the assessee in view of the recent judgment by the Hon ble Supreme Court in the case of Chekmate Services Pvt. Ltd. v. CIT [2022] 143 taxmann.com 178 (SC), wherein it has been held that deduction u/s 36(1)(va) in respect of delayed deposit of amount collected towards employees contribution to PF cannot be claimed when deposited within the due date of filing of return even when read with Section 43B of the Income-tax Act,1961. Relevant extract of the said judgment is reproduced as under: The deduction made by employers to approved provident fund schemes, is the subject matter of Section 36(1) (iv). It is noteworthy, that this provision was part of the original IT Act; it has largely remained unaltered. On the other hand, Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferent clauses of Section 36 (1). All these establish that Parliament, while introducing Section 36(1)(va) along with Section 2(24)(x), was aware of the distinction between the two types of contributions. There was a statutory classification, under the IT Act, between the two. There is no doubt that in Alom Extrusions, this court did consider the impact of deletion of second proviso to Section 43B, which mandated that unless the amount of employers' contribution was deposited with the authorities, the deduction otherwise permissible in law, would not be available. This court was of the opinion that the omission was curative, and that as long as the employer deposited the dues, before filing the return of income tax, the deduction was available. A reading of the judgment in Alom Extrusions, would reveal that this court, did not consider Sections 2(24)(x) and 36(1)(va). Furthermore, the separate provisions in Section 36(1) for employers' contribution and employees' contribution, too went unnoticed. When Parliament introduced Section 43B, what was on the statute book, was only employer's contribution (Section 36(1)(iv)). At that point in time, there was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... method of accounting, nevertheless, the deduction of such liabilities, based only on book entries, would not be given. To pass muster, actual payments were a necessary pre-condition for allowing the expenditure. The distinction between an employer's contribution which is its primary liability under law in terms of Section 36(1)(iv), and its liability to deposit amounts received by it or deducted by it (Section 36(1)(va)) is, thus crucial. The former forms part of the employers' income, and the later retains its character as an income (albeit deemed), by virtue of Section 2(24)(x) - unless the conditions spelt by Explanation to Section 36(1)(va) are satisfied i.e., depositing such amount received or deducted from the employee on or before the due date. In other words, there is a marked distinction between the nature and character of the two amounts the employer's liability is to be paid out of its income whereas the second is deemed an income, by definition, since it is the deduction from the employees' income and held in trust by the employer. This marked distinction has to be borne while interpreting the obligation of every assessee under Section 43B. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on made towards Corporate Guarantee Fees except for variation in the amount. Appeal for both the years is disposed of by this consolidated order. We take up the appeal relating to AY 2015-16, whose findings will apply mutatis mutandis to the other year of AY 2016-17 also. We thus, take up facts from AY 2015-16 for adjudication on the issue. 7. At the outset, ld. Counsel submitted that the issue is settled and fairly covered in favour of the assessee which the ld. CIT(Appeals) has exhaustively dealt with in his order by considering the facts of the case as well as the decision of the Hon ble High Court of Bombay in the case of CIT v. Everest Kanto Cylinder Limited [2015] 58 taxmann.com 254 (Bom) as well as by the decision of Coordinate Bench of ITAT, Kolkata in the case of Berger Paints India Limited in ITA Nos. 917 918/KOL/2017 dated 29.07.2022. 8. Brief facts of the case are that the assessee is engaged in the business of Coal Sales. It filed its return of income on 30.11.2015 reporting total income of Rs.34,64,50,050/-. Assessment was completed inter alia, by making an upward adjustment and addition thereto under section 92CA of Rs.7,53,60,879/- in respect of fees for Cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vour of the assessee by plethora of decisions referred above and dealt elaborately by the ld. CIT(Appeals) in his order. In most of the decisions referred above, the rate of Guarantee Fee has been taken to be in the range of 0.3% to 0.5%. In the present case, it is admittedly a fact on record that assessee suo motu has charged Guarantee Fee @ 0.50% from its AE. We also take note of the observations made by ld. CIT(A) in respect of basis of CCC credit rating adopted by the ld. TPO for the purpose of benchmarking of fee towards Corporate Guarantee which is devoid of any comparative factual data. Also, ld. CIT(A) has considered the equal split of benchmarking rate arrived by ld. TPO between the assessee and its AE which doesn t bear any rationality. 15. Further, this issue has been considered by the Coordinate Bench of ITAT, Kolkata in the case of Berger Paints India Limited (supra) and the relevant observations and findings, which deal with the identical issue in hand, are reproduced as under:- 16. Considering the above facts and circumstances of the case, detailed findings given by the ld. CIT(Appeals) as extracted above, plethora of decisions dealt herein and the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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