Case Number: ITA 1688/DEL/2020
Appellant: Aakaar Creations Private Limited, New Delhi
Respondent: DCIT Circle-1(1), New Delhi
Assessment Year: 2018-19
Result: Appeal dismissed
Case Filed on: 2020-10-14
Order Type: Final Tribunal Order
Date of Order: 2023-02-14
Pronounced on: 2023-02-14
This case involves Aakaar Creations Private Limited, New Delhi, challenging the disallowance of ESI and PF contributions for the assessment year 2018-19. The appeal was filed against the order of the Commissioner of Income Tax (Appeals)-I, New Delhi, which confirmed the disallowance made by the Assessing Officer.
The primary issue in this case was the disallowance of employee contributions towards ESI and PF due to late payment. The Assessing Officer disallowed these contributions, adding them back to the income of the company, as the deposits were made after the due date prescribed under the relevant acts but before the due date of filing the return under section 139(1) of the Income-tax Act.
The appellant, represented by Sh. Rakesh Kr. Khiwani, CA, argued that the disallowance was not permissible as the contributions were deposited before the due date of filing the return of income under section 139(1). The appellant cited various High Court decisions that favored the interpretation beneficial to the assessee, allowing such deposits.
The respondent, represented by Sh. Kanv Bali, Sr. DR, upheld the disallowance, citing the Supreme Court judgment in the case of Checkmate Services P. Ltd. vs. Commissioner Of Income Tax-I. The respondent argued that the Supreme Court had clearly distinguished between employer and employee contributions, holding that employee contributions must be deposited on or before the due date specified under the respective acts for the deduction to be allowed.
The tribunal, comprising Sh. C. M. Garg, Judicial Member, and Dr. B. R. R. Kumar, Accountant Member, noted the following:
The tribunal referred to the Supreme Court judgment in Checkmate Services P. Ltd. vs. Commissioner Of Income Tax-I, where it was held that employers must deposit employee contributions towards ESI and PF on or before the due date prescribed under the respective acts. The Supreme Court emphasized that employee contributions are deemed income and must be deposited within the due date to qualify for deduction.
The tribunal highlighted the distinction made by the Supreme Court between employer and employee contributions. While employer contributions are part of the employer’s liability and can be deposited before the due date of filing the return, employee contributions are considered as income held in trust and must be deposited within the due date prescribed under the respective acts.
The tribunal dismissed the appeal filed by Aakaar Creations Private Limited, upholding the disallowance of employee contributions towards ESI and PF due to late payment. The tribunal found that the disallowance was justified as per the Supreme Court judgment in Checkmate Services P. Ltd. vs. Commissioner Of Income Tax-I.
The order was pronounced in the open court on 14th February 2023, bringing clarity on the treatment of delayed deposits of employee contributions towards ESI and PF for the assessment year 2018-19.
Order:
The appeal filed by Aakaar Creations Private Limited is dismissed, and the disallowance of employee contributions towards ESI and PF is upheld.
Author: Accountant Member, Dr. B. R. R. Kumar
Date: 14.02.2023
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