Dismissal of National Housing Bank’s Appeal Against Delayed PF/ESI Deposit Disallowance for AY 2019-20

Dismissal of National Housing Bank’s Appeal Against Delayed PF/ESI Deposit Disallowance for AY 2019-20

In a significant ruling, the Income Tax Appellate Tribunal (ITAT), Delhi Bench ‘E’, has dismissed the appeal filed by National Housing Bank (NHB), New Delhi, against the order passed by the Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi, pertaining to the assessment year 2019-20. The judgment underscores the rigour of compliance with statutory timelines for depositing employees’ contributions to Provident Fund (PF) and Employee State Insurance (ESI).

Background

The case in point, ITA No. 1242/Del/2022, emanates from the original return of income filed by NHB for the assessment year 2019-20, declaring a total income of Rs.11,42,86,93,010. Subsequent to the return process, the Central Processing Centre (CPC) in Bangalore churned out an intimation under Section 143(1) of the Income Tax Act, 1961, determining the total income slightly upwards at Rs.11,43,03,92,370.

Aggrieved, NHB sought relief from the CIT(A), who dismissed NHB’s appeal, leading to the subject matter being escalated to the ITAT.

The Grouse and the Ruling

The bone of contention revolves around the disallowance made under sections 36(va) and 2(24)(x) of the Income Tax Act, for delayed deposit of employees’ contribution towards PF and ESI. NHB argued that such contributions, though delayed, should be allowable if paid before the due date of filing the return of income under section 139(1). However, the Tribunal, aligning with the judgment in the Checkmate Services Pvt. Ltd. case, underscored that contributions by employees towards PF and ESI are treated as the employer’s income under section 2(24)(x) and deductions under section 36(1)(va) are permissible only if such contributions are deposited within the stipulated timeframe under the relevant Acts.

The ITAT further reinforced that this principle has been irrevocably established by the Supreme Court and deviations cannot be entertained. Accordingly, it upheld the CIT(A)’s decision, remarking NHB’s case as a testament to the non-dilutable nature of statutory compliance pertaining to employee contributions towards PF and ESI.

Conclusion and Implications

The dismissal of NHB’s appeal by the ITAT sends a stern reminder to all employers about the critical importance of adhering to statutory deadlines for depositing employees’ contributions to PF and ESI. The judgment elucidates that such contributions, constituting the employer’s income, must be deposited within the due dates specified under the respective Acts to qualify for deductions under the Income Tax Act. This case is pivotal in setting a precedent for stringent compliance with tax laws and reiterates the unpardonable nature of delays in depositing employees’ contributions towards welfare funds.

Dismissal of National Housing Bank’s Appeal Against Delayed PF/ESI Deposit Disallowance for AY 2019-20