Employers Have To Deposit Employees' Contribution Towards EPF/ESI On Time To Avail Income Tax Deduction: ITAT

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that employers have to deposit employees' contributions towards EPF/ESI on time to avail of income tax deductions.

The two-member bench of Narender Kumar Choudhry (Judicial Member) and Anil Chaturvedi (Accountant Member) has relied on the decision of the Supreme Court in the case of Checkmate Services Pvt. Ltd. vs Commissioner of Income Tax-I in which it was held that the non-obstante clause under Section 43B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee's contribution on or before the due date as a condition for the deduction.

The appellant/Assessee is a financial institution engaged in the business of providing long-term finance for the construction or purchase of houses in India for residential purposes.

The CIT(A) upheld the action of the AO by which the adjustment was made on account of the delayed deposit of the employees' share of Provident Fund & ESI dues, as it was deposited before the due date of filing the return of income.

The issue raised was with respect to the disallowance of delayed deposit of an employee’s contribution to PF and ESI in the intimation passed under Section 143(1) of the Income Tax Act.

The tribunal held that the deduction under Section 36(1)(va) of the Income Tax Act can be allowed only if the employees’ share in the relevant funds is deposited by the employer before the due date.

Case Title: The National Housing Bank Versus CIT(A), NFAC

Citation: ITA No. 1242/Del/2022

Date: 16.03.2023

Counsel For Petitioner: Kamal Bansal

Counsel For Respondent: Arvind Bansal

Click Here To Read The Order