Payment Towards Employee’s Contribution To Provident Fund After Due Date Is Not Allowable As Deduction: ITAT

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has held that payment towards an employee’s contribution to the provident fund after the due date is not allowable as a deduction.

The two-member bench of Sandeep Singh Karhail (Judicial Member) and Om Prakash Kant (Accountant Member) has relied on the Supreme Court's decision in the case of Checkmate Services (P.) Ltd. and ruled 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 filed its return of income on 10/02/2021, declaring a total income of Rs.459,03,58,100. The return was processed after an addition of Rs. 6,30,42,740 was made on account of delayed payment towards the employee’s contribution to the provident fund under Section 36(1)(va).

The CIT (A) dismissed the appeal filed by the assessee. According to CIT(A), if the employer fails to deposit the entire amount towards the employees' contribution on account of the provident fund with the concerned department on or before the due date, the assessee is not entitled to a deduction.

The ITAT noted that the employee’s contribution to the provident fund was deposited by the assessee after the due date prescribed under the relevant statute but within the due date of filing the income tax return.

The ITAT ruled that the taxpayer's claim of deduction for the employee's contribution to PF and ESI was incorrect, necessitating a prima facie adjustment.

Case Title: Deutsche India Pvt. Ltd. Versus Asstt. Director of Income Tax

Citation: ITA no.2842/Mum./2022

Date: 22/02/2023

Counsel For Appellant: Niraj Sheth

Counsel For Respondent: Mahita Nair

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