Employer Can't Claim Benefit Of Sec 36(1)(Va) If He Fails To Deposit Employees' Contribution To PF Within Due Date: Kolkata ITAT

Section 36(1)(va) of Income tax Act states that if the amount received towards employees' contribution to PF is not deposited by the employer in the respective welfare account within the due date, then the same will be treated like income from business/profession.

The Bench of Sanjay Garg (Judicial Member) and Sanjay Awasthi (Accountant Member) reiterated that deduction u/s 36(1)(va) in respect of delayed deposit of amount collected towards employees' contribution to PF cannot be claimed even though deposited within the due date of filing of return even when read with Section 43B. (Para 5)

Facts of the case:

The assessee company had preferred an appeal contending that even though the deposits towards PF and ESI totalling to Rs.85,23,450/- consisted of employees' contribution and employer's contribution, the AO treated the entire amount as employees' contribution towards Provident Fund and Employees State Insurance and disallowed the entire amount u/s 36(1)(va) r.w.s 2(24)(x) of the Act on account of delayed deposit of employees' contribution to PF/ESI i.e. after the due date as provided under the respective welfare enactments.

Observations of the Tribunal:

The Bench found from the AR's submission that the employer's contribution was duly deposited well within the due date of filing of Income Tax Return and the same was allowable as deduction u/s 43B of the Act.

Hence, the Bench directed the AO to allow deduction u/s 43B read with Sec 36 if it is verified that the employer's contribution has been deposited before the due date of filing of return of income.

so far as the delayed deposit of employees' contribution to PF/ESI is concerned, the Bench referred to the decision of Supreme Court in Checkmate Services Pvt. Ltd. Vs. CIT [(2022) 143 taxmann.com 178], to reiterate that deduction u/s 36(1)(va) in respect of delayed deposit of amount collected towards employees' contribution to PF cannot be claimed even though deposited within the due date of filing of return even when read with Section 43B.

Hence, the ITAT partly allowed the assessee's appeal.

Counsel for Appellant/ Assessee: Ramesh Kr. Varma

Counsel for Respondent/ Revenue: P. P. Barman

Case Title: Supreme & Co. Pvt. Ltd vs. DCIT

Case Number: I.T.A. No.613/Kol/2024

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