Whether its processing under section 143(1)(a) or assessment U/s 143(3), PF / ESCI delayed payment is not allowable as deduction: ITAT Delhi

 

CA Naresh Jakhotia

Whether deduction towards delayed deposit of employee’s contribution to ESI/PF can be denied in case of processing of return under section 143(1)(a) is a question often debated and issue full of divergent views amongst the ITAT.

Recently, ITAT Delhi has held that the binding observations of the Supreme Court cannot be brushed aside simply because the decision was rendered in the context of the assessment framed under section 143(3) and not in the context of intimation framed under section 143(1). The Supreme Court has categorically held that the employee’s contribution deposited after respective due date cannot be allowed as deduction. Therefore, it would be incorrect to say that the decision of the Supreme Court is applicable only in the case of an assessment framed under section 143(3). This can neither be the intention of the legislators nor has the decision of the Supreme Court to be interpreted in such a way so as to create discrimination amongst the tax payers. Such an interpretation is adopted then those tax payers who are assessed under section 143(3) would have to face disallowance because of the delay in deposit of contribution and those tax payers who have been processed and intimated under section 143(1) would go scot free even if there is delay in deposit of contribution and even if they do not deposit the contribution.

The case detail is as under:

Savleen Kaur & Ors. vs. ITO

[ITA No. 2249/Del/2022]

[ITAT, Delhi Bench]

Let us have a short overview of the case.

Facts of the case

CPC while processing return of income of assessee under section 143(1) made disallowance on account of delayed deposit of employee’s contribution to ESI/PF. On appeal, the CIT (Appeals) confirmed the said disallowance. Before CIT (Appeals), the assessee contended that the disallowance made by CPC while processing return under section 143(1) is beyond the scope of provisions of section 143(1)(a) and therefore cannot be sustained. The assessee also contended that the decision of Hon’ble Supreme Court in the case of Checkmate Services (P.) Ltd. v. CIT was applicable only in the case of an assessment framed under section 143(3) and not applicable for the intimation framed under section 143(1).

Observations of Tribunal:
The Tribunal observed that the binding observations of the Supreme Court cannot be brushed aside simply because the decision was rendered in the context of the assessment framed under section 143(3) and not in the context of intimation framed under section 143(1). The Supreme Court has categorically held that the employee’s contribution deposited after respective due date cannot be allowed as deduction. Therefore, it would be incorrect to say that the decision of the Supreme Court is applicable only in the case of an assessment framed under section 143(3). This can neither be the intention of the legislators nor has the decision of the Supreme Court to be interpreted in such a way so as to create discrimination amongst the tax payers. Such an interpretation is adopted then those tax payers who are assessed under section 143(3) would have to face disallowance because of the delay in deposit of contribution and those tax payers who have been processed and intimated under section 143(1) would go scot free even if there is delay in deposit of contribution and even if they do not deposit the contribution.

Judgment by Tribunal
Thus, the Tribunal held that the ratio decidendi of the Supreme Court in the case of Checkmate Services (P.) Ltd. v. CIT is equally applicable to the intimation under section 143(1).

 

The copy of the order is as under:

 

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