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

Jurisdiction: Kolkata Income Tax Appellate Tribunal

In the present case, the Kolkata ITAT analyzed the eligibility of a claim for deduction under Section 36(1)(va) of the Income Tax Act concerning the delayed deposit of amounts collected towards employees’ contribution to the Provident Fund (PF).

The specific section in question, Section 36(1)(va) of the Income Tax Act, dictates that if the amount received towards employees’ contribution to PF is not deposited by the employer within the due date, it will be treated as income from business or profession. The Tribunal, comprising Sanjay Garg (Judicial Member) and Sanjay Awasthi (Accountant Member), emphasized that the deduction under Section 36(1)(va) cannot be claimed for delayed deposits, even if the deposits are made within the due date of filing of the income tax return, even when read with Section 43B.

Facts of the case reveal that the assessee company contested the treatment of the entire amount as employees’ contribution towards the Provident Fund and Employees State Insurance, leading to its disallowance under Section 36(1)(va) read with Section 2(24)(x) of the Act due to delayed deposits.

Upon considering the submissions, the Tribunal found that the employer’s contribution was deposited within the due date of filing of the Income Tax Return, making it eligible for deduction under Section 43B of the Act. Consequently, the AO was directed to allow the deduction under Section 43B if it is verified that the employer’s contribution was deposited before the due date of filing of the return of income.

Regarding the delayed deposit of employees’ contribution to PF/ESI, the Tribunal referred to the Supreme Court’s decision in Checkmate Services Pvt. Ltd. vs. CIT [(2022) 143 taxmann.com 178] to assert that the deduction under Section 36(1)(va) for delayed deposits cannot be claimed, even if deposited within the due date of filing of the return, when read with Section 43B.

Ultimately, the ITAT partly allowed the assessee’s appeal, shaping the outcome of this case.

Representatives:

  • Counsel for Appellant/Assessee: Ramesh Kr. Varma
  • Counsel for Respondent/Revenue: P. P. Barman

For further details, the complete order can be accessed here: Download the ITAT Order