Income Tax Appellate Tribunal - Delhi
Tiger 4 India Limited, New Delhi vs Acit, Circle-25(2), Delhi on 8 February, 2024
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'H', NEW DELHI
Before Dr. B. R. R. Kumar, Accountant Member
Sh. Anubhav Sharma, Judicial Member
ITA No. 377/Del/2023 : Asstt. Year : 2017-18
ITA No. 378/Del/2023 : Asstt. Year : 2018-19
Tiger 4 India Ltd., Vs ACIT,
7, Lower Ground Floor, L.S.C. B-1, Circle-25(2),
Vasant Kunj, New Delhi-110070 New Delhi
(APPELLANT) (RESPONDENT)
PAN No. AADCT3974E
Assessee by : Sh. S. K. Bansal, CA
Revenue by : Sh. Amit Katoch, Sr. DR
Date of Hearing: 05.02.2024 Date of Pronouncement: 08.02.2024
ORDER
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeals have been filed by the assessee against the orders of National Faceless Appeal C entre (N FAC), Delhi dated 20.12.2022.
2. Since, the issue involved in both the appeals are similar, they were heard together and being adjudicated by a commons order. In ITA No. 377/Del/2023, follow ing grounds have been raised by the assessee:
"1. That the Order date d 20- 12-2022 passed by the Lear ned CIT (A), Natio nal Faceless Appeal Centre, Delhi (Ld. CIT (A)) is bad in law , oppose d to the facts o f the case and liable to set aside .
2. That the Learned CIT, (Appeals) erred in confirm ing the a dditions on account of belated employe es' contr ibution to PF and ESI ignoring the fact that the appe llant Company is engaged in the business of 2 ITA No. 377 & 378/Del/2023 Tiger 4 India Ltd.
supply ing manpo wer and it is the res pons ibility of Principal Employe r to de posit PF/ESI contributions and not the appella nt. Accordingly no additions are w arranted in the hands o f appellant for delayed deposits o f emplo yees' contr ibutions to PF /ESI.
3. That the Ld CIT(A) furthe r erre d in placing reliance merely on the de cision of the Hon' ble Supreme Cour t in Chekmate Se rvice s (P) Ltd without apprec iating the fac t that Till 12.10.2022 (the day o n which the Hon'ble Supreme court passed the or der) the disallowanc e of bela ted employee s contribution to ESI and PF was a deba table issue a nd such adjustments canno t be m ade u/s.143(1)(a).
4. That the L d CIT(A) further e rre d i n not appreciating the fac t that the enabling pro vision of "incre ase in inco me"
contained in sub-clause (iv) o f Sec. 143( 1) having been give n effec t only from 01.04.2021 by way of amendment of the s aid w.e .f. 01-04-2021. Therefo re, adjustm ent prio r to A.Y .2021- 22 on acco unt of increase in income is not in acco rdance with law .
5. That the L d C IT(A) furthe r erred in confirm ing the additions of Rs. 3,60,35,261 originally made by the C PC Bangaluru igno ring the fact that the same is other wis e allo wable under S ection 37 of the Income Tax Ac t, 1961.
6. That the L d CIT(A) erred in holding that the assessment of the appellant w as completed by selecting case under scrutiny after issuing notice u/s 143(2) as aga inst the fact that no such no tice was ever issue d and the c ase was ne ver se lected in scrutiny."
3. The written submission of the ld. AR is as under:
"The only issue involved in this appeal relates to additio n on account o f alleged delayed de position o f Employees' Contribution to Provide nt Fund ( PF) and Employees' State Insurance (ESI) which is being conteste d in different grounds of appeal.3 ITA No. 377 & 378/Del/2023
Tiger 4 India Ltd.
AS PER APPELLANT Appellant had de posited the Employees' contributio ns to PF and ESI with the relevant Authorities within the due dates as presc ribed under Section 36( 1)( va) of the Income Tax Act, 1961.
AS PER ASSESSMENT ORDER AS PER LEARNED CIT (A) Employees' Contribution to Sustained the additions ESI and PF added back unde r holding that Employer has section 143(1) on account of statuto ry obligation to dela yed de position under deduct and deposit Accrual method. employees' co ntributio n every month within 15 days of the succeeding month.
Brief Fac ts of th e Appea l a. Appellant is a Limited Company engaged in the business of supply of manpower pr imarily securi ty guards and o ther workers to I.T. Sector , Banking Sector, Corporates etc. The business activities are spread across many States in the country. The appellant has its head office at Delhi and Branc hes across the country.
b. The appellant supplies vario us security guards m ostly gunmen to banks, other secur ity guards to other entities whose s alar ies are reimburse d by the respective e ntities.
c. Monthly attendance of various security perso nnels are receive d by the Branches of the appellant from the respective clie nts afte r the close of the month by 15th of the following month. (kindly see PB pages 227 to 233 for some of the attendance sheets prepared by the concerned 4 ITA No. 377 & 378/Del/2023 Tiger 4 India Ltd.
branches and the clie nt after the end o f the month to whic h attendance pertains).
Thus attendance of all its manpow er supplied to various clients across India fo r a month is rece ive d at the concerne d Branches of the appellant in the s ubse quent month. These are checked at the Branch le vel and then forw arded to H R section in the head office for preparing salary and wages sheets.
d. For Example a ttendance for the m onth of April 2017 was receive d by the appellant from its clients only after the close of April i.e. in the month o f May 2017. De tails of salary due to each such pe rson and the amount of employees contribution to ESI and PF alongwith Emplo yers' share there to wo uld be worked out in the month of May 2017 only . In such a case, it wo uld not be pos sible to deposit the emplo yees contributio n to ESI and PF for April 2017 by 15th May 2017 o n accrual basis for the re ason that the ir attendances are received in May-17 (norm ally during 1 to 15th) . Salary due is pr epared afte r rece iving atte ndance a nd accordingly quantum of ESI and PF contr ibutions would a lso be worke d o ut in May 2017 only.
e. Your honour, bills fo r salar ies and wages payable to the work force supplied to an e ntity fo r a month is raised only afte r the close of the that particul ar month i.e. in the subsequent month only w hen attendance details are receive d by the appe llant and am ount of s alaries and employer's contribution to ESI and PF are wo rked out. Journal Vo ucher e ntries for salaries and wages payable for a month alo ngw ith employees' contribution to ESI and PF are recorded in the books of accounts on accrual basis 5 ITA No. 377 & 378/Del/2023 Tiger 4 India Ltd.
only afte r determination of rele vant amounts at the end of that month.
f. Payment of salaries and wa ges pertaining to a m onth happens only after the same is worked out in the subsequent month. Thus, salary due to an emplo yee for the month of say April 2017 would be paid in the month of May 2017.
g. In the present case, the tax audito r repo rte d the amount of emplo yees' contr ibutio n to ESI and PF on accrual basis in the Tax Audit Repo rt (PB pages 44 to 53) whic h in a ny case could no t be deposited by 15th o f the succeeding month to which the salary pe rtains for the reasons state d above.
Central Processing Centre of the Income Tax department had made additio ns for delaye d deposit o f employer and employees' contribution to ESI and PF by taking due dates as mentione d on a ccrual basis in the tax audit repo rt. The learned CIT (A ppeals) NFAC had delete d the addit ions made by the C PC on account of employers' contribution to the said funds since these were deposited within due dates specifie d under Se ction 43-B of the I ncome Tax Act, 1961.
h. Ho weve r, additions under Section 36(1)(va) on account of employees' contribution to the said fund were sustained by the Ld CIT (A ) holding that Employer has statutor y obliga tion to deduct and de posit employees' contributio n every month within 15 days of the succee ding month irres pective o f whether the salar y, wages etc have been actually paid o r no t.6 ITA No. 377 & 378/Del/2023
Tiger 4 India Ltd.
i. Sec tion 36(1)(va) defines the "due dates" the date by whic h an a ssessee is require d as an employer to c redit an employee's contribution to the employee's ac count in the relev ant fund under any Act, rule , order o r notification issued thereunder or under any standing orde r, aw ard, contr act of ser vice or othe rw ise.
Vide clause 38 of the Employees' Provident Fund Scheme 1952 the 'due date' for deposit of e mployees' co ntributio n under the ESI a nd PF Ac ts are re quired to be reckoned with reference to the month of actual payment o f salary and wages a nd not when the liabilit y to pay arises as per accrual sy stem o f accounting.
j. Your honour, in the prese nt case, the appellant had deposited the employees contributions to Provident fund and ESI by the due dates as mentione d in section 36(1)(v a). Kindly refer PB pages 64 to 70 fo r depos it o f PF and PB pages 98 to 104 for deposition of ESI .
From the pe rusal of abo ve details, your honour will find that ba rring few cases, the Employee's contribution to PF were de posited within the due date s specifie d under The Pro vide nt Fund S cheme, 1952. Thus for example, salary for t he month of April 2017 was paid in May 2017 (PB pages 169 to 171) , the due date o f depositio n of impugned ESI and PF would be 15- 06-2017 but the appellant deposited all PF and ESI contributions of emplo yees on 18- 05-2017 i.e. immediately afte r disburs al o f salaries and wages . Similar ly in other months a lso, there is no de lay.7 ITA No. 377 & 378/Del/2023
Tiger 4 India Ltd.
PRAYER In the facts and c ircumstances o f the present appeal, the appe llant pr ays yo ur hono ur tha t fo r computing the period of delay in de position of employees' contribution to PF and ESI, the due da te may kindly be reckoned from the end of the month in which salar y and wages are disbursed by the appe llant and no t month to which the salary pertains. It is in acco rdance with pro visions of re levant Ac t as s pe cified under Sec tion 36(1)(va) of the I ncome Tax Act, 1961.
Reliance is placed on the following decisions:
1. Hon' ble Ko lkata Bench of the T ribunal in the case of Kanoi Paper Industries Ltd. Vs. ACIT (75 TTJ 448)
2. Hon' ble Delhi IT AT in the cases of Benson Movers P. Ltd., New Delhi vs. ACIT, Circle -
4(2) , Ne w Delhi on 17 November, 2023.
Vigilant Secur ity Placement & Dete ctive Services Pvt. Ltd. Vs . DCIT in ITA. No. 2740/De l/2022 dated 13.06.2023, Dignus Ser vice s Vs. ITO in ITA. Nos. 116 & 117/De l/2023 date d 26.09.2023 Sentinel Co nsulta nts Pvt. Ltd. Vs. ACIT in ITA. Nos. 7 & 8/ Del/ 2023 date d 12.06.2023 B. L. K ashyap & Sons L td. in ITA. N o. 2622/Del/2022 date d 18.07.2023 VVDN Technolo gie s Pvt. Ltd. in ITA. No. 164/Del/2023 date d 4.07.2023
3. Ho n'ble Bombay ITAT in the case of Fluid Air (India) Ltd. Vs. DCIT 63 I TD 182 (Bom) 8 ITA No. 377 & 378/Del/2023 Tiger 4 India Ltd.
4. In this connection, the appellant also places reliance on the judgment of the Hon'ble S upreme Court in the c ase of CIT v. J.H. Gotla (1985) 156 ITR 323 (SC), K. P. Varghese v. ITO ( 1981) 131 ITR 597 (SC) and CIT v. Vegetable Products Ltd. (1973) 88 ITR 192 (SC) at page 195 to argue that the court may modify the language used by the legis lature so as to achieve the intentio n of the legislature and to produce a rational re sult and fur thermore that any case of ambiguity is required to be resolved in favour of the assessee ."
4. Heard the arguments of both the parties and peruse d the material available on record.
5. The issue of ESI/PF payment has attained finality by the order of the Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs. CIT-I, vide order dated 12 t h Octo ber, 2022 wherein it was observed that employers have to deposit the employee's contribution towards EPF/ESI on or before the due date for availing deduction. In the cases before the Hon'ble Apex Court, the employers had belatedly deposited their employees' contribution towards the EPF and ESI, considering the due date s under the relevant provisions of the Act. The Assessing Officer ruled that by virtue of Section 36(1)(va ) read with Section 2 (24)(x) of the IT Act, such sums received by the appellants constituted "income". It was held that those amounts could not have been allowed as deductions under Section 36(1)(va) of the IT Act when the payment was ma de beyond the relevant due date under the respective acts. The Income Tax Appe llate Tribunal and later the Gujarat High C ourt dismissed the challenge against this order of AO . In appeal, the court 9 ITA No. 377 & 378/Del/2023 Tiger 4 India Ltd.
noted that the Hon'ble Kerala High Court has also ruled in favour of reve nue on this issue whereas the Hon'ble High Courts of Bombay, Himachal Pradesh, Calcutta, Guwahati and Delhi have favoured the interpretatio n beneficial to the assessee . The Hon'ble Apex Bench effective ly reversed the judgme nt in Commissioner of Income Tax vs. Alom Extrusions Ltd. (1 SCC
489) relied upon by the assessee.
6. The Hon' ble Apex Court in the case of Checkmate Services P. Ltd. vs. Commissioner Of Income Tax-I in CA No. 2833 /2016 vide order dated 12.10.2022 o bserved that there is a marked distinction be tween the nature and character of the two amounts viz., the employers' contribution and employees' contr ibution required to be depo sited by the employer. The first one is the employer's liability is to be paid out of its income whereas the second is deemed an income, by definition, since it is the deduction from the employees' income and held in trust by the employer. The Hon'ble Apex Court held as under:
"In the o pinion of this Court, the reaso ning in the impugne d judgment that the non-o bstante c lause wo uld not in any manner dilute or ove rride the employe r's obligation to deposit the amounts retained by it or deduc ted by it fr om the emplo yee' s income, unless the conditio n that it is deposited on o r before the due date, is correct and justified. T he non-o bstante c lause has to be unders tood in the context of the entire provisio n of Section 43 B which is to e nsure timely payment before the returns are filed, of cer tain liabilities which are to be borne by the assessee in the fo rm of tax, interest payment a nd other statutory liability. In the case o f these liabilities, what constitutes the due date is defined by the statute . Nevertheless, the assessees are given some leeway in that as long as deposits are m ade beyond the due date, but befo re the date of filing the return, the deduction is allowe d. That, howe ver, cannot apply in the case of amounts which are held in trust, as it is in the case of emplo yees' co ntributions- whic h are 10 ITA No. 377 & 378/Del/2023 Tiger 4 India Ltd.
deduc ted from their income. They are not part of the assessee employe r's income, nor are they he ads of deduc tio n per se in the form of statutory pay out. They are o ther s' income, monie s, only deemed to be inco me, with the o bject o f ensuring that the y are paid within the due date specified in the particular law. The y have to be deposited in ter ms of such we lfare enactments . It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus , i t is an essential condition for the deduction that such amounts are de po sited on or be fore the due date. If such interpretatio n were to be ado pted, the non-o bstante clause under Section 43 B o r anything contained in that provisio n wo uld not absolve the assessee from its liability to deposit the emplo yee's contr ibutio n on or before the due da te as a condition fo r deductio n."
7. As the is sue of payment of employees contribution towards the PF has been rule d against the assessee by the Hon'ble Supreme Court, the a ppeal of the assessee on this ground is liable to be dismissed.
8. In the re sult, the appeals o f the assessee are dismissed. Order Pronounced in the Open Court on 08/02/202 4.
Sd/- Sd/-
(Anubhav Sharma) (Dr. B. R. R. Kumar)
Judicial Member Accountant Member
Dated: 08/02/2024
*Subodh Kumar, Sr. PS*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR