Actual date of salary payment to be considered for disallowance of EPF u/s 36(1)(va) – ITAT

Date of actual payment of salary to be considered for disallowance of EPF u/s 36(1)(va) for delay in deposit within 15 days – ITAT

ABCAUS Case Law Citation:
ABCAUS 3732 (2023) (05) ITAT

Important Case Laws relied upon:
Checkmate Services (P.) Ltd. Vs CIT-1, [2022] 143 taxmann.com 178 (SC)
Primary Agricultural Cooperative Credit Society Ltd. vs. DCIT (2022) 138 taxmann.com 571

In the instant case, the assessee had challenged the order passed by the CIT(A) , National Faceless Appeal Centre (NFAC) in confirming disallowance  u/s 36(1)(va) by CPC vide order passed u/s 143(1) of the Income Tax Act, 1961 (the Act).

The assessee was a partnership firm. The return of income of the firm was processed u/s 143(1) of the Act making disallowance towards delay in payment of employees contribution to PF and ESI u/s 36(1)(va) of the Act.

The assessee contended that no disallowance can be made u/s 143(1)(a) of the Act towards employees contribution to EPF and ESI.

The assessee submitted that there was inadvertent error while filing Form 3CD in mentioning the correct qualifying dates of remittances.

The assessee also contended that the salary for two month was paid in the subsequent months, therefore the due dates have to be considered from the actual date of payment of salary.

It was submitted that unless the salary is actually paid to the employees, employees contribution to the PF and ESI cannot be made.

The Tribunal observed that the issue of disallowance u/s 36(1)(va) u/s 143(1)(a) is settled by the Hon’ble High Court and rejected the contention of the assessee in this regard.

Tribunal observed that the coordinate bench of the ITAT has held that time-limit for making payment in respect of contribution to the provident fund within 15 days should be considered from the month during which the wages/salary is actually disbursed irrespective of  month to which the same relates.

Accordingly, the Tribunal remitted this issue to the Assessing Officer (AO) with a direction to examine and decide the issue in the light of the said judgment of the ITAT.

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