Employers contribution not covered under Supreme Court order in case of Checkmate

Employers contribution not covered under Supreme Court order in case of Checkmate. Payment by cheque within due date allowed by ITAT

ABCAUS Case Law Citation:
ABCAUS 3721 (2023) (04) ITAT

Important Case Laws relied upon:
Checkmate Services P. Ltd. vs CIT ABCAUS 3614 (2022) (09) SC
Alom Extrusions Ltd. [2009] 185 TAXMAN 416 (SC)
P.L. Haulwel Trailers Ltd. v. Deputy Commissioner of Income tax
Moody’s Analytics Knowledge Services (India) (P.) Ltd. v. Income-tax Officer (TDS)
Natma Securities Ltd. v. ACIT

In the instant case, the assessee had challenged the order passed by the CIT(A) NFAC in confirming the addition towards employer contribution under section 36(1)(va) of the Income Tax Act, 1961 (the Act).

The case of the assessee was that the CIT(A) wrongly placed reliance upon the judgement of Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd by not appreciating that the issue involved in said case was only with respect to employees contribution and as such cannot be applied on employer contribution which is covered by section 43B(b) of the Act.

The assessee had filed return u/s 139(1) for the impugned assessment year. The return was processed by CPC u/s 143(1) and on the basis of tax audit report of the assessee, made addition u/s 36(1)(va) for late deposit of PF & ESI contribution.

Before the CIT(A) the assessee pleaded that the entire amount of late contribution of PF & ESI is not the point of addition for violation of section 36.

It was stated that the entire amount of late contribution of PF & ESI was not qualified for disallowance as it included employers contribution and also the amount related to the late credit of cheque which was produced in the bank within the time limit.

However, CIT(A) confirmed the additions without considering the assessees’s submissions.

Before the Tribunal, the assessee placed reliance the CBDT Circular No. 22/2015 dated 17.12.2015 to support its contention that the employer contribution is covered by section 43B of the Act and no disallowance was called for as the entire amount was paid before filing of the return u/s 139(1) of the Act.

Further the assessee placed reliance on CBDT Circular No. 261 dated 08.08.1979 and several judgments to support its plea that no disallowance can be made where contribution was paid by cheque within the time limit as per the stipulated due date of relevant Acts. But the cheque was cleared after the due date of the relevant act. The assessee produced confirmation from the bank for presenting the cheque in the relevant dates and also, the certificate of auditor in this regard.

Employers contribution not covered under Supreme Court order in Checkmate case

The Tribunal opined that the employer contribution was not under the purview of the order of the Hon’ble Apex Court in the case of Checkmate Service Pvt. Ltd. The Hon’ble Apex Court had only dealt with the delay in payment related to employee’s  contribution. Further the payment by cheque within due date is squarely covered by the Board Circular and the order of the coordinate bench.

Accordingly, the appeal was allowed and the impugned additions were quashed

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