No disallowance u/s 36(1)(va) for PF deposit on next working date due to national holiday

Due to national holiday, deposit of PF on next working date is in due compliance with the provisions of section 36(1)(va) of the Income Tax Act, 1961 – ITAT 

In a recent judgment, ITAT Chandigarh has held that the due date being the national holiday, the deposit of employee’s share of PF contribution on the next working date shall be in due compliance with the relevant statue and nothing adverse can be held against the assessee by way of invoking the provisions of section 36(1)(va) of the Income Tax Act, 1961.

ABCAUS Case Law Citation:
4326 (2024) (11) abcaus.in ITAT Chandigarh

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming disallowance on account of delay in deposit of employee’s share of PF contribution under section 36(1)(va) of the Income Tax Act, 1961 (the Act).

It was submitted that the due date of deposit of employee’s share of PF contribution fell due on National Holiday i.e, on 15^th August and given that, the assessee had deposited the said contribution on the next working day i.e; 16^th August. It was submitted that this fact was not under dispute and same was apparent from the impugned order wherein the CIT(A) had referred to the contents of the tax audit report so submitted by the assessee.

It was submitted that since the due date falls on a date which was National Holiday, the deposit could have been made only on the day following the National Holiday and the assessee duly complied with its obligation and had made necessary compliance on next day.

It was further submitted that exactly identical matter came up for consideration before the Hon’ble Delhi High Court wherein the question of law was as to whether Income Tax Appellate Tribunal misdirected on facts and in law in holding that the amount payable towards ESI fall for due on National Holiday and therefore the deposits made on the following day was amenable to deduction. It was submitted that the Hon’ble Delhi High Court decided the matter in favour of the assessee.

The Tribunal observed that the assessee company had deposited the PF contribution which was falling due on 15^th August on the next working day i.e; 16^th August. It held that the due date being the national holiday, the deposit on the next working date shall be in due compliance with the relevant statue and nothing adverse can be held against the assessee by way of invoking the provisions of section 36(1)(va) of the Act.

In the result, the disallowance so made by the CPC/AO and upheld by the CIT(A) was deleted and the matter was decided in favour of the assessee.

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