Kolkata ITAT: Can’t Claim Tax Deduction for Unpaid Employee Contributions (PF & ESI) to Account

The Kolkata ITAT learning that the taxpayer’s returns have been processed in the Computer Processing Centre held that when the auditors have reported in the audit report that employees’ contributions have been deducted by the taxpayer from the employee’s salaries but not deposited within the deadline furnished under PF&ESI Act, assessee could not avail for any deduction.

The ITAT allowed such a ruling while referring to the law laid by the Supreme Court in the case of Checkmate Services (P) Limited vs CIT.

The Bench of Rajpal Yadav (Vice-President) and Dr. Manish Borad (Accountant Member) witnessed that “if employees’ contribution is not being paid to the respective PF & ESI Acts, then, deduction cannot be claimed by an assessee”. (Para 9)

Under the matter, the taxpayer company preferred the ongoing petition contesting the measure of CIT(A) in verifying the disallowance made by the AO on the basis of the belated deposit of PF and ESI to the respective government account after the stipulated due date as per the Income-tax Act vis-a-vis PF Act.

The Bench noted that a court wishes for the dispute between the parties and the reason could engage on the decision on the point and engage the decision on the fact of law which might bear on the ultimate consequence of the case.

When the provision is been interpreted by the court then the same decides as to what the definition and effect of the words utlised via legislature and the same is a declaration for the rule, the Bench stated.

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The Bench clarified that the judgment claims as to what the legislature had said on promulgation of the law, and the declaration is this was the law, this is the law, and in this way, the provision shall be construed.

ITAT agreed with the IT authority’s decision and dismissed the taxpayer’s petition.