Employee contributions to PF and ESIC must be deposited by the employer within the due dates prescribed in the respective welfare statutes; failure to do so results in the denial of deduction under Section 36(1)(va) of the Income Tax Act, regardless of payment before the return filing date.

आदेश / ORDER

PER PARTHA SARATHI CHAUDHURY, JM:

The present appeal preferred by the assessee emanates from the order of the Ld.CIT(Appeals)-3, dated 12.09.2025 for the assessment year 2019-20 as per the grounds of appeal on record.

2. The relevant facts in this case are that the return was processed u/s.143(1) of the Income Tax Act, 1961 (for short ‘the Act’) denying deduction claim on account of employee’s share of contribution towards Provident fund and Employee State Insurance Scheme (ESIC) amounting to Rs.37,78,002/- u/s. 36(1)(va) of the Act. The assessee further filed an application for rectification u/s. 154 of the Act on 16.07.2020 mentioning that even though employee’s contribution towards PF & ESIC was paid beyond the specified time limit provided in the respective Acts but it was paid before the due date of filing of return of income.

3. In this regard, the Ld. CIT(Appeals) placing reliance on the judgment of the Hon’ble Apex Court in the case of Checkmate Services (P) Ltd. Vs. CIT (2022) 143 taxman.com 178 (SC) has held and observed as follows:

“3.1.1 I have gone through the grounds of appeal and statement of facts filed by the appellant submission furnished by the appellant before me and facts and circumstances of the case. In this case, the CPC has disallowed the contributions of delayed payment of EPF and ESIC u/s. 36(1)(va) of the Act, 1961. The appellant in the submission filed before me has submitted that contributions of EPF and ESIC paid after due date under respective acts but before due date of filing of return, the disallowances could not be made. The appellant in support of its claim has furnished various judicial pronouncements. I find the matter of late deposit of employee's share of contribution to PF and ESIC u/s.2(24)(x) r.w.s.36(1)(va) and 43B of the Act has been finally settled once the judgement of Hon'ble Apex court has come out in the case of M/s Checkmate Services Pvt. Ltd on 12.10.2022 where at para 54 of the order it is held that —

“………Nevertheless, the assessees are given some leeway in that as long as deposits are made beyond the due date, but before the date of filing the return, the deduction is allowed. That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees' contributions- which are deducted from their income. They are not part of the assessee employer's income, nor are they heads of deduction per se in the form of statutory pay out. They are others' income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare 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, it is an essential condition for the deduction that such amounts are deposited on or before the due date……….”

The ratio of the judgement of the Hon'ble Apex Court is applicable in the case of the appellant. Accordingly the grounds of appeal are dismissed.”

4. We observe that the Hon’ble Apex Court has held that the employee’s contributions if not deposited in respective accounts of PF & ESIC etc. within the due date prescribed in the respective statutes, in such scenario, the said amount deposited at later dates amounts to deemed income in the hands of the employer. That on similar facts and circumstances, ITAT, Division Bench, Pune in the case of Kohinoor Developments Corporation, Vs. The Asstt. Director of Income-tax, CPC, Bengaluru, ITA Nos.718 & 719/PUN/2021: A.Y. 2018-19 & 2019-20, dated 07.11.2022 has dealt w