Checkmate Services Pvt ltd Vs CIT- I (Supreme Court)
Date -12th October 2022
Sub- Deduction u/s 36(1)(va) in respect of delayed deposit of amount collected towards employees’ contribution to PF can not be claimed when deposited within the due date of filing of return even when read with Section 43B of the Income-tax Act,1961.

This important decision was decided in favour of the department on 12th October, 2022 when the Supreme Court was seized of a situation where Kerala and Gujarat high court were in favour of the department whereas other high court including calcutta high court decided in favour of the assessee. The court noted that is apparent is that the scheme of the Act is such that Sections 28 to 38 deal with different kinds of deductions, whereas Sections 40 to 43B spell out special provisions, laying out the mechanism for assessments and expressly prescribing conditions for disallowances. The scheme of the provisions relating to deductions, such as Sections 32- 37, on the other hand, deal primarily with business, commercial or professional expenditure, under various heads (including depreciation). Each of these deductions, has its contours, depending upon the expressions used, and the conditions that are to be met. It is therefore necessary to bear in mind that specific enumeration of deductions, dependent upon fulfilment of particular conditions, would qualify as allowable deductions: failure by the assessee to comply with those conditions, would render the claim vulnerable to rejection.

Finally it was noted that the essential character of an employees’ contribution, i.e., that it is part of the employees’ income, held in trust by the employer is underlined by the condition that it has to be deposited on or before the due date. The court pointed out to the finer distinction between Section 43B and the non-obstante clause in that section by observing that the said clause could not be applied to the deemed income u/s 36(1)(va) which was basically a money held in trust.

This judgement thus sets at rest, the entire controversy ,though it will now lead to several cases of revision, reassessment as probably there will be notices u/s 148 /263 in respect of already concluded assessments.

Ramesh Patodia
14-10-2022