PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:-

1. This assessee’s appeal for A.Y. 2019-20, arises from order of the National Faceless Appeal Centre (NFAC), Delhi dated 16-09-2021, in proceedings under section 250 of the Income Tax Act, 1961; in short “the Act”.

2. The assessee has taken the following grounds of appeal:-

3. The brief facts of the case are that the assessee is a private limited company and is engaged in software development and data processing. The income tax return was electronically filed on 17-10-2019, showing total income of ` 43,72,550/-. Thereafter, CPC Bangalore processed the return and an intimation under section 143 (1) of the Act was passed on 01-05-2020. The income has been assessed at ` 49,31,690/- by making disallowance of claim of ` 5,23,920/- in respect of employee's contribution towards provident fund and ` 35,188/- in respect of ESIC, and the total disallowance was ` 5,59,108/-. In passing the order, the AO did not allow the claim under section 36(1)(va) of the Act of ` 5,23,920/- being the employee's contribution under EPF and ` 35,188/- on account of ESIC which was paid beyond the period prescribed under the respective Acts.

4. In appeal, Ld. CIT(Appeals) dismissed assessee's appeal holding that the Finance Act 2021 has clarified this aspect related to the operation of the section. The Ld. CIT(Appeals) made the following observations while dismissing the assessee's appeal:

"8.4.15 The Finance Act 2021 has cleared the aspect related to the operation of these clauses also. The wordings of the captioned Explanation clearly assert that the clarification will apply to earlier Assessment years also as the newly added Explanation 2 below Section 36 clearly uses the word that "it is hereby clarified that the provisions of section 43B shall not apply and shall be deemed never to have been applied for the purposes of determining the "due date" under this clause. Similarly, in the Explanation 5 inserted below 43B also, the words used are "it is hereby clarified that the provisions of this section shall not apply and shall be deemed never to have been applied...."

8.4.16. From the wordings above, it is also clear that the above clarificatory amendment brought in by the Finance Act, 2021 applies to the issue in the instant appeal also. While in the Explanatory Memorandum to the Finance Bill, it was stated that "these amendments will take effect from 1st April, 2021 and will accordingly apply to the assessment year 2021-22 and subsequent assessment years", but the said lines are not there in the Finance Act, 2021, which has been finally passed by the Parliament and received Presidential Assent."

5. The assessee is in appeal before us against the aforesaid additions confirmed by Ld. CIT(Appeals). Before us the counsel of the assessee agreed that now this position has been clarified against the assessee by the Supreme Court in the case of Checkmate Services (P.) Ltd. [2022] 143 taxmann.com 178 (SC) and accordingly, the issue may be decided in light of the above Supreme Court decision.

6. We observe that the position on this issue has been clarified by the Hon'ble Supreme Court in the case of Checkmate Services (P.) Ltd. [2022] 143 taxmann.com 178 (SC) which held that for assessment years prior to 2021-22, non obstinate clause under section 43B could not apply in case of amounts which were held in trust as was case of employee's contribution which were deducted from their income and was held in trust by assessee-employer as per section 2(24)(x), thus, said clause would not absolve assessee-employer from its liability to deposit employee's contribution on or before due date as a condition for deduction. The Hon'ble Supreme Court observed that there is a marked difference between nature and character of assessee-employer's contribution and amounts retained by assessee from out of employee's income by way of deduction wherein one is liability to be paid by employer and second is deemed income as per section 2(24)(x) which is held in trust by assessee-employer, thus, said marked difference was to be borne while interpreting obligation of assessee-employer under section 43B of the Act. The Hon'ble Supreme held that the non obstinate clause under section 43B could not apply in case of amounts which were held in trust as was case of employee's contribution which were deducted from their income and was not part assessee-employer's income, thus, said clause would not absolve assessee-employer from its liability to deposit employee's contribution on or before due date as a condition for deduction. Again the Supreme Court in the case of Harrisons Malayalam Ltd. [2022] 145 taxmann.com 608 (SC), dismissed the SLP of the Assessee against order of High Court that where assessee-company failed to pay employees' contribution towards EPF and ESI within due date prescribed in respective Acts, deduction under section 36(1)(va) was not allowable. Recently in the case of Ms. Nalina Dyave Gowda [2023] 146 taxmann.com 420 (Bangalore - Trib.) the assessee during, financial year 2018-19 (assessment year 2019-20) made payment of employees' contribution to ESI and PF beyond due date specified under relevant Act and claimed deduction of same under section 36(1)(va). The Assessing Officer made disallowance of employees' contribution to ESI and PF while electronically processing return of income under section 143(1)(a) of the Act. The ITAT held that disallowance under section 143(1)(a) was valid in view of Supreme Court's decision in case of Checkmate Services (P.) Ltd. v. CIT [2022] 143 taxmann.com 178 and the assessee will not be entitled to deduction of belated payment of ESI and PF of employees' share of contribution as per provisions of section 36(1)(va) of the Act.

6.1. In view of the above observations respectfully following the decision of the Honourable Supreme Court in the case of Checkmate Services Private Ltd. supra and Harrisons Malayalam Ltd. supra, we hereby dismiss the assessee's appeal.

7. In the result, the appeal of the assessee is dismissed.