Facts of the Case

The appeal was filed by the Revenue against the order of the Income Tax Appellate Tribunal (ITAT), which had allowed deduction to the assessee in respect of employees’ contribution towards Provident Fund (PF) and insurance.

The dispute pertained to delayed deposits of employees’ contribution, particularly an amount of ₹1,56,12,404 deposited on 16.08.2018, whereas the due date was 15.08.2018, which was a National Holiday.

The Tribunal had relied on earlier judicial precedents and allowed the deduction on the ground that the amounts were deposited before the due date of filing the return under Section 139(1) of the Income Tax Act.

Issues Involved

  1. Whether employees’ contribution to PF deposited beyond the due date prescribed under the relevant statute is allowable as deduction if deposited before filing the return under Section 139(1).
  2. Whether deposit made on the next working day (16.08.2018) is deemed to be within due date when the original due date (15.08.2018) falls on a National Holiday 

Petitioner’s (Revenue’s) Arguments

  • The Revenue relied on the Supreme Court judgment in Checkmate Services (P.) Ltd. vs. CIT, contending that employees’ contribution must be deposited within the due date prescribed under the respective statute, failing which deduction is not allowable.
  • It was argued that since the deposit was made on 16.08.2018 instead of 15.08.2018, the Assessing Officer rightly disallowed the deduction.
  • The Revenue further contended that the Tribunal’s reliance on earlier judgments was incorrect in light of the Supreme Court ruling.

Respondent’s (Assessee’s) Arguments

  • The assessee submitted that the due date (15.08.2018) was a National Holiday, and therefore, the deposit made on the next working day (16.08.2018) should be treated as timely.
  • Reliance was placed on Section 10 of the General Clauses Act, 1897, which allows compliance on the next working day when the due date falls on a holiday.
  • It was also argued that necessary steps for deposit were initiated on 14.08.2018.

Court’s Findings / Order

  • The Court acknowledged the binding nature of the Supreme Court ruling in Checkmate Services (P.) Ltd., thereby holding that employees’ contribution must be deposited within the statutory due date and not merely before filing of return.
  • Accordingly, the first issue was decided in favour of the Revenue.
  • However, on the second issue, the Court held:
    • Since the due date (15.08.2018) was a National Holiday, the assessee could validly deposit the amount on the next working day (16.08.2018).
    • Section 10 of the General Clauses Act applies in such circumstances.
    • Therefore, the deposit made on 16.08.2018 is deemed to be within time.
  • Consequently, the second issue was decided in favour of the assessee, and the appeal was disposed of accordingly.

Important Clarification

  • The judgment clarifies that while the Supreme Court decision in Checkmate Services strictly governs delayed deposits, exception applies where the due date falls on a holiday.
  • In such cases, Section 10 of the General Clauses Act overrides procedural rigidity, allowing compliance on the next working day.
  • This creates a crucial distinction between:
    • Actual delay (not allowable), and
    • Deemed compliance due to holiday (allowable).

Sections Involved

  • Section 36(1)(va) – Employees’ Contribution to PF
  • Section 139(1) – Due date for filing return
  • Section 143(1) – Processing of return
  • Section 10 of the General Clauses Act, 1897

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/60805092023ITA122023_15031

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