Court finds ITAT justified in sustaining CPC’s 143(1) adjustment, but allows deduction where due date fell on national holiday
Meetu Kumari | Sep 28, 2025 |
HC Upholds CPC Adjustment on PF/ESI but Allows National-Holiday Deposit Exception
The appellant filed its return for AY 2019-20 declaring a total income of Rs. 15,78,68,550/-. CPC (the AO) processed the return and, by intimation dated 28.05.2020 under section 143(1), made an adjustment of Rs. 4,14,22,293/- by disallowing deductions claimed for employees’ provident fund, ESI and related items on the ground that contributions had been deposited after the statutory due dates under the relevant welfare enactments.
The appellant protested and pursued appeals before the CIT(A) and ITAT; the ITAT, relying on the Supreme Court’s decision in Checkmate Services (P) Ltd., restored the CPC adjustment, and aggrieved, the appellant took the matter to the High Court.
Issues Raised before HC:
(i) Whether the ITAT was right in upholding the CPC / 143(1)(a) adjustment of Rs. 4,14,22,293/- for AY 2019-20; and
(ii) whether amounts of Rs. 44,28,453/- (PF) and Rs. 72,151/- (ESI) deposited on 16.08.2018 should be allowed because the statutory due date, 15.08.2018, fell on a national holiday.
HC’s Ruling: The High Court held that the ITAT was justified in relying on Checkmate Services (P) Ltd.. The Court accepted the legal distinction between employer-contributions and employee-contributions and agreed that employee contributions are deemed income of the employer unless credited to employees’ accounts on or before the statutory due date. The Court treated Explanation 5 to Section 43B as clarificatory of the legal position and held that Checkmate correctly interpreted the statute so as to permit the CPC adjustment under section 143(1)(a) where the delay in depositing employees’ contributions was apparent from the return/audit record. For these reasons, the first question was answered against the appellant.
On the second question (national holiday), the Court followed its earlier coordinate-bench reasoning in Pepsico India Holdings and held that where a statutory due date fell on a national holiday (15.08.2018), a deposit made on the next working day (16.08.2018) is allowable for deduction. The Court therefore answered the second question in favour of the appellant.
The appeal was disposed of accordingly.
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