PF/ESI Due Date and Month of Salary Disbursement: ITAT Delhi Restores Issue for Verification

Background of the PF and ESI disallowance

Benson Movers Pvt. Ltd. challenged an adjustment of ₹1,18,48,520 made while processing its return under Section 143(1). The adjustment related to employees’ contributions to the Employees’ Provident Fund and Employees’ State Insurance.

The Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, confirmed the adjustment by an order dated 20 October 2022. The company then appealed before the Delhi ITAT.

Among other grounds, the assessee argued that the authorities had computed the delay by treating the month to which salary related as the relevant month. According to the company, the correct reference point should be the month in which salary or wages were actually disbursed because employees’ contributions are recovered when salary is paid.

Assessee’s argument before the Tribunal

The company submitted that, for calculating the period of delay, the relevant month should be the month of actual salary disbursement and not merely the calendar month for which salary was payable.

It relied on Kanoi Paper & Industries Ltd. v. ACIT and several Delhi Tribunal decisions, including Sentinel Consultants Pvt. Ltd., Vigilant Security Placement & Detective Services Pvt. Ltd., Dignus Services, B.L. Kashyap & Sons Ltd. and VVDN Technologies Pvt. Ltd.

On that basis, the assessee requested that the matter be sent back to the Assessing Officer to verify the salary-payment dates and the corresponding PF and ESI deposit dates.

Effect of the Supreme Court’s Checkmate Services ruling

The broader legal position on delayed employees’ contributions had already been settled by the Supreme Court in Checkmate Services Pvt. Ltd. v. CIT. Employees’ contributions are governed by Section 36(1)(va) and must satisfy the due date prescribed under the relevant welfare law. Payment merely before the income-tax-return due date does not, by itself, cure a delay beyond the statutory PF or ESI due date.

The Tribunal’s discussion in Benson Movers did not dilute Checkmate Services. The narrower question was how the statutory due date should be calculated on the facts, particularly whether the month of actual salary disbursement had been examined before treating the deposit as late.

The general deduction provision in Section 37(1) also could not independently rescue an amount specifically governed by Section 36(1)(va).

Why the salary-disbursement month mattered

The assessee’s case was that an obligation to deposit an amount recovered as employees’ contribution arises with actual salary disbursement. Therefore, where salary for one month is paid during the following month, the deposit timeline should be examined with reference to the month of payment.

The earlier Tribunal reasoning relied upon by Benson Movers observed that accrual of a salary liability, without actual disbursement, may not by itself fasten the obligation to deposit employees’ contributions under the labour laws. This factual aspect had not been examined by the Assessing Officer or the CIT(A).

A proper verification required a month-wise comparison of the salary disbursement date, deduction or recovery of employees’ contribution, applicable statutory due date and actual challan-payment date.

Delhi ITAT’s ruling

The Tribunal followed the approach adopted in the earlier coordinate-bench cases. It restored the issue to the Assessing Officer to determine the correct due date for remittance after examining the factual matrix and the observations in Kanoi Paper & Industries Ltd.

The Assessing Officer was directed to provide an adequate opportunity of hearing. The assessee was permitted to submit all necessary information supporting its calculation of the relevant due dates.

The appeal was allowed for statistical purposes. This expression is important: the Tribunal did not finally delete the complete ₹1.18 crore disallowance or conclusively hold that every employer may calculate PF and ESI deadlines from a later salary-payment month.

The ruling is a remand, not a blanket extension of PF/ESI deadlines

The headline proposition that the PF/ESI due date ‘depends on the month of salary disbursement’ must be read with the actual outcome. The ITAT held that this plea required examination by the Assessing Officer; it did not express a final opinion on the merits for every disputed month.

Employers should not use this decision as authority to postpone statutory deposits as a routine practice. The applicable EPF and ESI provisions, wage-payment facts, payroll records and current portal requirements must be checked for each contribution period.

Where a return adjustment has treated contributions as delayed without considering actual salary-payment dates, Benson Movers supports requesting a proper factual verification.

Documents required for month-wise verification

• Monthly salary register showing the period to which salary relates
• Bank statements or payment records showing the actual salary-disbursement date
• Employee-wise PF and ESI deduction workings
• EPF electronic challan-cum-return and ESI contribution records
• Challans and bank proof showing the actual contribution-payment date
• Tax-audit report disclosure and the reconciliation used for the income-tax return
• A month-wise table showing salary month, payment month, statutory due date and deposit date

Practical implications for employers

Payroll teams should avoid recording only the salary month and challan date. They should also preserve the actual wage-payment date because that date may become material when the calculation of default is disputed.

Before filing the income-tax return, the PF and ESI ledgers should be reconciled with payroll records and challans. Any contribution that is late under the applicable welfare law may be disallowable under Section 36(1)(va), even if it was deposited before the return-filing due date.

If an adjustment is proposed through return processing, the employer should respond with the month-wise factual matrix rather than relying only on a general legal submission.

Key takeaways from Benson Movers

• The appeal concerned a ₹1,18,48,520 adjustment for employees’ PF and ESI contributions.
• The Supreme Court’s Checkmate Services rule on statutory due dates remains applicable.
• The separate factual question is whether the due date was calculated using the correct salary-disbursement month.
• The Delhi ITAT restored that question to the Assessing Officer instead of deciding it conclusively.
• The employer must provide reliable payroll and payment evidence during fresh proceedings.
• The ruling should not be presented as a universal extension of EPF or ESI deadlines.

Conclusion

Benson Movers Pvt. Ltd. v. ACIT is valuable because it distinguishes two issues: the strict legal consequence of missing the statutory PF/ESI due date, and the factual method used to identify that due date. The Delhi ITAT required the Assessing Officer to examine the month of actual salary disbursement and the supporting records before deciding whether the contributions were late.

For employers, the practical lesson is clear: deposit contributions on time, maintain precise month-wise payroll evidence and do not assume that payment before the income-tax-return due date is sufficient.