Checkmate Services: the rule on employee PF that 80% of practices still get wrong
The Supreme Court ruled in 2022 that employee PF contributions must be deposited by the labour-law due date - not the ITR due date. Three years on, we still see this disallowed in scrutiny notices.
Checkmate Services - three years on, still the most disallowed deduction
The Supreme Court's October 2022 ruling in Checkmate Services (P) Ltd v. CIT is short, clear, and binding. Yet three years on, the employee PF contribution disallowance under Section 36(1)(va) remains the most common adverse adjustment we see in faceless assessment notices.
What the SC held
> Employee contributions to PF / ESI / superannuation funds must be deposited by the due date under the relevant labour law (typically the 15th of the next month) to be deductible.
>
> Section 43B's grace period (deposit before ITR due date) does not save them.
Why this still trips practices up
Three reasons:
- Employer contributions get the 43B grace. Section 43B(b) gives a grace period for the employer's share. Many accountants apply the same logic to the employee's share - wrongly.
- The labour-law due date is the 15th, not the end of the month. Payroll systems that batch-process at month-end miss this regularly.
- Pre-Checkmate cases gave the grace. Several High Court decisions before October 2022 allowed the deduction. ITAT bench composition still occasionally produces inconsistent orders that practitioners then cite.
What to do
For FY 2025-26 onwards:
- Calendar reminder for the 15th of every month - both PF and ESI.
- System rule in your payroll software: if PF is processed after the 15th, flag the entry for the assessee's attention with a "non-deductible" warning.
- Reconciliation between the PF ECR upload date and the 36(1)(va) deduction claimed in computation.
What to do for past years
If you have FY 2022-23, 2023-24, or 2024-25 returns where the employee PF was deposited late but you claimed the deduction:
- Open assessments: be ready for adjustment. Don't litigate Checkmate - it's settled.
- Closed assessments: file an updated return (ITR-U) under Section 139(8A) and pay the additional tax. The 25%-or-50% additional tax is far cheaper than the eventual reassessment + interest + penalty exposure.
Cross-references
- Statute: Section 43B
- Case: Checkmate Services (P) Ltd v. CIT [2022] 448 ITR 518 (SC)
- Earlier case: CIT v. Alom Extrusions Ltd [2009] 319 ITR 306 (SC) - the predecessor employer-only case
- ThynkTax tool: Section 43B compliance check
- Reviewed by CA Anand Subramanian, Head of TDS, Payroll & ESI/PF