PF, ESI Contributions Paid Before Return Due Date Allowed as Deduction Under Section 43B; Revenue Appeal Dismissed

HC dismissed the Revenue's appeal regarding disallowance of PF and ESI contributions deposited after the statutory due dates but before filing the return. Relying on SC precedent interpreting Section 43B and holding the Finance Act 2003 as curative and retrospective from 1.4.1988, HC held that such payments are allowable deductions. Since the Tribunal's order aligned with the SC view, no substantial question of law arose for consideration. The Tribunal's allowance of the employer's PF and ESI deductions was upheld, and the Revenue's appeal was rejected.

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Issues: Whether the Income Tax Appellate Tribunal was correct in law in allowing deduction of employees' contribution to PF and ESI (Rs. 49,62,671) disallowed by the Assessing Officer on the ground that payments were made beyond due dates and therefore not allowable under Section 36(va) and liable to be treated as income under Section 2(24)(x) of the Income-tax Act, 1961.

Analysis: The issue was examined in the context of subsequent pronouncements of the Hon'ble Supreme Court, notably decisions determining the effect of the Finance Act, 2003 on the proviso to Section 43B of the Income-tax Act, 1961. The Supreme Court held that the amendment effected by the Finance Act, 2003 operates retrospectively from 1.4.1988 and is curative in nature, thereby impacting the legal position governing allowability of payments and the operation of provisos inserted earlier. Given that the Supreme Court's rulings settle the operative legal position relevant to the factual matrix before the Tribunal, the Tribunal's allowance of the deduction aligns with the higher court's interpretation of the retrospective effect of the legislative amendment.

Conclusion: In favour of Assessee.

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