Employer allowed to deduct late employee ESI and PF contributions under retrospective Section 43B amendment from April 1, 1988

HC held that, following the SC's determination that the Finance Act, 2003 amendment to Section 43B was curative and retrospective to 1 April 1988, employer could deduct employees' delayed contributions to ESI and PF by invoking the amended provision. The court allowed deletion of amounts representing employee contributions paid after the due date under Section 43B, ruling in favor of the assessee.

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Issues:
Whether the deletion of the addition by the Assessing Officer on account of Employees' Contribution to ESI and PF by invoking the provision of Section 36(1)(va) read with Section 2(24)(x) of the Act was correct or not.

Analysis:
The High Court of Calcutta heard an appeal by the Revenue against an order of the Income Tax Appellate Tribunal related to the assessment year 2006-07. The main issue was the correctness of the deletion of the addition by the Assessing Officer concerning Employees' Contribution to ESI and PF under Section 36(1)(va) and Section 2(24)(x) of the Act. The Tribunal, following the Supreme Court decision in Commissioner of Income Tax vs. Alom Extrusion Ltd., held that the deletion was justified, leading to the Revenue's appeal.

The High Court noted that the Supreme Court in the case of Commissioner of Income Tax vs. Alom Extrusion Ltd. had held that the amendment to the second proviso to Sec 43(B) of the Income Tax Act introduced by the Finance Act, 2003, was curative and required retrospective application from 1st April, 1988. Accordingly, the deletion of the amount paid by the Employees' Contribution beyond the due date was deductible by invoking the amended provisions of Section 43(B) of the Act. As a result, the Court found no substantial question of law involved in the appeal and dismissed it.

In conclusion, the High Court upheld the Tribunal's decision based on the Supreme Court's interpretation of the relevant provisions of the Income Tax Act. The retrospective application of the amendment to Section 43(B) allowed for the deduction of the Employees' Contribution, leading to the dismissal of the Revenue's appeal.

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