2013 (11) TMI 971 - HC - Income Tax

High Court confirms deduction of employer's Provident Fund contributions under Income Tax Act

The High Court upheld the appellant's entitlement to claim benefits under section 43B of the Income Tax Act, allowing for the deduction of employer's ... PF and ESIC – Belated payments – Held that:- Following Commissioner of Income Tax Vs. Alom Extrusions Ltd, reported in [2009 (11) TMI 27 - SUPREME COURT] - The assessee was entitled to the exemption as the amount was paid during grace period permissible / available under the Provident Fund Act - The asseessee shall be entitled to exemption / deduction under section 43 to the extent payment was made within the grace period – Amendment to section 43B apply retrospectively with effect from 1st April, 1988 - Decided against Revenue. Issues:1. Interpretation of section 43B of the Income Tax Act regarding belated payment of PF and ESIC.2. Applicability of an amendment in section 43B of the Income Tax Act retrospectively.3. Entitlement to deduction under section 43B for employer's contribution to Provident Fund.Analysis:1. The main issue in this case revolved around the interpretation of section 43B of the Income Tax Act concerning the disallowance of belated payment of Provident Fund (PF) and Employee State Insurance Corporation (ESIC) contributions. The dispute arose from the amendment brought into force in the Financial Year 2004, which the appellant argued should be applied retrospectively from 01.04.1988. The appellant contended that the specific provision in the form of Proviso to Section 43B of the Act should have been considered in this context.2. The appellant's argument was based on the fact that the employer's contribution to the Provident Fund was deposited within the grace period permitted under the relevant Provident Fund Act. Additionally, the appellant cited the second amendment in section 43B of the Act brought into force by the Financial Act, 2003, which allowed for deduction if the employer's contribution was deposited before the due date of filing the return. However, the Assessing Officer did not accept these arguments, leading to the addition of the employer's contribution amount to the appellant's income for that assessment year.3. The CIT(A) later deleted the addition made by the Assessing Officer, ruling in favor of the appellant's entitlement to claim benefits under section 43B of the Act. Subsequently, the ITAT partly allowed the appeal, stating that the appellant was entitled to exemption as the amount was paid within the grace period permissible under the Provident Fund Act. The High Court upheld the decision of the ITAT, emphasizing that if the employer contributions were deposited within the grace period, the appellant was entitled to deduction under section 43B. The Court found no error in the ITAT's decision and dismissed the appeal, stating that no substantial question of law arose in the case.In conclusion, the High Court's judgment clarified the interpretation of section 43B of the Income Tax Act, affirmed the applicability of relevant amendments, and confirmed the appellant's entitlement to deduction for employer's contributions to the Provident Fund deposited within the grace period.