Employees' provident fund contributions are deductible if paid before the return-filing deadline, despite a later provident fund due date.

The Karnataka HC examined whether section 43B of the Income-tax Act, 1961 covers employees' contribution to provident fund when paid after the provident fund due date but before the section 139(1) return-filing deadline. It read the provision with the Employees' Provident Funds Scheme, 1952 and section 2(24)(x), treating the employee's contribution deducted from salary as income of the employer and focusing on timely actual payment. The amendment to section 43B was treated as curative, and no material distinction was drawn between employer's and employee's contributions for deduction purposes when payment is made within the return-filing time limit. The disallowance was held unsustainable.

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Issues: Whether the benefit of section 43B of the Income-tax Act, 1961 extends to employees' contribution to provident fund when the amount is remitted before the due date for filing the return under section 139(1) of the Income-tax Act, 1961 though after the due date under the relevant provident fund law.

Analysis: The question turned on the meaning of the expression "any sum payable by the assessee as an employer by way of contribution to any provident fund" in section 43B of the Income-tax Act, 1961. The provisions of the Employees' Provident Funds Scheme, 1952 were examined, particularly the provisions dealing with contribution, payment of contribution, and the employer's share, to show that the employer is required in the first instance to pay both the employer's contribution and the member's contribution, and may thereafter recover the employee's share. The employee's contribution deducted from salary is treated as income of the employer under section 2(24)(x) of the Income-tax Act, 1961, and deduction is available if payment is made within the statutory time prescribed under section 139(1) of the Income-tax Act, 1961. The amendment to section 43B was treated as curative, and no distinction was found in the provision between employer's contribution and employee's contribution for the purpose of deduction when payment is made within the return-filing due date.

Conclusion: The benefit of section 43B is available even in respect of employees' contribution to provident fund if the amount is paid before the due date under section 139(1) of the Income-tax Act, 1961; the disallowance was therefore not sustainable.

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