2014 (5) TMI 222 - HC - Income Tax

Delayed PF and EPF Contributions Paid Before Tax Return Filing Allowed as Deductions Under Sections 36(1)(va) and 43B

Commissioner of Income Tax Versus M/s. State Bank of Bikaner & Jaipur and Jaipur Vidyut Vitaran Nigam Ltd.

The HC held that employer or employee contributions to PF, EPF, CPF, or GPF paid after the prescribed due date but before filing the income tax return ... Addition u/s 36(1)(va) – PF deposited beyond the time prescribed – Scope of section 43B of the Act – Permission for delayed payment as to Employer’s contribution OR employee’s contribution – Held that:- Relying upon Allied Motors (P) Ltd. vs. CIT [1997 (3) TMI 9 - SUPREME COURT] - the legislature brought in the statute Section 43(B)(b) to curb the activities of such tax payers who did not discharge their statutory liability of payment of dues - to put a check on the claims/deductions having been made, the provision was brought in to curb the activities - the explanation appended to Section 36(1)(va) of the Act further envisage that the amount actually paid by the assessee on or before the due date admissible at the time of submitting return of the income u/s 139 of the Act in respect of the previous year can be claimed by the assessee for deduction out of their gross total income - Sec.43B starts with a notwithstanding clause & would thus override Sec.36(1) (va) and if read in isolation Sec. 43B would become obsolete. Till the provision was brought in as the due amounts on one pretext or the other were not being deposited by the assessees though substantial benefits had been obtained by them in the shape of the amount having been claimed as a deduction but the amounts were not deposited - the amounts can be paid later on subject to payment of interest and other consequences and to get benefit under the Income Tax Act, an assessee ought to have actually deposited the entire amount as also to adduce evidence regarding such deposit on or before the return of income u/s 139(1) of the Act – thus, where the PF and/or EPF, CPF, GPF etc., if paid after the due date under respective Act but before filing of the return of income u/s 139(1), cannot be disallowed u/s 43B or u/s 36(1)(va) of the IT Act – Decided against Revenue. Issues Involved:1. Justification of ITAT in deleting the addition made on account of depositing the PF payment beyond the prescribed time.2. Applicability of Section 36(1)(va) and Section 43B of the Income Tax Act regarding delayed payment of employees' contribution to PF.Detailed Analysis:Issue 1: Justification of ITAT in Deleting the AdditionThe primary issue revolves around whether the ITAT was justified in deleting the addition made by the Assessing Officer (AO) for the delayed deposit of Provident Fund (PF) payments. The AO disallowed the amounts on the grounds that the payments were made beyond the prescribed time limits under the relevant Acts, invoking Section 43B of the Income Tax Act. The respondent-assessees argued that the payments were made before the due date of filing the return of income, thus making the claim allowable under Section 43B. The CIT(A) and ITAT both agreed with the respondent-assessees, citing the judgment of the Hon'ble Apex Court in CIT Vs. Vinay Cement Ltd., which supports the view that payments made before the filing of the return should be allowed.Issue 2: Applicability of Section 36(1)(va) and Section 43BThe court examined the interplay between Section 36(1)(va) and Section 43B. Section 36(1)(va) stipulates that the employees' contribution to PF must be credited to the employees' account in the relevant fund on or before the due date. Section 43B, however, permits deductions if the payment is made before the due date for filing the return of income under Section 139(1). The court noted that Section 43B starts with a notwithstanding clause, which means it overrides Section 36(1)(va). The court also referred to several judgments, including Allied Motors (P) Ltd. vs. CIT and Commissioner of Income Tax Vs. M/s. Alom Extrusions Limited, which held that the amendments to Section 43B are curative and retrospective in nature, thus applicable from 01/04/1988.Conclusion:The court concluded that the PF and other similar contributions, if paid after the due date under the respective Acts but before the filing of the return of income under Section 139(1), cannot be disallowed under Section 43B or Section 36(1)(va). The substantial question of law was answered against the appellant-revenue and in favor of the assessee. Consequently, the appeals were dismissed, affirming that the ITAT was justified in deleting the additions made by the AO for delayed PF payments.