PF and ESI employee contributions paid before return-filing due date remained deductible under the Income-tax Act.

Employees' contribution to provident fund and ESI paid on or before the due date for filing the return under section 139(1) was treated as allowable deduction. The Court applied its earlier view that amounts deducted from salary become income under section 2(24)(x), but deduction is available when the payment is made within the return-filing due date. It also held that the benefit is not restricted by drawing a distinction between employer's and employees' contributions for this purpose, and that section 43B(b) does not alter that result on these facts.

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Issues: Whether employees' contribution to provident fund and ESI, paid on or before the due date for filing the return under section 139(1) of the Income-tax Act, 1961, is allowable as a deduction and whether section 43B(b) applies to such contribution instead of sections 36(1)(va) and 2(24)(x) of the Income-tax Act, 1961.

Analysis: The Court followed its earlier decision holding that, under the provident fund scheme, the employer initially pays both the employer's contribution and the employees' contribution and is entitled to recover the employees' share from salary. In that setting, the employees' contribution deducted by the employer is treated as income under section 2(24)(x) of the Income-tax Act, 1961, but deduction is available if the amount is paid before the due date prescribed under section 139(1). The Court further held that the legislative benefit extends without making a distinction between employer's and employees' contributions for this purpose.

Conclusion: The issue was answered in favour of the assessee and against the Revenue. The deduction was held allowable where payment was made before the due date for filing the return.

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