2019 (7) TMI 1877 - AT - Income Tax

Tribunal allows assessee's claim on provident fund contributions, emphasizing timely deposit.

The tribunal set aside the CIT(A) decision and directed the Assessing Officer to allow the assessee's claim regarding the employees' contribution to the ... Allowability of employees' contribution to provident fund where remitted before due date of filing return - interpretation of section 36(1)(va) read with section 43B regarding employees' contribution - no distinction between employer and employee contribution under Provident Fund Act - extension of time for deduction till due date of furnishing return of income - precedential value of coordinate bench decisions in revenue appealsAllowability of employees' contribution to provident fund where remitted before due date of filing return - interpretation of section 36(1)(va) read with section 43B regarding employees' contribution - no distinction between employer and employee contribution under Provident Fund Act - Employees' contribution to provident fund remitted belatedly but before the due date for filing the income-tax return is allowable as deduction. - HELD THAT: - The Tribunal examined whether employees' share of provident fund, paid after the due date prescribed under the Provident Fund Act but before the due date for filing the return under section 139(1), could be disallowed under section 36(1)(va) read with section 43B. Having regard to the scheme and definitions in the Provident Fund Act and its Scheme (where the employer initially deposits the total contribution and may recover the employee's share), the Tribunal found no statutory distinction between employer and employee contributions. Section 43B grants an extension permitting payment up to the due date for furnishing the return; consequently, where the total contribution (inclusive of employees' share) is deposited on or before the return-filing due date, deduction cannot be denied. The Tribunal relied on coordinate-bench and High Court decisions reaching a similar conclusion and applied the Supreme Court principle that, where reasonable constructions favouring the assessee exist, they should be adopted. Applying that reasoning to the facts, the Tribunal set aside the lower authority's disallowance and directed the Assessing Officer to allow the claim. [Paras 7, 8]The assessee's claim for deduction of employees' provident fund contribution deposited before the due date of filing the return is allowed; the assessing officer is directed to permit the claim.Final Conclusion: Appeal allowed; the addition disallowing employees' provident fund contribution is set aside and the Assessing Officer is directed to allow the claim for Assessment Year 2015-16. Issues Involved:Whether the contribution received from employees paid before the due date of filing the return is allowable or not.Detailed Analysis:Issue 1: Contribution Received from EmployeesThe case involved an individual deriving income from labor contracts, who filed a return of income declaring a total income. The Assessing Officer disallowed the employee's contribution to ESI & EPF as it was remitted belatedly, treating it as deemed income under section 2(24)(x) r.w.s. 36(1)(va) of the Act. The appellant contended that the contribution was paid before the due date of filing the return. The CIT(A) dismissed the appeal, citing judicial precedents. The appellant argued that the issue was covered by a decision of the tribunal in another case. The Departmental Representative relied on the orders of the authorities below.Issue 2: Judicial PrecedentsThe ITAT, Visakhapatnam Bench referred to the decision in the case of M/s. Eastern Power Distribution Company of A.P. Ltd., where it was held that deductions for employees' contribution to PF should be allowed if paid before the due date of filing the income tax return u/s 139(1) of the Act. The tribunal analyzed the provisions of section 36(1)(va) and section 43B(b) of the Act, emphasizing that there is no distinction between employees' and employer's contribution to PF. Various judicial decisions were cited to support the view that if the total contribution is deposited before the due date of filing the return, no disallowance can be made.Decision:Respecting the decision of the tribunal in the case of M/s. Eastern Power Distribution Company Ltd., the order passed by the CIT(A) was set aside, directing the Assessing Officer to allow the claim of the assessee. The appeal filed by the assessee was allowed. The tribunal upheld the CIT(A) order, concluding that there is no difference between employees' and employer's contribution to PF, and if the total contribution is deposited before the due date of filing the return, no disallowance can be made towards employees' contribution to the provident fund.This detailed analysis highlights the key legal arguments, interpretations of relevant provisions, and the final decision of the tribunal based on judicial precedents and statutory provisions.