Delayed employees' provident fund contribution is not deductible when deposited after the statutory due date

Employees' contribution to provident fund and ESI is treated as income under section 2(24)(x) and remains deductible only if credited to the relevant fund on or before the due date under section 36(1)(va). Section 43B(b) applies separately to employer's contribution and does not override the specific restriction governing employees' contribution. The earlier distinction recognised in Alom Extrusions was confined to employer's contribution, and the reasoning in Merchem Ltd. was held to remain correct. Delayed deposit of employees' contribution therefore does not qualify for deduction, and the disallowance is sustained.

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Issues: Whether belated payment of employees' contribution to provident fund and ESI is deductible under the Income-tax Act, and whether the non obstante clause in section 43B overrides the specific restriction in section 36(1)(va) so as to apply the same treatment to employees' contribution and employer's contribution.

Analysis: The statutory scheme treats employees' contribution and employer's contribution separately. Employees' contribution is first treated as income under section 2(24)(x) and is deductible only if credited to the relevant fund on or before the due date under section 36(1)(va) and its Explanation. Section 43B(b) deals with sums payable by the employer by way of contribution and operates in a different field. The curative deletion considered in Alom Extrusions related to employer's contribution and does not nullify the separate restriction governing employees' contribution. The earlier decision in Merchem Ltd. correctly applied this distinction and does not call for reconsideration.

Conclusion: Belated employees' contribution is not deductible if not deposited within the due date under the relevant welfare statute. Section 43B does not override section 36(1)(va) in that context, and the question seeking reconsideration of Merchem Ltd. is answered against the assessee and in favour of the Revenue.

Final Conclusion: The appeal fails, and the disallowance of deduction for delayed employees' contribution is upheld, while the statutory distinction between employees' and employer's contributions is maintained.

Ratio Decidendi: Employees' contribution to welfare funds is governed by section 2(24)(x) read with section 36(1)(va), and if not deposited within the prescribed due date it cannot be claimed as deduction by invoking section 43B, which applies separately to employer's contribution.

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