2018 (12) TMI 311 - AT - Income Tax

Tribunal overturns disallowance of Provident Fund contribution, ruling in favor of assessee.

M/s High Volt Electricals Pvt. Ltd. Versus ACIT, Palghar Circle, Ward (2), Palghar

The Tribunal ruled in favor of the assessee, holding that the disallowance of employees' contribution to Provident Fund under Sec. 36(1)(va) r.w.s. ... Addition on payment made towards Employee Contribution to Provident Fund after specific due date - scope of amendment to Sec. 43B - Held that:- It is an admitted fact, that though the assessee had deposited the employees contribution to provident fund beyond the time period allowed under the PF act, however, the said amounts were paid before the ‘due date’ of filing of the return of income by the assessee under Sec. 139(1) of the Act. We are unable to accept the observations of the lower authorities, that the provisions of Sec. 43B would not be applicable as regards the employees contribution to provident fund, and the same would continue to be governed by Sec. 36(1)(va) r.w.s. 2(24)(x) of the Act. We find that the issue under consideration is squarely covered by the judgment of the Hon’ble High Court of Bombay in the case of CIT Central, Pune Vs. Ghatge Patil Transports Ltd. (2014 (10) TMI 402 - BOMBAY HIGH COURT) clearly observed that both employees and employers contribution would be covered under the amendment to Sec. 43B of the Act - Disallowance to be deleted - Decided in favour of assessee. Issues:Disallowance of employees' contribution to Provident Fund under Sec. 36(1)(va) r.w.s. 2(24)(x) of the Income-tax Act, 1961.Analysis:1. The appeal was filed against the order passed by the Commissioner of Income Tax (Appeals)-3, Thane, arising from the order passed by the Assessing Officer under Sec. 143(3) of the Income-tax Act, 1961 for A.Y. 2013-14.2. The assessee, engaged in manufacturing and repair of electrical transformers, filed its return of income for A.Y. 2013-14 on 27.08.2013, declaring total income at &8377; 2,23,68,227. The case was selected for scrutiny assessment under Sec. 143(2).3. The Assessing Officer disallowed the amount of &8377; 6,30,867 deposited towards Employees' Contribution to Provident Fund beyond the stipulated date under the Provident Fund Act. The assessee argued that the payment was made before the due date for filing the return of income, relying on a Supreme Court judgment.4. The CIT(A) upheld the disallowance, leading the assessee to appeal. The Authorized Representative contended that the payment was made before the due date for filing the return of income, presenting a detailed chart to support the claim.5. The Authorized Representative argued that the lower authorities erred in distinguishing between employees' and employers' contributions to the provident fund, citing a Bombay High Court judgment that both contributions fall under the amended Sec. 43B of the Act.6. The Departmental Representative supported the lower authorities' orders.7. The Tribunal observed that the issue revolved around whether the disallowance of employees' contribution to provident fund was justified under the post-amended Sec. 43B of the Act. The Tribunal referred to the Bombay High Court judgment, concluding that the disallowance could not be sustained as it was not in line with the court's decision.8. Consequently, the disallowance of &8377; 6,30,867 was deleted, and the CIT(A)'s order upholding the disallowance was set aside.9. The appeal of the assessee was allowed, and the order was pronounced in open court on 26/09/2018.