Employees' provident fund and ESI payments before return filing due date were treated as deductible despite late welfare-statute deposit.

Employees' contribution to provident fund and ESI, when remitted after the due date under the welfare enactment but before the return-filing due date under section 139(1), was treated as allowable under the statutory scheme discussed by ITAT Visakhapatnam. The Tribunal followed a coordinate bench view that no distinction should be drawn, for this purpose, between employer's and employees' contribution where payment is made before the income-tax return due date. It also applied the rule that, where two reasonable interpretations of a taxing provision are possible, the interpretation favourable to the assessee should prevail. On that basis, the disallowance was found unsustainable.

---

---

Issues: Whether employees' contribution to provident fund and ESI, if deposited after the due date under the relevant welfare enactments but before the due date for filing the return of income, is allowable as a deduction.

Analysis: The appeal turned on the interaction between the deeming provision treating employees' contribution as income and the deduction provisions governing payment of sums to welfare funds. Following the coordinate bench decision relied on, the Tribunal noted that the statutory scheme does not warrant a distinction, for this purpose, between employer's and employees' contribution where the aggregate contribution is remitted before the due date under section 139(1). The Tribunal also adopted the view that, where two reasonable interpretations of a taxing provision are possible, the one favourable to the assessee should be preferred.

Conclusion: The issue was answered in favour of the assessee. The disallowance was held unsustainable and the Revenue's appeal was dismissed.

Ratio Decidendi: Employees' contribution to provident fund or similar welfare funds, if paid before the due date for filing the return of income, is allowable and cannot be disallowed merely because the payment was made after the due date prescribed under the relevant welfare statute.

---