2021 (5) TMI 201 - AT - Income Tax

Employees' provident fund contributions must be credited on time for tax deduction. Tribunal upholds decision.

The Tribunal upheld the CIT(A)'s order, confirming the disallowance of the deduction for employees' contributions to the provident fund that were not ... Employees contribution to provident fund as covered by the provisions of section 43B - HELD THAT:- Gujarat High Court in the case of CIT Vs. Gujarat State Road Transport Corporation [2014 (1) TMI 502 - GUJARAT HIGH COURT] whereby the issue of contribution of employees towards provident fund has been adjudicated against the assessee. The Hon`ble Court held that ‘Contribution of employees towards provident fund does not come under the purview of section 43B of the Act’. - Decided against assessee. Issues Involved:1. Deductibility of employees' contributions to provident fund under Section 43B of the Income Tax Act, 1961.2. Applicability of the Gujarat High Court's decision in CIT Vs. Gujarat State Road Transport Corporation.Detailed Analysis:Issue 1: Deductibility of Employees' Contributions to Provident Fund under Section 43B of the Income Tax Act, 1961The primary grievance of the assessee was the claim for deduction of employees' contributions to the provident fund under the provisions of Section 43B of the Income Tax Act, 1961. The assessee argued that such contributions are covered under Section 43B and thus should be deductible.The Tribunal referred to the judgment of the Jurisdictional Hon'ble Gujarat High Court in the case of CIT Vs. Gujarat State Road Transport Corporation, which had adjudicated this issue. The Gujarat High Court held that the contribution of employees towards the provident fund does not come under the purview of Section 43B of the Act. The court emphasized that as per Section 2(24)(x) of the Act, any sum received by the assessee from employees as contributions to any provident fund or other welfare fund constitutes income. Section 36(1)(va) specifies that such sums are deductible only if credited to the employees' accounts in the relevant fund on or before the due date as defined under the respective Act.The Tribunal reiterated the provisions of Section 36(1)(va) and Section 43B, explaining that Section 36(1)(va) pertains to employees' contributions and mandates that the contributions must be credited by the due date specified in the Provident Fund Act or ESI Act. The Tribunal noted that the deletion of the Second Proviso to Section 43B by the Finance Act, 2003, which allowed deductions on actual payment before the due date for filing the return, applies to employers' contributions and not to employees' contributions.Issue 2: Applicability of the Gujarat High Court's Decision in CIT Vs. Gujarat State Road Transport CorporationThe Tribunal upheld the applicability of the Gujarat High Court's decision in CIT Vs. Gujarat State Road Transport Corporation. The High Court had clarified that any sum received by the assessee from employees as contributions to provident fund or ESI must be credited to the employees' accounts in the relevant fund by the due date specified under the respective Acts. Failure to do so disallows the deduction of such contributions in computing the income under Section 28 of the Act.The Tribunal noted that the High Court's decision was binding and that there had been no amendments to Section 36(1)(va) or its explanation that would alter the requirement for timely crediting of employees' contributions. The Tribunal dismissed the assessee's appeal, confirming the CIT(A)'s order and aligning with the High Court's ruling.Conclusion:The Tribunal concluded that the issue was squarely covered against the assessee by the Gujarat High Court's judgment. Consequently, the Tribunal upheld the CIT(A)'s order, confirming the disallowance of the deduction for employees' contributions to the provident fund that were not credited by the due date. The appeal filed by the assessee was dismissed.