Employees' ESI and PF contributions paid before return filing due date cannot be disallowed despite delay under welfare laws.

Employees' contribution to ESI and provident fund paid after the due date under the welfare laws but before the due date for filing the return was held allowable as a deduction. The Tribunal preferred the interpretation beneficial to the assessee where two reasonable constructions of the tax provision were possible, and followed its coordinate-bench view that timely deposit before the return-filing deadline prevents disallowance. On that basis, the disallowance of employees' contributions was held unsustainable and the addition was directed to be deleted.

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Issues: Whether employees' contribution to ESI and provident fund, paid after the due date under the respective welfare laws but before the due date for filing the return, is allowable as deduction and whether the resulting disallowance could be sustained.

Analysis: The appeals concerned disallowance of employees' share of ESI and PF. The Tribunal noted that the controversy on the interaction between section 36(1)(va) and section 43B of the Income-tax Act, 1961 had been considered in divergent judicial views, but preferred the line of authority favouring the assessee. It relied on the principle that where two reasonable constructions of a taxing provision are possible, the construction beneficial to the assessee should be adopted. The Tribunal also followed its earlier coordinate-bench view that if the employees' contribution is deposited on or before the due date for furnishing the return under section 139(1), no disallowance is warranted.

Conclusion: The disallowance of employees' contribution to ESI and PF was not sustainable, and the addition was directed to be deleted.

Ratio Decidendi: Employees' contribution to welfare funds, if deposited on or before the due date for filing the return of income under section 139(1), cannot be disallowed merely because the payment was made after the due date under the relevant welfare statutes.

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