Provident fund deduction depends on timely deposit; due date runs from the wage month, not actual salary payment

Employees' contribution to provident fund and ESI is deductible only if deposited within the due date under the relevant welfare law, because such contribution retains the character of income under section 2(24)(x) until valid payment is made. The note explains that the employer is primarily responsible for remittance under the provident fund statute and scheme, with wage deduction serving only as the mode of recovering the employee's share. It further states that the due date is linked to the end of the relevant wage month, not the date of actual salary disbursement, and that the argument for resolving ambiguity in favour of the assessee is not accepted in light of binding Supreme Court authority.

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Issues: Whether delayed deposit of employees' contribution to provident fund and ESI is allowable as a deduction, and whether the due date for provident fund contribution should be linked to the date of actual salary disbursement.

Analysis: The issue was examined in the light of the Supreme Court ruling that employees' contribution covered by section 36(1)(va) of the Income-tax Act, 1961 retains the character of income under section 2(24)(x) and is deductible only if deposited within the due date prescribed under the relevant welfare law. The Employees' Provident Funds and Miscellaneous Provisions Act, 1952 and the Employees' Provident Fund Scheme, 1952 place the initial responsibility to remit both employer's and employee's contributions on the employer, with deduction from wages being only the mode of recovery of the employee's share. Paragraphs 30, 32 and 38 of the Scheme were read together with section 6 of the Act to hold that the obligation to deposit arises with reference to the close of the relevant month, not the date on which salary is actually paid. The plea that ambiguity should be resolved in favour of the assessee was rejected because the statutory scheme and binding precedent clearly fixed the due date and the court declined to reopen the issue in the face of the Supreme Court authority.

Conclusion: The deduction was not allowable for delayed deposit of employees' provident fund contribution, and the assessee's contention that the due date runs from actual salary disbursement was rejected.

Final Conclusion: The appeal failed on the sole substantive issue and the disallowance was sustained.

Ratio Decidendi: Employees' contribution to provident fund is deductible only when deposited within the due date prescribed by the welfare statute, and the due date is computed with reference to the statutory month for which wages are earned, not the later date of actual salary payment.

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