Delayed employee provident fund and ESI contributions are not deductible when paid after the prescribed due date.

Employee's contribution to provident fund and ESI deposited after the due date prescribed under the welfare laws was held not deductible under section 36(1)(va) of the Income-tax Act, 1961. The Tribunal rejected a liberal reading of the Employees' Provident Fund Scheme and followed the contrary view of the Madras High Court, which requires remittance within the stipulated time from the close of the month for which salary is earned. On that basis, delayed payment attracted disallowance, the request for remand was refused, and the addition for delayed employee contribution remained undisturbed.

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Issues: Whether the employee's contribution to provident fund and ESI deposited after the due date prescribed under the relevant welfare laws was allowable as a deduction under section 36(1)(va) of the Income-tax Act, 1961.

Analysis: The Tribunal noted the assessee's reliance on a coordinate bench view supporting a liberal construction of the expression "every month" in clause 38 of the Employees' Provident Fund Scheme, 1952, but held that the issue was governed by the contrary view of the Madras High Court. On that view, the contribution has to be remitted within the stipulated time from the close of the month for which salary is earned, and payment after the due date attracts disallowance. In light of the higher judicial precedent, the plea for remand was rejected.

Conclusion: The employee's contribution paid after the due date was not allowable as a deduction, and the disallowance was sustained against the assessee.

Final Conclusion: The appeal was dismissed and the addition on account of delayed employee contribution to PF/ESI remained undisturbed.

Ratio Decidendi: Employee's contribution to provident fund or similar welfare funds, if not deposited within the prescribed due date, is not deductible under section 36(1)(va) of the Income-tax Act, 1961.

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