Late deposit of employees' provident/welfare fund shares upheld as non-deductible; s.36(1)(va) disallowance sustained despite payment before return filing

Whether deduction under s.36(1)(va) is allowable when the employer deposits employees' share to provident/welfare funds after statutory due dates but before filing the return - held that relying on Supreme Court (Checkmate Services) the statutory prerequisite for s.36(1)(va) is deposit by the employer within the time prescribed by the respective fund Acts; the due date under s.139(1) is irrelevant. Payment of Wages Act s.5 does not prescribe deposit timing for fund contributions; the specific fund Acts (15 days rule) govern. Outcome: disallowance under s.36(1)(va) sustained and adjustment under s.143(1)(a) upheld against the assessee.

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Issues: (i) Whether disallowance of employees' contribution under section 36(1)(va) is justified where the employer deposited employees' share after the statutory due date under the relevant Acts but before filing the return relying on section 43B; and whether such disallowance can be made by the assessing officer under clause (a)(iv) of section 143(1).

Analysis: The liability of employees' contributions crystallises as employer's income under section 2(24)(x), and deduction under section 36(1)(va) requires crediting the employee's contribution to the relevant fund on or before the due date prescribed under the respective Acts. Section 43B permits deduction only on actual payment, with a proviso allowing deduction if payment is made on or before the due date for filing the return under section 139(1); however, the Supreme Court has held that the proviso to section 43B does not alter the specific due-date requirement in section 36(1)(va) for employees' share. Section 143(1)(a)(iv) permits processing adjustments where disallowance of expenditure is indicated in the audit report; point 20(b) of Form 3CA, by specifying sum received from employees, due date for payment and actual date of payment, can clearly indicate non-compliance with section 36(1)(va). The two limbs of clause (iv) disallowance of expenditure and increase of income are independent; an audit report indicating actual date of payment after statutory due date constitutes an apparent indication of disallowance of expenditure under clause (iv).

Conclusion: The disallowance under section 36(1)(va) in the intimation processed under section 143(1)(a) is justified where the audit report indicates that employees' contributions were credited after the statutory due date under the relevant Acts; reliance on payment before the due date for filing return under section 139(1) (proviso to section 43B) does not entitle deduction under section 36(1)(va).

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