Employer and employee PF/ESI contribution disallowance: timely deposit before return filing or by salary disbursement month avoids additions.

Disallowance of employer contribution to provident fund and ESI under tax deduction provisions is impermissible where the employer's share was deposited before the due date for filing the return; the assessing officer must verify deposit before allowing disallowance and, if proved, reverse the addition. For employees' contributions, the due date for deposit is to be reckoned from the month of actual salary disbursement rather than accrual; where the assessee proves timely deposit measured by actual disbursement month (as in cited tribunal precedent), the AO shall cancel related additions. The matter is remitted to the AO for adjudication in line with the tribunal precedent and the assessee's appeal is disposed for statistical purposes.

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Issues: (i) Whether the disallowance of employer's contribution to Provident Fund and ESI of INR 22,64,426/- under Section 36(1)(va) is sustainable where such contributions are deposited before the due date of filing return under Section 139(1) read with Section 43B; (ii) Whether the disallowance of employee's contribution to PF/ESI of INR 8,54,091/- under Section 36(1)(va) is sustainable where salary payment was postponed and contributions were deposited within the prescribed time reckoned from the month of actual salary disbursement.

Issue (i): Whether employer's contribution to PF/ESI deposited before the due date of filing the return is liable to disallowance under Section 36(1)(va) read with Section 43B.

Analysis: The Tribunal examined whether deposits of employer's statutory contributions made before the due date for filing the return under Section 139(1) satisfy the requirements of Section 36(1)(va) read with Section 43B. The Tribunal directed that the assessing officer may verify records to ascertain whether deposits were made before the due date of filing the return and, if so, reverse the disallowance.

Conclusion: In favour of the Assessee. Where employer's contributions are shown to have been deposited before the due date of filing the return under Section 139(1), the disallowance under Section 36(1)(va) read with Section 43B shall be deleted.

Issue (ii): Whether employee's contributions to PF/ESI are liable to disallowance under Section 36(1)(va) where salary disbursement was postponed and contributions were deposited within the time reckoned from the month of actual salary payment.

Analysis: The Tribunal considered precedents treating the due date for deposit of employee contributions as to be reckoned from the month of actual salary disbursement. The Tribunal found merit in the contention that short delays (e.g., one or two days due to holidays) and deposits made within the prescribed period measured from actual payment date may preclude disallowance, and remitted the issue to the assessing officer for adjudication in accordance with the referenced coordinate-bench decision and applicable law.

Conclusion: In favour of the Assessee. If the assessee demonstrates that employee contributions were deposited within the due period reckoned from the month of actual salary disbursement, the additions/disallowances shall be reversed.

Final Conclusion: Both issues are remitted to the file of the Assessing Officer for fresh adjudication in accordance with law and the Tribunal's directions; the appeal is allowed for statistical purposes.

Ratio Decidendi: Deposits of employer's statutory contributions made before the due date for filing the return under Section 139(1) satisfy Section 43B and preclude disallowance under Section 36(1)(va); for employee contributions, the due date for deposit is to be reckoned from the month of actual salary disbursement, and deposits made within that period negate disallowance under Section 36(1)(va).

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