Provident fund remittance timing: contributions paid within the accounting year or grace period were not disallowed.

Employer's provident fund contribution paid before the end of the accounting year was treated as an actual discharge of liability, so disallowance under section 43B was not justified and the addition was deleted. Employees' contribution deducted from salary remained deductible under section 36(1)(va) where it was remitted within the statutory grace period recognised by the provident fund scheme and circulars, because that payment satisfied the due-date requirement in substance; the addition was therefore deleted. The note applies a practical and purposive construction of the due-date conditions for provident fund remittances and concludes that contributions paid within the accounting year or within the recognised grace period should not be disallowed merely for missing the exact monthly due date.

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Issues: (i) Whether the employer's contribution to provident fund paid within the accounting year but after the monthly due date was disallowable under section 43B of the Income-tax Act, 1961. (ii) Whether employees' contribution to provident fund deducted from salaries but remitted within the statutory grace period could be denied deduction under section 36(1)(va) of the Income-tax Act, 1961.

Issue (i): Whether the employer's contribution to provident fund paid within the accounting year but after the monthly due date was disallowable under section 43B of the Income-tax Act, 1961.

Analysis: The amount representing employer's contribution had been remitted before the close of the accounting year and no outstanding liability remained at year-end. In such a situation, the statutory bar in section 43B, which is concerned with actual discharge of the liability within the relevant year, did not justify disallowance.

Conclusion: The addition was not sustainable and was deleted in favour of the assessee.

Issue (ii): Whether employees' contribution to provident fund deducted from salaries but remitted within the statutory grace period could be denied deduction under section 36(1)(va) of the Income-tax Act, 1961.

Analysis: Employees' contribution deducted from salary was treated as deemed income under section 2(24)(x), but deduction remained allowable if credited within the due date under section 36(1)(va). The relevant provident fund scheme and circulars allowed a five-day grace period beyond the fifteenth day, and payment within that grace period was treated as compliance in substance with the due-date requirement. On that practical construction, the remittance made within the grace period satisfied the statutory condition for deduction.

Conclusion: The addition was deleted and deduction was allowed in favour of the assessee.

Final Conclusion: The appeal succeeded on the principal tax issues, with both disputed additions being deleted.

Ratio Decidendi: Where provident fund contributions are paid within the accounting year or within a recognised statutory grace period, the corresponding disallowance cannot be made merely because the remittance was not made on the exact monthly due date; the due-date requirement must be applied in a practical and purposive manner in light of the governing scheme and circulars.

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