Bonus and PF Contributions Paid Before Due Date Allowed Under Section 43B, Disallowance Under Section 36(1)(va) Set Aside

The ITAT Jaipur held that the bonus amount and employees' contribution to PF, paid before the due date for filing the return under section 139(1), cannot be disallowed under section 36(1)(va) due to the provisions of section 43B. The tribunal set aside the CIT(A)'s order confirming the disallowance of the bonus, ruling that the disallowance was not justified. The appeal was partly allowed, and the AO was directed to recalculate the tax liability in accordance with this decision.

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ISSUES:

Whether the bonus amount paid after the end of the financial year but before the due date of filing the return is eligible for deduction under Section 43B of the Income Tax Act, 1961.Whether the disallowance of employee's contribution to Provident Fund (PF) on the ground of late payment is justified under Section 36(1)(va) of the Income Tax Act, 1961.Whether the provisions of Section 36(1)(va) can be invoked for disallowance of bonus payments.

RULINGS / HOLDINGS:

The bonus amount of Rs. 14,03,538/- paid on 17.09.2018, i.e., before the due date of filing the return under Section 139(1), is eligible for deduction under Section 43B of the Income Tax Act, 1961; hence, its disallowance is not sustainable.The disallowance of employee's contribution to PF due to non-payment within 15 days of the close of the month is confirmed, as the mandatory condition for claiming deduction under Section 36(1)(va) has not been fulfilled.The provisions of Section 36(1)(va) cannot be resorted to for disallowance of the bonus amount timely paid; therefore, its application in this context is erroneous.

RATIONALE:

The Court applied the statutory framework of Sections 43B and 36(1)(va) of the Income Tax Act, 1961. Section 43B mandates that certain expenses, including bonus payments, are allowable only if paid on or before the due date of filing the return under Section 139(1).Since the bonus was paid on 17.09.2018, prior to the due date of 30.09.2018 for filing the return, the payment qualifies for deduction under Section 43B, notwithstanding the audit report indicating otherwise.The Court clarified that Section 36(1)(va), which requires timely payment of employee contributions to PF and ESI funds for deduction, cannot be extended to disallow bonus payments.The disallowance of PF contribution was upheld due to non-compliance with the mandatory 15-day payment condition post month-end, consistent with statutory requirements.No dissenting or alternative opinions were recorded.

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