2025 (7) TMI 1744 - AT - Income Tax

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

M/s Rajasthan Knowledge Corporation Ltd. Versus The ACIT, Circle-1, Jaipur.

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 ... Deduction u/s 36(1)(va) - Addition towards bonus amount and employees contribution to PF, which was deposited late - HELD THAT:- As is available from the information available said amount of bonus is stated to have been paid on 17.09.2018. Said amount came to be paid before due date of filing of return u/s 139(1) of the Act. Therefore, in view of provisions of section 43B of the Act, no disallowance of the said amount could be made. Ld. AR for the appellant has rightly submitted that provisions of Section 36(1)(va) of the Act cannot be resorted to for disallowance of this amount. Accordingly, we are of the considered view that the impugned order cannot be sustained as regards disallowance of the bonus amount timely paid by the assessee under the Act. This appeal is partly allowed and the impugned order passed by Learned CIT(A) is set aside whereby disallowance of bonus was also confirmed by Learned CIT(A). AO to do recalculations having regard to this decision and in accordance with rules. 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.