Employee welfare contribution deadlines govern deductibility, while bona fide composition tax and written-off VAT receivables remain deductible business claims.

Works contract tax paid under a prescribed composition scheme is described as deductible business expenditure where incurred wholly and exclusively for contracting operations. VAT refund receivables may be claimed as bad debts when bona fide written off after recovery becomes impossible; separate proof of irrecoverability is not required once the write-off is recorded. Employees' PF and ESI contributions deposited after the due dates under the relevant welfare laws remain non-deductible, even if paid before the income-tax return filing deadline. A later provision stated to apply prospectively cannot alter the position for an earlier assessment year, and deposit deadlines run from when wages become due rather than actual salary disbursement.

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Issues: (i) Whether works contract tax paid under the composition scheme and irrecoverable VAT refund claims written off were allowable deductions; (ii) Whether employees' PF and ESI contributions deposited after the prescribed due dates were deductible, including whether the subsequent provision under the Income-tax Act, 2025 applied retrospectively and whether the due date ran from actual salary disbursement.

Issue (i): Whether works contract tax paid under the composition scheme and irrecoverable VAT refund claims written off were allowable deductions.

Analysis: The works contract tax was paid at the prescribed composition rate on contract receipts during the pre-GST period, and neither its payment nor its business purpose was disputed. It constituted expenditure incurred wholly and exclusively for the contracting business. The VAT refund claims were carried as receivables and were bona fide written off when recovery became impossible after the GST transition. A debt need not be independently proved irrecoverable once it is written off in the accounts.

Conclusion: The works contract tax was allowable as business expenditure and the VAT refund write-off was allowable as a bad debt, in favour of the assessee.

Issue (ii): Whether employees' PF and ESI contributions deposited after the prescribed due dates were deductible, including whether the subsequent provision under the Income-tax Act, 2025 applied retrospectively and whether the due date ran from actual salary disbursement.

Analysis: The governing position for the relevant assessment year remained that employees' contributions paid after the due date under the respective welfare enactments were not deductible, notwithstanding payment before the return-filing due date. The later provision under the Income-tax Act, 2025 was expressly effective from 01.04.2026 and was neither curative nor clarificatory. The prescribed period for deposit was determined with reference to the month in which wages became due, and could not be extended by reference to the employer's actual date of salary disbursement. The tax audit report also recorded delayed deposits.

Conclusion: The employees' PF and ESI contributions were disallowable, against the assessee.

Final Conclusion: The deductions for works contract tax and written-off VAT receivables were sustained, while the disallowance relating to delayed employees' welfare contributions remained undisturbed.

Ratio Decidendi: A bona fide business levy and a receivable written off as irrecoverable are deductible where their payment or write-off is established; employees' welfare contributions paid beyond the statutory due date remain disallowable under the law applicable to the assessment year, and a later prospective amendment cannot alter that position.

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