TaxTMI 
TaxTMI 
1997 (2) TMI 557
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....t too without assigning proper reasons. He ought to have decided the addition made by the Assessing Officer. The Hon'ble ITAT may order accordingly." 4. We have heard the ld. assessee's counsel as well as the ld. D.R. The assessee's counsel addition to reiterating the submissions made before the lower authorities has submitted that the assessee was advised by its income-tax advisors that the employees and the employers contribution towards EPF, EFPF, ESIS, Insurance Fund, Administrative charges, etc. were to be deposited within 15 days from the date of payment of salary or wages as the case may be and the same being 7th of every month the assessee remained under the bona fide belief that the amounts were to be deposited by 15th day of next month starting after the date of disbursement of salary and wages which in this case was 7th of every month (the assessee was paying salary and wages on 7th of every month). He further supported this aspect by submitting that it was not a case where either the assessee has disputed the liability or has not deposited the same. Rather, as far as payments of EPF are concerned most of the same have been made on 22nd day of the month i.....
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....he referred to the CBDT Circular No. 372 dated 8th December, 1983. In view of these facts, he submitted that the above provisions should be construed liberally, otherwise, it will be a great injustice to the assessee. The ld. counsel further submitted that if the legislative intention is not taken into account then the assessee will never get the deduction because by virtue of the provisions of sections 43B and 2(24)(x) read with section 36(1)(va) these amounts will be income for this year and as the assessee has actually paid the amounts in the year relevant to the assessment year 1992-93 itself, it will not get the deduction in any of the subsequent years. He, therefore, emphasised that such interpretation of the provisions will lead to injustice to the assessee and absurd results, which was never the intention of the legislative. Quoting his earlier submission, he submitted that short delay in depositing the amount was because of bona fide belief entertained by the assessee on the advice of its tax consultant, however mistaken it may be. The assessee is entitled to the benefit of doubt. Similarly, the delay having been caused due to want of funds may be considered as genuine ....
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....586 35,346 27-05-1991 21-05-1991 May/91 3,600 27,914 2,048 1,575 35,137 19-06-1991 27-06-1991 June/91 3,680 28,836 2,097 1,613 36,226 29-07-1991 29-07-1991 July/91 3,789 29,172 1,649 2,143 36,753 22-08-1991 22-08-1991 Aug/91 3,893 30,159 2,218 1,703 37,973 27-09-1991 27-09-1991 Sept/91 3,859 29,324 2,506 1,671 37,360 28-10-1991 28-10-1991 Oct/91 3,830 29,950 2,536 1,691 38,007 25-11-1991 25-11-1991 Nov/91 5,146 39,638 3,359 2,240 50,383 19-12-1991 19-12-1991 Dec/91 4,148 32,073 2,352 1,809 40,382 16-01-1992 16-01-1992 Jan/92 4,151 32,099 2,355 1,811 40,416 22-02-1992 22-02-1992 Feb/92 4,461 34,523 2.545 1,958 43,487 23-03-1992 23-02-1992 Mar/92 4,388 33,236 2,438 1,876 41,938 12-04-1992 12-04-1992 4,73,408 II. ESIS Contribution (Employer's & Employees' Contribution) Month Amount Date....
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....ons strictly the assessee will not get deduction either in this year or in any of the subsequent years), can be avoided, more so when the Legislature never intended so and to decide this issue we consider it necessary to consider the CBDT Circular No. 372 dated 8-12-1983 as well as the relevant provisions of Employees P.F. Scheme and ESIS for the definition of "month" etc. the relevant portion of the CBDT Circular No. 372 dated 8-12-1983 explaining the reasons for insertion of section 43B is extracted below : "35.2 Several cases have come to notice where taxpayers do not discharge their statutory liability such as in respect of excise duty, employer's contribution to provident fund, Employees' State Insurance Scheme, etc. for long periods of time, extending sometimes to several years, for the purposes of their income-tax assessments, they claim the liability as deduction on the ground that they maintain accounts on mercantile or accrual basis. On the other hand, they dispute the liability and do not discharge the same. For some reasons or the other, undisputed liabilities also are not paid. 35.3 To curb this practice, the Finance Act has inserted a new section 43B to ....
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....essee by way of tax or duty under any law or any sum payable by the assessee as employer by way of contribution to any provident fund or superannuation fund or gratuity fund etc. shall be allowed as a deduction in computing the income of the year in which such sum is actually paid by the assessee. Further, the Finance Act, 1987, inserted two provisos before the Explanation to the section with effect from 1-4-1988 to the effect that the second proviso dealt with liabilities falling under clause (b) of section 43B of the Act to the effect that no deduction will be allowed in the assessment of the employers unless such contribution is paid to the fund on or before the 'due date'. Due date means the date by which an employer is required to credit the contribution to the employees' account in the relevant fund under the provisions of any law or terms of contract of service or otherwise. 11. As the assessee has deposited the amounts within the period relevant to the assessment year 1992-93 so, if the assessee's claim is not allowed in this year then it will not get any deduction in any of the subsequent years. Therefore, we are in agreement with the submission of the a....
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....derlying the statutory provision." 12. On careful consideration of the facts and circumstances of the case before us, as discussed above, and respectfully following the decisions of the Hon'ble Supreme Court (supra), we are of the opinion that the provisions of section 43B, section 2(24)(x) read with section 3(1)(va), so far as they are concerned with the time for making payment, should be interpreted liberally keeping in view principle of equity and legislative intent behind enacting such prohibitory provisions so that the injustice and the absurdity can be avoided. 13. Another question to be decided in this case is the determination of 'due date' for making payment and for this purpose, we would like to consider the provisions of sections 36(2) and 38 of the Employees' Provident Fund Scheme, 1952 because there seems to be some ambiguity in those provisions. Section 36(2) reads as under : "Every employer shall send to the Commissioner within 15 days of the close of each month a return - (a) in Form 5, of the employees qualifying to become members of the Fund for the first time during the preceding month together with the declarations in Form 2 furnished....
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....d to have been made within due date and, therefore, no disallowance could be made on this account. 16. As regards applicability of the provisions of section 2(24)(x) and the allowability of deduction under section 36(1)(va) of the Act, we are of the considered opinion that section 36(1)(va) yields to section 43B as the latter section starts with a non obstante clause. According to section 43B the deduction is to be regulated only on the basis of actual payment in the previous year in which it is so paid. However, first proviso and second proviso were added to section 43B by the Finance Act, 1987 with effect from 1-4-1988. The first proviso reduces the rigour of the main section by enabling the assessee to get the benefit of deduction in respect of taxes, duties, etc, even if they were paid after the end of the previous year but before the due date for furnishing of return under section 139(1) of the Act. The second proviso also introduced along with the first proviso with effect from 1-4-1988 is to the effect that unless the payment in respect of contributions to PF, etc., have been actually made during the previous years on or before the due dates as prescribed under the releva....
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....rginal delay or a few days on certain occasions. We hold that no part of the contributions received by the assessee from its employees towards PF and ESI can be disallowed, so as to consider the same as assessee's income under section 2(24)(x) read with section 36(1)(va). 17. Considering all the facts and circumstances of the case as well as the decisions referred to above, we are of the opinion that as the assessee had paid all the amounts within a period from 9 to 22 days from the date of payment of wages/salary and therefore the submissions, regarding admissibility of benefits for having a bona fide belief entertained as a result of its advice by the tax advisors that the payment was to be made after 15 days from the date of payment of salaries and wages that the delay; otherwise had been due to financial difficulty as well as the submission that the delay was not intentional or was not to defraud the revenue because by delaying the payments by a few days the assessee was not to get any benefit rather was putting it to the risk of serious penal consequences, as envisaged in sections 43B, 2(24)(x) read with the provisions of section 36(1)(va) which no prudent person would ....