TaxTMI 
TaxTMI 
2017 (1) TMI 677
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....ent to Employees State Insurance (ESI) Fund. Admittedly, the employee's contribution and employer's contribution both were not deposited by the appellant assessee before the due date by which the assessee is required as an employer to credit contribution to the employee's account in the relevant fund under the relevant statute, however, the amount was actually paid by the assessee before the due date applicable in its case for furnishing the return of income under sub-section (1) of Section 139 of the Income Tax Act, 1961 ( for short "the Act") in respect of the previous year in which the liability to pay such sum was incurred and the evidence of such payment was furnished alongwith the return. 3. The Assessing Officer vide assessment order dated 23.3.04 disallowed the deduction claimed by the assessee towards the deposit of employee's contribution to the said funds, observing that as per provisions of Section 36 (1) (va) of the Act, if employee's contribution to PF and ESI is not credited to the employee's account on or before the due date, the same being included in income under provisions of Section 2(24) (x) of the Act is liable to be taxed. However, on application being filed....
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...., by which the second proviso to Section 43B stands deleted, the deduction has to be allowed even in respect of employee's contribution, notwithstanding the provisions of Section 36(1) (va) and explanation attached thereto, if the contribution is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of Section 139 in respect of the previous year in which the liability to pay such sum was incurred. Learned counsel while relying upon a Bench decision of this court in State Bank of Bikaner & Jaipur's case (supra), submitted that the question arising for consideration of this court in these appeals out of the order impugned passed by the ITAT is no more res integra. In support of the contention, learned counsel also relied upon the decisions of the Hon'ble Supreme Court in the matter of "CIT vs. Alom Extrusions Ltd." (2009) 319 ITR 306 (SC) and "CIT vs. Vinay Cement Ltd., (2009) 313 ITR-St.1 and the decisions of Karnataka High Court in "CIT vs. Sabari Enterprises", (2008) 298 ITR 141, Gauhati High Court in "CIT vs. George Williamson (Assam) Ltd.", (2006) 284 ITR 619 , Uttrakhand High Court in "CIT vs. De....
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....36 (1) (va) and Section 43B did not come up for consideration. Relying upon the decision of Kerala High Court in the matter of "Commissioner of Income Tax, Cochin vs. Merchem Ltd.", (2015) 378 ITR 443, learned counsel submitted that if the contention raised on behalf of the assessee is accepted it will render the explanation attached to Section 36 (1) (va) redundant. Learned counsel submitted that both the provisions operating in different fields have to be given effect to and therefore, the assessee having failed to deposit the employee's contribution towards PF and ESI before the due date i.e. the date by which the assessee was required to as an employer to credit an employee's contribution to the employee's account in the relevant fund under the relevant statute is not entitled to deduction while computing its income under Section 28 of the Act. 11. Replying the contentions raised on behalf of the Revenue, learned counsel for the appellant submitted that the question with regard to applicability of the provisions of Section 43B (b) as it stands after deletion of second proviso has been specifically dealt with by the various High Courts and therefore, the contention of the Reven....
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....oviso thereto by Finance Act, 2003, permitting certain deductions on actual payment, can be applied for allowing the deductions in respect of the employee's contribution towards the relevant fund or funds received by the assessee not credited to the employee's account on or before the due date as contemplated under explanation attached to Section 36 (1) (va) of the Act but is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of Section 139 in respect of the previous year in which the liability to pay such sum was incurred and the evidence of such payment is furnished by the assessee alongwith such return. 15. It is to be noticed that Section 43B, a non obstante clause, shall be operative irrespective of other provisions of the Act in respect of the deductions specified, which are otherwise allowable under the Act. As per clause (b) of Section 43B read with proviso to Section 43B, any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of the employees shall be an allowable deduction if s....
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....deduction from his wages and in case of an employee employed through an immediate employer, as per provisions of Section 41 of the ESI Act, the principal employer is entitled to recover the amount of employer's contribution as well as employee's contribution from the immediate employer either, by deduction from any amount payable or as debt payable by the immediate employer. But in any case, both under PF fund and ESI Scheme as created under the relevant statutes, it is the duty of the principal employer to make payment of the contributions comprising of the employer's contribution and employee's contribution and the payment of employee's contribution by the principal employer is not dependent on such sum being actually received from the employees. 18. In the backdrop of the provisions of the PF Act and ESI Act discussed hereinabove, adverting to the provisions of Section 43B of the Act, it is pertinent to note that the clause (b) thereof refers to 'sum payable by the assessee as an employer by way of contribution' to any provident fund, superannuation fund or gratuity fund or any other fund for the welfare of the employees. As discussed hereinabove, under the relevant statutes, b....
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....n 43B or under Section 36(1)(va) of the Act. 21. In Sabari Enterprises case (supra), the Karnataka High Court while dealing with the question whether the contributions made by the assessee to PF and ESI are allowable deduction even though it is made beyond the stipulated period as contemplated under mandatory provisions of Section 36 (1)(va) read with Section 2(24) (x) and Section 43B of the Act, held that the provisions of Section 43B (b) clearly provides that notwithstanding anything contained in the other provisions of the Act including Section 36(1) clause (va) of the Act, even prior to insertion of that clause the assessee is entitled to get statutory benefit of deduction. The court observed that the explanation to clause (va) of Section 36(1) of the Act further makes it very clear that the amount actually paid by the assessee on or before the due date applicable i.e. at the time of submitting returns of income under Section 139 of the Act to the Revenue in respect of the previous year can be claimed by the assessees for deduction out of their gross income. 22. In Alom Extrusions Ltd.'s case (supra), the Hon'ble Supreme Court held that the Finance Act 2003 deleting the secon....
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....he Supreme Court in Vinay Cement's case (supra). 27. In Essae Teraoka Pvt. Ltd.'s case (supra), the Karnataka High Court held that 'contribution' used in clause (b) of Section 43B of the Act means the contribution of the employer and the employee and thus, if the contribution is made on or before the due date or furnishing the return of income under subsection (1) of Section 139 of the Act, the employer is entitled for deduction. 28. In Merchem Ltd.'s case (supra), heavily relied upon by the Revenue, the Kerala High Court while disagreeing with the view taken by the various High Courts and explaining the decision of the Hon'ble Supreme Court in Alom Extrusion's case (supra), held: "26. Therefore, in our view, when Sec.43B as it stood prior to the amendment and Sec.36(1)(va) Explanation 1 thereto r/w Sec.2(24)(x) are considered together, it is clear that they operate in different fields. So far as the employee's contribution received is concerned, it should have been paid on or before the due date prescribed under the relevant statutes. Then again the learned counsel contended that on a reading of Sec.43B(b), any sum "payable by the assessee as an employer" by way of contributio....