TaxTMI 
TaxTMI 
2020 (10) TMI 1119
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....bunal, Chennai (hereinafter called "the Tribunal") read as under:- "1. For that the order of the Commissioner of Income Tax (Appeals) is contrary to law, facts and circumstances of the case to the extent prejudicial to the interest of the assessee and at any rate is opposed to the principles of equity, natural justice and fair play. 2. For that the Commissioner of Income Tax (Appeals) erred in upholding the disallowance of employees' contribution to PF & ESI amounting to Rs. 83,08,244/- u/s.36(1)(va). 3. For that the Commissioner of Income Tax (Appeals) erred in disallowing the employees' contribution to PF & ESI for the reason that the payments to the relevant fund were not made within the due date of the relevant statute. 4. For that Commissioner of Income Tax (Appeals) failed to appreciate that the payment of employees' contribution to PF & ESI within the due date for filing the return of income is an allowable expenditure. 5. For that the Commissioner of Income Tax (Appeals) erred in upholding the addition of Rs. 18,52,300/- as unexplained credit u/s.68. 6. For that the Commissioner of Income Tax (Appeals) failed....
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.... PF & ESI by invoking Sec.36(1)(va) read with Section 2(24)(x) of the 1961 Act , as these contributions received by the assessee from its employees were deposited by assessee with the PF/ESI authorities beyond the time prescribed under PF & ESI Act , while it is an admitted position that the said employees contribution towards PF and ESI were deposited by assessee with the aforesaid authorities before the due date as is prescribed for filing of return of income u/s.139(1) of the 1961 Act. The Ld.CIT(A) vide appellate order dated 28.02.2019 has disallowed the same by holding as under: "5. I heard contentions of the AR of the Appellant and perused the grounds of appeal, assessment order, AR's submission and material available on record. My observations in respect of the grounds raised by the appellant are as follows: 6. PF&ESI: 6.1 Assessing Officer noticed that the assessee remitted employee's Contributions to ESI and PF amounting to Rs. 83,08,244/- after the due dates prescribed and hence disallowed the same u/s.36(1)(va) r.w.s 2(24)(x). 6.2 In the grounds of appeal, the appellant contested as under: "2. For that the Assessing Of....
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....d., in ITA No.2848/Chny/2017 order dated 19.09.2018, in which, one of us namely Judicial Member was part of the Division Bench who pronounced the said order, wherein the tribunal held that deduction u/s 36(1)(va) read with Section 2(24)(x) of the 1961 Act is to be allowed if the employee contribution to PF/ESI received by the taxpayer is deposited before the due date as is prescribed for filing of return of income under the provisions of Section 139(1) of the 1961 Act, albeit the same was deposited beyond the time stipulated under the provisions of statute governing PF/ESI. The Ld.Counsel for the assessee also relied upon decision of the Co-ordinate Benches of Chennai Tribunal in the case of M/s Selva Gold Covering Pvt. Ltd. v. DCIT in ITA No.693/Chny/2017 dated 25.11.2019, in which, one of us namely Accountant Member was part of the Division Bench who pronounced the said order wherein tribunal has also allowed the deduction with respect to employee contribution towards PF/ESI received by taxpayer which was deposited beyond the time prescribed under the relevant statute governing PF/ESI but was deposited before the due date of filing of return of income as is prescribed under Secti....
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....ntly, the said decision of Single Judge of Hon'ble Madras High Court was challenged by the taxpayer before the Division Bench of Hon'ble Madras High Court by filing writ appeal no. 2854 of 2018 and CMP No. 23727 of 2018 and the Division Bench of Hon'ble Madras High Court was pleased to grant permission to the tax-payer to withdraw the original writ petition namely WP No. 5264 of 2018 as well writ appeal no. 2854 of 2018, vide orders dated 09.01.2019. We have also observed that in the case of M/s.Repco Home Finance Pvt. Ltd.(supra) in which one of us namely Accountant Member was part of the Division Bench who pronounced the said order, the Chennai tribunal has elaborately discussed this issue including the decision of the Hon'ble Madras High Court in the case of M/s.Unifac Management Services (India) Pvt. Ltd.(supra), and after considering the various decisions passed by Superior Courts have decided the issue in favour of the taxpayer. The decision of the ITAT, Chennai, in the case of Repco Home Finance Private Limited (supra) is reproduced hereunder: "10. The next effective issue, which is agitated by Revenue before tribunal , is with respect of disallowance of Rs. 6,31,78....
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....he Revenue has now filed an appeal before the tribunal agitating against the decision of learned CIT(A) granting relief to assessee despite specific provision as is contained in Section 36(1)(va) read with Explanation 1 of the 1961 Act that deduction towards employees contribution to PF can be allowed only when the employer remits the said employee contribution to the credit of employee with relevant fund on or before the due date specified in statute governing PF, which admittedly was not complied by the assessee. Before us, the Ld. D.R. submitted that Section 36(1)(va) read with Explanation 1 of the 1961 Act clearly provides that employee contribution to Provident Fund amount should have been deposited before the due date as prescribed under the statute governing Provident Fund. By relying on the provisions of section 36(1)(va) of the Act so far as employees contribution is concerned, the learned DR relied upon the decision of Hon'ble Madras High Court in the case of The Principal C.I.T. v. M/s.Orchid Pharma Ltd., in Tax case appeal Nos.430 & 421 of 2019 & CMP No.13978 of 2019 for ay:2013-14 and 2014-15, judgment dated 08.07.2019 and prayers were made by Ld. D.R. to restore the m....
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....sub-clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date. Explanation.-For the purposes of this clause, "due date" means the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise;]" "Certain deductions to be only on actual payment. 43B. Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of- *** (b) 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 employees, *** *** shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referre....
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....in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return: Provided further that no deduction shall, in respect of any sum referred to in clause (b), be allowed unless such sum has actually been paid during the previous year on or before the due date as defined in the Explanation below clause (va) of sub-section (1) of section 36.] *** *** Thus, Section 43B of the 1961 Act as it stood vide amendment made by Finance Act, 1987 w.e.f. 01.04.1988 , inter-alia, provided that notwithstanding anything contained in any other provision of the 1961 Act, a deduction which is otherwise allowable under the 1961 Act shall be allowed of 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 employees provided the said sum is actually paid during the previous year on or before the due date as defined in the Explanation below clause (va) of sub-section (1) of section 36 viz. the date prescribed under the relevant statute governin....
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....8, which decision of Hon'ble Supreme Court is reproduced hereunder: 6. The lead matter in this batch of civil appeals is CIT v. Alom Extrusions Ltd. [Civil Appeal arising out of S.L.P. (C) No. 23851 of 2007]. Prior to the amendment of section 43B of the Act, vide Finance Act, 2003, the two provisos to section 43B of the Act read as under : "Provided that nothing contained in this section shall apply in relation to any sum referred to in clause (a) or clause (c) or clause (d) or clause (e ) or clause (f), which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under subsection (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return : Provided further that no deduction shall, in respect of any sum referred to in clause (b) , be allowed unless such sum has actually been paid in cash or by issue of a cheque or draft or by any other mode on or before the due date as defined in the Explanation below clause (va) of sub-section (1) of section 36, and whe....
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...., by which the Mercantile System of Accounting with regard to tax, duty and contribution to welfare funds stood discontinued and, under section 43B, it became mandatory for the assessee(s) to account for the afore-stated items not on Mercantile basis but on cash basis. This situation continued between 1-4-1984 and 1-4-1988, when the Parliament amended section 43B and inserted first proviso to section 43B. By this first proviso, it was, inter alia, laid down, in the context of any sum payable by the assessee(s) by way of tax, duty, cess or fee, that if an assessee(s) pays such tax, duty, cess or fee even after the closing of the accounting year but before the date of filing of the Return of income under section 139(1) of the Act, the assessee(s) would be entitled to deduction under section 43B on actual payment basis and such deduction would be admissible for the accounting year. This proviso, however, did not apply to the contribution made by the assessee(s) to the labour welfare funds. To this effect, first proviso stood introduced with effect from 1-4-1988. Vide Finance Act, 1988, the second proviso came to be inserted. It reads as follows: "Provided further that no dedu....
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....ess and fee on the one hand with contributions to Employees' Provident Fund, superannuation fund and other welfare funds on the other. However, the Finance Act, 2003, bringing about this uniformity came into force with effect from 1-4-2004. Therefore, the argument of the assessee(s) is that the Finance Act, 2003, was curative in nature, it was not amendatory and, therefore, it applied retrospectively from 1-4-1988, whereas the argument of the Department was that Finance Act, 2003, was amendatory and it applied prospectively, particularly when the Parliament had expressly made the Finance Act, 2003, applicable only with effect from 1-4-2004. It was also argued on behalf of the Department that even between 1-4-1988 and 1-4-2004, Parliament had maintained a clear dichotomy between payment of tax, duty, cess or fee on one hand and payment of contributions to the welfare funds on the other. According to the Department, that dichotomy continued up to 1-4-2004, hence, looking to this aspect, the Parliament consciously kept that dichotomy alive up to 1-4-2004, by making Finance Act, 2003, come into force only with effect from 1-4-2004. Hence, according to the Department, Finance Act, 2....
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....estion which arose for determination was, whether sales tax collected by the assessee and paid after the end of the relevant previous year but within the time allowed under the relevant Sales Tax law should be disallowed under section 43B of the Act while computing the business income of the previous year? That was a case which related to assessment year 1984-85. The relevant accounting period ended on 30-6- 1983. The Income-tax Officer disallowed the deduction claimed by the assessee which was on account of sales tax collected by the assessee for the last quarter of the relevant accounting year. The deduction was disallowed under section 43B which, as stated above, was inserted with effect from 1-4-1984. It is also relevant to note that the first proviso which came into force with effect from 1-4-1988 was not on the statute book when the assessments were made in the case of Allied Motors (P.) Ltd. (supra). However, the assessee contended that even though the first proviso came to be inserted with effect from 1-4-1988, it was entitled to the benefit of that proviso because it operated retrospectively from 1-4- 1984, when section 43B stood inserted. This is how the question of retro....
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....004, would get the benefit of deduction under section 43B of the Act. In our view, therefore, Finance Act, 2003, to the extent indicated above, should be read as retrospective. It would, therefore, operate from 1-4-1988, when the first proviso was introduced. It is true that the Parliament has explicitly stated that Finance Act, 2003, will operate with effect from 1-4-2004. However, the matter before us involves the principle of construction to be placed on the provisions of Finance Act, 2003. 10. Before concluding, we extract hereinbelow the relevant observations of this Court in the case of CIT v. J.H. Gotla [1985] 156 ITR 323, which reads as under: "...We should find out the intention from the language used by the Legislature and if strict literal construction leads to an absurd result, i.e., a result not intended to be subserved by the object of the legislation found in the manner indicated before, then if another construction is possible apart from strict literal construction, then that construction should be preferred to the strict literal construction. Though equity and taxation are often strangers, attempts should be made that these do not remain always so....
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....r an approved superannuation fund made by the assessee as an employer, subject to certain limits and also subject to certain conditions as the CBDT may think fit to specify. Clause (v) of sub-section (1) of section 36 enables the assessee to seek deduction in respect of sum paid by it as an employer by way of contribution towards an approved gratuity fund created by him for the exclusive benefit of his employees under an irrevocable trust. Then comes clause (va) which deals about employees' contribution in the provident fund and ESI and reads as under:- "(va)any sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date. Explanation - For the purposes of this clause, 'due date' means the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract or service or otherwis....
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....ly been paid in cash or by issue of a cheque or draft or by any other mode on or before the due date as defined in the Explanation below clause (va) of sub-section (1) of section 36, and where such payment has been made otherwise than in cash, the sum has been realized within fifteen days from the due date." 8. As per the first proviso, if the payment is actually made on or before the due date applicable in his case for filing the return, it would be admissible as deduction. Thus, the 'due date' is the date on which return is to be filed. The case of the Revenue is that for employees' contribution, the 2nd proviso was specifically incorporated and in the present case, as we are concerned with non-deposit of the employees' contribution towards provident fund as well as ESI contribution by the employer, only 2nd proviso be looked into. 9. What is sought to be argued is that distinction is to be made while treating the case related to employers' contribution on the one hand and employees' contribution on the other hand. It was submitted that when employees' contribution is recovered from their salaries/wages, that is trust money i....
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....es that such deduction would be permissible only on actual payment. This is the scheme of the Act for making an assessee entitled to get deduction from income insofar as employees' contribution is concerned. It is in this backdrop we have to determine as to at what point of time this payment is to be actually made. 12. Since the ITAT while holding that the amount would qualify for deduction even if paid after the due dates prescribed under the Provident Fund/ESI Act but before the filing of the income-tax returns by placing reliance upon the Supreme Court judgment in Vinay Cement Ltd.'s case (supra). at this juncture we take note of the discussion of ITAT on this aspect :- "11. We have carefully considered the rival submissions in the light of material placed before us. In the assessment order ld. Assessing Officer has categorically stated that what the amount due was for which month in respect of EPF, Family Pension, PF inspection charges and ESI deposits and what were the due dates for these deposits and on which date these deposits were made. The dates of deposits are mentioned between 23rd May, 2001 to 23rd April, 2002. The latest payment is made on 23....
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....[2008] 297 ITR 320, this Court specifically dealt with this issue and relying upon the aforesaid judgment of the Guwahati High Court, as affirmed by the Supreme Court in Vinay Cement Ltd.'s case (supra), the appeal of the Revenue was dismissed. More detailed discussion is contained in another judgment of this Court in CIT v. P.M. Electronics Ltd. [2009] 177 Taxman 1. Specific questions of law which were proposed by the Revenue in that case were as under :- "(a)Whether amounts paid on account of PF/ESI after 'due date' are allowable in view of section 43B, read with section 36(1)(va) of the Act? (b)Whether the deletion of the 2nd proviso to section 43B by way of amendment by the Finance Act, 2003 is retrospective in nature" (p. 2) 16. These questions were answered by the Division Bench in the following manner :- "7. Having heard the learned counsel for the revenue, as well as, the assessee, we are of the view that the view taken by the Tribunal deserves to be sustained as it is no longer res integra in view of the decision of the Supreme Court in the case of CIT v. Vinay Cement Ltd. 213 ITR 268 which has been followed by a Div....
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....assed by the Supreme Court on 7-3-2007 wherein it observed as follows:- 'Delay condoned. In the present case we are concerned with the law as it stood prior to the amendment of section 43B. In the circumstances, the assessee was entitled to claim the benefit in section 43B for that period particularly in view of the fact that he has contributed to provident fund before filing of the return. Special leave petition is dismissed'. 10. In view of the above, it is quite evident that the special leave petition was dismissed by a speaking order and while doing so the Supreme Court had noticed the fact that the matter in appeal before it pertain to a period prior to the amendment brought about in section 43B of the Act. The aforesaid position as regards the state of the law for a period prior to the amendment to section 43B has been noticed by a Division Bench of this Court in Dharmendra Sharma's case (supra). Applying the ratio of the decision of the Supreme Court in Vinay Cement Ltd.'s case (supra) a Division Bench of this Court dismissed the appeals of the revenue. In the passing we may also note that a Division Bench of the Madras High Court in the cas....
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.... 13. In these circumstances, we respectfully disagree with the approach adopted by a Division Bench of the Bombay High Court in Pamwi Tissues Ltd.'s case (supra). 14. In these circumstances indicated above, we are of the opinion that no substantial question of law arises for our consideration in the present appeal. The appeal is, thus, dismissed." (p. 3) It also becomes clear that deletion of the 2nd proviso is treated as retrospective in nature and would not apply at all. The case is to be governed with the application of the 1st proviso. 17. We may only add that if the employees' contribution is not deposited by the due date prescribed under the relevant Acts and is deposited late, the employer not only pays interest on delayed payment but can incur penalties also, for which specific provisions are made in the Provident Fund Act as well as the ESI Act. Therefore, the Act permits the employer to make the deposit with some delays, subject to the aforesaid consequences. Insofar as the Income-tax Act is concerned, the assessee can get the benefit if the actual payment is made before the return is filed, as per the principle laid down by ....
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....ny substantial question of law arises for consideration in these appeals. Accordingly, both the Tax Case(Appeals) stand dismissed. No Costs. Consequently, M.P. N. 1 of 2015 is also dismissed." 10.3.7 We have also observed that Co-ordinate Division Bench of Chennai Tribunal in ACIT v. SPEL Semiconductor Limited in I.T.A. No. 3263/Chny/2018 for ay:2013-14 has decided this issue in favour of the tax-payer as in that case the employee contribution of the Provident Fund was deposited by employer to the credit of employees with respective PF fund after the due date as prescribed in the applicable PF Act, but was deposited before the due date as prescribed for filing of return of income under Section 139(1) of the 1961 Act, by relying on decision of Hon'ble Madras High Court in the case of CIT v. Industrial Security & Intelligence India Private Limited(supra). One of us namely Hon'ble Judicial member was part of the Division Bench who pronounced the order in the case of SPEL Semiconductor Limited(supra). 10.3.8 We have observed that most of the Hon'ble High Courts in India have taken a view on this issue of belated deposit of employee contribution towards PF/ESI and othe....
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.... decision(s) of Hon'ble Kerala High Court in the case of CIT v. Merchem Limited reported in (2015) 378 ITR 443(Ker.) and also decision in the case of Popular Vehicles and Services Private Limited v. CIT reported in (2018) 96 taxmann.com 13(Ker.), wherein this issue is decided by Hon'ble Kerala High Court in favour of Revenue and with this background, Hon'ble Madras High Court remanded the matter back to the file of learned CIT(A) for fresh adjudication of the issue , after considering entire law in statute and decisions of Courts post the decision of Hon'ble Delhi High Court in the case of Aimil Limited(supra). We have observed that Hon'ble Supreme Court in the case of Alom Extrusion(cited supra) while adjudicating on applicability of amended provision of Section 43B of the 1961 Act by virtue of deletion of second proviso and amendment of first proviso by Finance Act, 2003 which was applicable wef 01.04.2004 , held the said amendments to be curative in nature and to apply retrospective wef 01.04.1988. The Hon'ble Supreme Court also referred to larger bench decision in the case of Allied Motors Private Limited (1997) 224 ITR 677(SC) to hold amendment made by Finance Act, 2003 to be ....
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....) 366 ITR 1(Bom.). The Hon'ble Delhi High Court in AIMIL Limited (supra) held that if employees contribution is not deposited by the due date prescribed under the relevant Acts and is deposited late, the employer not only pays interest on delayed payments but can incur penalties also , for which specific provisions are made in the Provident Fund Act as well as the ESI Act. It further held that the statutes governing PF/ESI permits the employer to make the deposit with some delays , subject to the aforesaid consequences. Insofar as the 1961 Act is concerned, the assessee can get the benefit if the actual payment made is before the return of income is filed , as per the principle laid down by the Supreme Court in Vinay Cement Ltd.'s case(supra). However, Hon'ble Delhi High Court has now decided this issue in favour of Revenue in the case of CIT v. Bharat Hotels Limited reported in (2019) 410 ITR 417(Del.) , while impliedly reversing the stand taken in its earlier decision in the case of Aimil Limited(supra). However, the decision in the case of Aimil Limited(supra) was not brought to the notice of Hon'ble Judges of Delhi High Court while adjudicating in the case of Bharat Hotels(supr....
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....further went on to hold that the issue before Hon'ble Supreme Court while adjudicating appeal in the case of Alom Extrusion(supra) was never with respect of employees contribution to PF/ESI and it was only in context of employers contribution to PF/ESI , wherein amendments brought in by Finance Act, 2003 were held to be retrospective by Hon'ble Supreme Court in the case of Alom Extrusion(supra). The decision of Hon'ble Kerala High Court in the case of Popular Vehicles (supra) is reproduced as hereunder: "7. We will first notice the provisions. "S.2(24) "income" includes - ** ** ** (x) any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the provisions of the Employees' State Insurance Act, 1948 A(34 of 1948), or any other fund for the welfare of such employees". "S.36. Other deductions (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in the section 28- ** ** ** (v) any sum paid by the assessee as an employer by way of....
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....Ltd.'s case (supra)and Merchem Ltd.'s case (supra)applied in two different fields; the former with reference to Section 43B(b), being employer's contribution and the latter dealing with employee's contribution as covered by Section 36(1)(va). We would first deal with Alom Extrusions Ltd.'s case (supra)which has dilated upon the history of the legislation and the reason for the various amendments brought in. We first notice that the question which arose for consideration in Alom Extrusions Ltd.'s case (supra)was as to "whether omission (deletion) of the second proviso to section 43B of the Income-tax Act, 1961, by the Finance Act, 2003, operated with effect from April 1, 2004, or whether it operated retrospectively with effect from April 1, 1988" (sic para 4). The Hon'ble Supreme Court noticed that prior to Finance Act, 2003, the second proviso to Section 43B restricted the deduction in respect of any sum payable by an employer by way of contribution to provident fund/superannuation fund or any other fund for the welfare of employees, unless it stood paid within the specified due date. 10. Here we have to notice that sub-clause (b) of Section 43B....
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....nd fee and not applied to contributions to labour welfare funds. The reason also stated by the Hon'ble Supreme Court "to be that the employer(s) should not sit on the collected contributions and deprive the workmen of the rightful benefits under social welfare legislations by delaying payment of contributions to the welfare funds" (sic - para 16). It is this declaration by the Hon'ble Supreme Court which is relied on by the learned Counsel for the appellant to contend that the Hon'ble Supreme Court was considering the question of employee's contribution also. Otherwise, there would not have been a reference to an 'employer sitting on the collected contribution', is the compelling argument. 12. We have to understand this statement with reference to the question framed by the Hon'ble Supreme Court at the first instance in the opening paragraph of the judgment. We also have to notice that even otherwise the Explanation to sub-clause (va) of Section 36(1) took care of the employee's contributions; which was introduced by the Finance Act, 1987 with effect from 01.04.1988, from which date the statute recognised the distinction between emp....
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....ductions to be allowable only on actual payment; when such deductions are otherwise allowable. Primarily it is to be noticed that it is a restrictive clause, the amendments to which or the deletion of a proviso in which cannot lead to it being converted as an enabling provision permitting deduction even when there was no deduction permissible by the other provisions of the Act. The non-obstante clause has no effect insofar as the employee's contribution which is specifically covered by sub-clause (va) of Section 36(1). By virtue of the Explanation below sub-clause (va), no deduction could be claimed if the contribution has not been paid, after collection from the employees by way of deduction from their salaries, within the due date under the EPF&MP Act. The deletion of a proviso under Section 43B cannot render otiose the Explanation under Section 36(1)(va). 15. Merchem Ltd.'s case (supra), we notice, dealt with the specific question of disallowance of employee's contribution when the same was not paid within the time provided under the statute under which the welfare fund was created and held so in paragraph 19: '19. Therefore, income of the asses....
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.... income referred to in section 28 of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1983 or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him." Therefore, according to us, since the Respondent has admittedly not paid the deduction so made within the due date as provided under Sec. 36(1)(va), the Respondent was not entitled to get deduction of the amounts deducted thereunder for and on behalf of the employees'. 16. The learned Judges had elaborately considered the decision in Alom Extrusions Ltd.'s case (supra)and has found the provisions having application in different fields. Section 43B(b) dealt with the employer's contribution and sub-clause (va) of Section 36(1) was concerned with the employees contribution as rightly held. We do not find ourselves persuaded to take a different view with respect to employee's contribution and we respectfully follow the decisio....
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....t the time of payment of salary is received by the employer-Company and is treated as income under Section 2(24). On remittance of this contribution, within the due date, it is allowed as a deduction under Section 36. If it is not paid to the welfare fund within the due date provided under the relevant statute, it remains as an income in the books of accounts of the assessee/employer Company. The said contribution having not been paid to the applicable welfare fund within the due date provided, the assessee for all time is deprived of claiming such a remittance, made subsequently, as deduction from the income. This, as the Hon'ble Supreme Court noticed, is looking at the spirit behind the labour welfare legislation and the need for the employer to satisfy the remittance within the time provided under the statute creating the welfare fund. At least with respect to the employee's contributions, which the employer deducts from the salary of the employees, if it is not remitted into the fund within the due date, the employer not only has defaulted the stipulation in the labour legislation but has received an income; albeit an illegal enrichment. Sub-section (v) is with respect ....
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....licable in his case for furnishing the return of income u/s 139(1) of the 1961 Act. So , what is important for entering into provisions of Section 43B of the 1961 Act is that the deduction ought to be firstly allowable under the provision of the 1961 Act before recourse to Section 43B of the 1961 Act can be taken. Provisions of Section 36(1)(va) allows deduction towards employees contribution to PF/ESI and other welfare funds of employees which is required to be deposited by employer to the credit of employee with relevant fund on or before the due date as is prescribed under the relevant statute applicable for PF/ESI and other welfare funds of employees , otherwise deduction u/s 36(1)(va) of the 1961 Act is not allowable and employee contribution towards PF/ESI and other employees welfare funds received by employer shall be deemed to be income of the assessee u/s 2(24)(x) of the 1961 Act. Thus, firstly to get deduction u/s 36(1)(va) of the 1961 Act of the employee contribution received by employers towards PF/ESI which constitute income in the hands of employer by virtue of Section 2(24)(x) of the 1961 Act, the employers is required to deposit the employees contribution to the cre....
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....f entering into provisions of Section 43B of the 1961 Act which deals with allowing deduction on payment basis provided the deduction is otherwise allowable under the provisions of the 1961 Act. Section 36(1)(va) of the 1961 Act is a provision which entitles tax-payer to claim deduction from the income and hence the provision is to be strictly construed and the onus is on the assessee to prove that it fulfills all the conditions as stipulated under Section 36(1)(va) read with Explanation before claiming deduction from its income. The decision of Constitution Bench of Hon'ble Supreme Court in the case of Commissioner of Customs (Imports) v. Dilip Kumar & Co. reported in (2018) 9 SCC 1 is relevant. The recent decision of Hon'ble Supreme Court in the case of Ramnath & Co. v. CIT reported in (2020) 116 taxmann.com 885(SC) is relevant (refer para 17 to 20) , which is reproduced hereunder: Dilip Kumar & Co. 17. The core question referred for authoritative pronouncement to the Constitution Bench in the case of Dilip Kumar & Co. (supra) was as to what interpretative rule should be applied while interpreting a tax exemption provision/notification when there is an ambiguity....
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....or limited period or with the specific objective, etc. That is why its construction, unlike charging provision, has to be tested on different touchstone. In fact, an exemption provision is like an exception and on normal principle of construction or interpretation of statutes it is construed strictly either because of legislative intention or on economic justification of inequitable burden or progressive approach of fiscal provisions intended to augment State revenue. But once exception or exemption becomes applicable no rule or principle requires it to be construed strictly. Truly speaking liberal and strict construction of an exemption provision are to be invoked at different stages of interpreting it. When the question is whether a subject falls in the notification or in the exemption clause then it being in nature of exception is to be construed strictly and against the subject, but once ambiguity or doubt about applicability is lifted and the subject falls in the notification then full play should be given to it and it calls for a wider and liberal construction." (emphasis supplied) ** ** ** 58. In the above passage, no doubt this Court observed that....
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....onstrue it liberally." 60. We do not find any strong and compelling reasons to differ, taking a contra view, from this. We respectfully record our concurrence to this view which has been subsequently, elaborated by the Constitution Bench in Hari Chand case " (emphasis in bold supplied) 17.2. The Constitution Bench decision in Hari Chand Shri Gopal (supra) was also taken note of, inter alia, in the following:- "50. We will now consider another Constitution Bench decision in CCE v. Hari Chand Shri Gopal (hereinafter referred as "Hari Chand case", for brevity). We need not refer to the facts of the case which gave rise to the questions for consideration before the Constitutional Bench. K.S. Radhakrishnan, J., who wrote the unanimous opinion for the Constitution Bench, framed the question viz. whether manufacturer of a specified final product falling under the Schedule to the Central Excise Tariff Act, 1985 is eligible to get the benefit of exemption of remission of excise duty on specified intermediate goods as per the Central Government Notification dated 11-8-1994, if captively consumed for the manufacture of final product on the ground that the r....
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....notification. 66.2. When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the Revenue. 66.3. The ratio in Sun Export case is not correct and all the decisions which took similar view as in Sun Export case stand overruled." (emphasis in bold supplied) 17.4. Obviously, the generalised, rather sweeping, proposition stated in the case of Sun Export Corporation (supra) as also in other cases that in the matters of taxation, when two views are possible, the one favourable to assessee has to be preferred, stands specifically disapproved by the Constitution Bench in Dilip Kumar & Co. (supra). It has been laid down by the Constitution Bench in no uncertain terms that exemption notification has to be interpreted strictly; the burden of proving its applicability is on the assessee; and in case of any ambiguity, the benefit thereof cannot be claimed by the subject/assessee, rather it would be interpreted in favour of the revenue. 18. It has been repeatedly emphasised on behalf of the appellant that Se....
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....on, the ambit and scope of the provision for the purpose of its applicability cannot be expanded or widened and remains subject to strict interpretation but, once eligibility is decided in favour of the person claiming such deduction, it could be construed liberally in regard to other requirements, which may be formal or directory in nature. 10.3.11 Thus, keeping in view strict and literal interpretation of provisions of Section 36(1)(va) of the 1961 Act read with Explanation 1 and Section 2(24)(x) of the 1961 Act , the assessee will not be entitled for deduction as the employee contribution towards PF received by assessee was deposited late beyond the time stipulated under the relevant statute governing PF. But, it is equally true that the Constitutional Courts viz. Hon'be High Courts and Hon'ble Supreme Court in India have powers to read down the provisions of the 1961 Act to make it workable and to avoid absurdity. On perusal of the decision of Hon'ble Supreme Court in the case of Alom Extrusion(supra) , it is observed that Hon'ble Supreme Court has elaborately discussed provisions of Section 36(1)(va) ,2(24)(x) and amendments made by Finance Act, 2003 to Secti....
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....nd other employees welfare funds and in the ideal situation , the said amounts ought to have been deposited by employer which it collected from its employees, to the credit of employee with relevant funds within time stipulated as due date by respective statute governing PF/ESI etc. but at the same time if the employer does not deposit the contribution towards PF/ESI etc within due date as prescribed under relevant statute governing PF/ESI etc, the employers are visited with Interest for delayed deposit of PF/ESI as well Penalties for late deposit beyond the time stipulated under the relevant statute governing PF/ESI and other employees welfare funds. Reference is drawn to Section 7Q and 14 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. Similarly, Hon'ble Madras High Court in the case of Industrial Security and Intelligence India Private Limited (supra) after considering and interpreting the decision of Hon'ble Supreme Court in the case of Alom Extrusion (supra) and Hon'ble Delhi High Court in the case of Aimil Limited(supra) held that deduction is to be allowed for belated payment of employee contribution to PF/ESI which is deposited beyond the ....