TaxTMI 
TaxTMI 
2021 (8) TMI 1219
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.... 3. The issue at hand regarding allowability of deduction on account of deposit of employee's contribution to provident fund and ESI. The ld. CIT (A) held that the same have not paid before the due date are not eligible for claim of deduction. 4. Before us, the ld. AR relied on a plethora of case laws which have been mentioned at page nos. 4 & 5 of the order of the ld. CIT (A) and canvassed relying on the provisions of Section 43B. 5. We have gone through the provisions of the Section 36(1)(va) and Section 43B, cases cited and also the judgments on this issue. To mention a few, MADRAS HIGH COURT : October 23, 2018 M/S. UNIFAC MANAGEMENT SERVICES (INDIA) PRIVATE LTD. VERSUS THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATION CIRCLE 3 (2), CHENNAI The scope of Section 43B and Section 36 (1)(va) are different and thus, there is no question of reading both provisions together to consider as to whether the assessee is entitled to deduction in respect of the sum belatedly paid towards such contribution, especially when such sum is, admittedly, a sum received by the assessee/employer from his employee. Therefore, for considering such question, app....
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....at income to include any sum received by the assessee from his employees as contribution to any provident fund or superannuation fund or any fund set up under the provisions of ESI Act or any other fund for the welfare of such employees. Section 36 of the Act pertains to the other deductions. Sub-section (1) of the said section provides for various deductions allowed while computing the income under the head 'Profits and gains of business or profession.' Clause (va) of the said sub-section provides for deduction of 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 to the said clause provides that, for the purposes of this clause, " due date to mean 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 there- under or under any standing order, award, contract of service or otherwise. 8. Section 43B specifies ....
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....o clarify that the provisions of the said section do not apply and deemed to never have been applied to a sum received by the assessee from any of his employees to which provisions of sub-clause (x) of clause (24) of section 2 applies. 12. The language of newly proposed explanation 2 to section 36(1)(va) and explanation 5 to section 43B makes it clear that the amendment is retrospective. 13. The rational of the amendment was explained by the Memorandum to the Finance Bill, 2021 as below: "There is a distinction between employer contribution and employee' s contribution towards welfare fund. It may be noted that employee' s contribution towards welfare funds is a mechanism to ensure the compliance by the employers of the labour welfare laws. Hence, it needs to be stressed that the employer' s contribution towards welfare funds such as ESI and PF needs to be clearly distinguished from the employee' s contribution towards welfare funds. Employee' s contribution is employee own money and the employer deposits this contribution on behalf of the employee in fiduciary capacity. By late deposit of employee contribution, the employers get unjustly enriched....
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....ts and circumstances of the case because Hon'ble Supreme Court has decided the issue in Alom Extrusions Ltd. case qua employers contribution as per section 43B(b) of the Act and not qua employees contribution u/ s 36 (1)(va) of the Act. 11. Hon'ble jurisdictional High Court in case of CIT vs. Bharat Hotels Ltd. (2019) 410 ITR 417 (Delhi) (supra) decided the identical issue qua delayed deposit of employees contribution on account of PF & ESI against the assessee by holding that assessee would be entitled to deduction in terms of section 36(1)(va) of the Act to the extent if the employees contribution on account of PF & ESI is deposited on or before the due date, and the employees contribution on account of PF & ESI deposited beyond the stipulated period would not make the assessee company entitled to claim deduction from its return. For ready perusal, operative part of the judgment of CIT vs. Bharat Hotels Ltd. (supra) is extracted as under:- "7. The issue here concerns the interplay of Section 2(24)(x) of the Act read with Section 36 (1)(va) of the Act alongside provisions of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (especi....