TaxTMI 
TaxTMI 
TaxTMI 
2022 (5) TMI 1172
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing Officer disallowed the claim of payment of Rs.15,58,782/- under section 36(1)(va) of the Income Tax Act, observing that the employees' contribution of EPF & ESI was paid after due date stipulated in these Acts. Subsequently, the rectification application filed by the assessee under section 154 of the I.T. Act was also rejected by the Assessing Officer. 3. Aggrieved by the order of the Assessing Officer, the assessee preferred an appeal before the ld. CIT(A). The ld. CIT(A), NFAC, vide his/her impugned order, confirmed the order of the Assessing Officer. The assessee is in further appeal before this Tribunal. 4. The ld. Counsel for the assessee, at the outset, submitted that the issue involved relates to the addition sustained by ld. CIT(A) of Rs.15,58,782/-, representing employees' shares towards contribution to ESIC & EPF, which the assessee had deposited beyond the due date mentioned in the provisions of the relevant section of the Income Tax Act; and that however, the deposits were made before the filing of return of income for the relevant assessment year. The ld. Counsel for the assessee further submitted that the issue involved in this appeal is squarely covered in favo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ration. In this back drop, we find it appropriate, first, to examine judgments of various High Courts which have been rendered after considering Supreme Court judgment in Commissioner of Income Tax Vs Alom Extrusions Ltd. (supra) and thereafter would examine the entire aspect in totality. 17. We find that with respect to employees contribution to Provident Fund, as to whether disallowable or not with reference to Section 36(1)(va) read with Section 43B, a similar question came up for consideration before Gujarat High Court in Commissioner of Income Tax Vs Gujarat State Road Transport Corporation, (2014) 366 ITR 170. Therein Assessee collected Rs.51,06,02,712/- from its employees towards provident fund contribution but deposited Rs.21,16,61,582/ with provident fund trust. Thus there was a short fall of Rs.24,89,41,130/. This amount of short fall was treated by Assessing Officer as income of Assessee vide Section 2(24)(x) read with Section 36(1)(va) of Act 1961. Assessing Officer also added Rs.1,93,55,580/ being the amount of short fall towards employers contributory provident fund and disallowed the same under Section 43B of Act 1961. He also disallowed the said amount of Rs.1,93....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Section 36(1)(va). It said: "It is required to be noted that as such there is no amendment in Section 36(1)(va) and even the Explanation to Section 36(1) (va) is not deleted and is still on the statute and is required to be complied with. Merely because with respect to the employer's contribution the second proviso to Section 43B which provided that even with respect to the employer's contribution (Section 43B(b)), the Assessee was required to credit the amount in the relevant fund under the PF Act or any other fund for the welfare of the employees on or before the due date under the relevant Act, is deleted, it cannot be said that Section 36(1)(va) has been deleted and/or amended." 19. That is how Gujarat High Court held that Section 43B would not be attracted in a case where dispute relates to employees contribution only. Section 43B would be confined only to employer's contribution. It further said: "Therefore, with respect to the employees contribution received by the assessee if the assessee has not credited the said sum to the employees' account in the relevant fund or funds on or before the due date mentioned in the Explanation to Section 36(1)(va), the assessee sha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e counsel for Revenue attempted to pursue to take a different view following decision of Gujarat High Court. The Division Bench judgment delivered by Hon'ble Dilip B. Bhosale, (as his lordship then was) held, if the contribution of employees fund is deposited within due date the Assessee is straightaway entitled for deduction under Section 36(1)(va). However Section 43B provides for certain deductions allowable only on actual payment. It gives an extension to the employer to make payment of contribution to provident fund or any other fund, till due date applicable for furnishing of Return under Section 139(1) of Act 1961, in respect of previous year in which liability to pay such sum was incurred, and evidence of such payment is furnished by Assessee along with such Return. Court then said: "In short, this provision states, notwithstanding anything contained in any other provision contained in this Act, a deduction otherwise allowable in this Act in respect of any sum payable by the assessee as an employer by way of contribution to any fund such as provident fund shall be allowed if it is paid on or before the due date as contemplated under Section 139(1) of the Income Tax Act. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) which includes profits and gains. Further in clause (x) of Section 2(24) any sum received by Assessee from employees as 'contributions' to any provident fund/superannuation fund or any fund set up under Act 1948, or any other fund for welfare of such employees constitute 'income'. This is the reason why every Assessee/ Employer was entitled to deduction even prior to April, 1, 1984, keeping books on mercantile system of accounting, as a business expenditure, by making provision in his books of account in that regard. Assessee was capable of keeping money with him and just by mentioning in accounts, was able to claim deduction as business expenses. Section 43B was inserted to check this practice and it resulted in discontinuing mercantile system of accounting with regard to tax, contributions etc. With induction of Section 43B an Assessee could claim deduction on actual payment basis. By Finance Act, 1988 Parliament inserted first proviso w.e.f. 01.04.1988 which inter alia provides that any sum payable by Assessee by way of tax, duty, cess or fee, if payment is made after closing of accounting year but before date of filing of Return under Section 139(1), Assessee ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o is curative and apply retrospectively w.e.f. 01.04.1988. 28. From the aforesaid judgment, we find that irrespective of the fact that deduction in respect of sum payable by employer contribution was involved, but Court did not restrict observations, findings and declaration of law to that context but looking to the objective and purpose of insertion of Section 43B applied it to both the contributions. It also observed clearly that Section 43B is with a non-obstante clause and therefore over ride even if, anything otherwise is contained in Section 36 or any provision of Act 1961. 29. Therefore, we are clearly of the view that law laid down by High Courts of Karnataka, Rajasthan, Punjab & Haryana, Delhi, Bombay and Himachal Pradesh have rightly applied Section 43B in respect to both contributions i.e. employer and employee. Otherwise view taken by Gujarat High Court and followed by Kerala High Court, with great respect, we find expedient to dissent therewith. 30. In view of above all the questions formulated above are answered against Revenue and in favour of Assessee." 8. I find that in the aforesaid judgment passed by Hon'ble Jurisdictional High Court, the Hon'b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....existed on the statute so far as employee contribution received by employer from employee which is to be deposited to the credit of employee with PF fund on or before the due date as provided in statute governing PF, to enable the employer to claim deduction u/s 36(1)(va) of the 1961 Act read with Section 2(24)(x) of the Act, and no deduction shall be allowed by virtue of Section 43B in case of delayed deposit beyond the time stipulated for deposit under relevant statute governing PF by virtue of being hit by Section u/s 36(1)(va) of the Act as it is stated in the explanation that provisions of section 43B shall not apply and shall be deemed never to have been applied for the purposes of determining the 'due date' under this clause , although the said amounts were deposited before the due date as prescribed for filing of return of income u/s 139(1) of the 1961 Act. The above amendment from the plain reading of the Section indicates that it ought to have retrospective effect , but on perusal of Memorandum to Finance Bill 2021, it transpires that the lawmakers have consciously made it applicable from ay: 2021-22 and subsequent assessment years. It is also recognised in the sa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd 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 subclause (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. Section 43B specifies the list of deductions that are admissible under the Act only upon their actual payment. Employer's contribution is covered in clause (b) of section 43B. According to it, if any sum towards employer....