2022 (11) TMI 123

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....oyee contribution to Employees State Insurance and Provident Fund of Rs.75,57,462 u/s. 43B r.w.s. 36(1)(va) of the Act by the revenue authorities. 3. The assessee is an individual and filed return of under the head income from business or profession declaring income of Rs.21,74,290 and claiming a refund of Rs.3,86,670. The AO vide intimation u/s. 143(1) disallowed a sum of Rs.75,57,462 u/s. 43B of the Income-tax Act, 1961 [the Act] towards delayed remittance contribution to PF and ESI. Before the CIT(Appeals), the assessee furnished the break-up of the contribution between employees and employers as under:     PF and ESI i) Employees contribution Rs.29,88,667 ii) Employees contribution Rs.45,68,795 iii) Total ....

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.... second proviso of Section 43B, its intention was not to treat the disparate nature of the amounts, similarly. As discussed previously, the memorandum introducing the Finance Bill clearly stated that the provisions - especially second proviso to Section 43B - was introduced to ensure timely payments were made by the employer to the concerned fund (EPF, ESI, etc.) and avoid the mischief of employers retaining amounts for long periods. That Parliament intended to retain the separate character of these two amounts, is evident from the use of different language. Section 2(24)(x) too, deems amount received from the employees (whether the amount is received from the employee or by way of deduction authorized by the statute) as income - it is the ....

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....enditure. 53. The distinction between an employer's contribution which is its primary liability under law - in terms of Section 36(1)(iv), and its liability to deposit amounts received by it or deducted by it (Section 36(1)(va)) is, thus crucial. The former forms part of the employers' income, and the later retains its character as an income (albeit deemed), by virtue of Section 2(24)(x) - unless the conditions spelt by Explanation to Section 36(1)(va) are satisfied i.e., depositing such amount received or deducted from the employee on or before the due date. In other words, there is a marked distinction between the nature and character of the two amounts - the employer's liability is to be paid out of its income whereas the second is dee....

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....ject of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. If such interpretation were to be adopted, the non-obstante clause under Section 43B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee's contribution on or before the due date as a condition for deduction. 55. In t....