TaxTMI 
TaxTMI 
2024 (6) TMI 1277
X X X X Extracts X X X X
X X X X Extracts X X X X
....PC. Bangalore (in brevity the 'AO') passed u/s 143(1) of the Act dated 28.04.2020. 2. The assessee has taken the following grounds of appeal: "1. That the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre erred in facts and on law in confirming the addition made in the intimation U/s 143(1) issued by the Ld. DCIT when the same was unlawful and arbitrary as the issue involved was debatable on facts and law. 2. That the Ld. CIT (Appeals), NFAC erred in facts and on law in confirming the addition of Rs. 40,91,341/- made by the CPC, Bangalore invoking the provisions of section 43B of the Income Tax Act, 1961 read with sections 2(24)(x) and 36(1)(va) for the alleged delay in depositing the Employees Contribution to Provi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....The return was processed and from the Tax Audit Report it was found that the assessee has violated the provisions of Section 36(1)(va) read with Section 43B(b) of the Act for delay in payment of PF&ESI amounting to Rs. 40,91,370/-. During the processing of the return, the entire amount was disallowed and added back with total income which was mentioned in the Tax Audit Report on account of disallowance u/s 36(1)(va) read with Section 2(24)(x) of the Act for delayed payments towards employees' contribution to PF&ESI. The employees' contribution to PF&ESI was made before due date of filing return of income but after the due date of the mentioned in the specific Act. 5. Being aggrieved, the assessee filed an appeal before ld. CIT(A) w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e other hand, Gujarat and Kerala HCs took contrary view (minority view) favouring tax authority that the due date for deposit for employees' contribution is the statutory due date under the relevant statutes governing the SSS (statutory due date) and thus, if not paid within statutory due date, the taxpayer permanently forfeits the deduction. Upholding the minority view, the Supreme Court, in the present case, ruled in favour of the tax authority and held that employees' contributions are deductible if paid before the statutory due date. Supreme Court resolves judicial conflict on the due date of payment of employees' contributions to Social Security Schemes for tax deduction. The Supreme Court ruling effectively endorses the amendmen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on thereof. ► By inserting Section 36(1)(va) and amending definition of "income", the Parliament intended that amounts not earned by the taxpayer, but received by it - whether in the form of deductions or otherwise, as receipts, were to be treated as income. Since these receipts did not belong to taxpayer but were held by them as trustees, Section 36(1)(va) was inserted to ensure that if these receipts are deposited in the relevant SSS on or before the "due date", they could be treated as deductions. The "due date'' is specifically defined as the date by which the amounts have to be credited by the employer, in the concerned SSS. Most importantly, this condition does not apply to employer's contribution which is covered by separate ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....from employees' income and held in trust by the employer, are artificially treated as employer's income unless paid by statutory due date. The marked distinction between nature and character of two amounts has to be borne in mind while interpreting the two provisions. Hence, the HCs taking minority view were correct in holding that "non-obstante clause" in Section 43B does not dilute or override employer's obligation to deposit employees' contribution by statutory due date. The present SC ruling in favour of the tax authority effectively endorses Finance Act, 2021 amendment and makes it clarificatory in nature. Since the present SC ruling is of Three-Judge Bench while the earlier Alom Extrusions ruling was of Two-Judge Bench, the present ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iew that It has finally been held by Hon'ble Apex Court there is clear distinction between 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 from its employees' in terms of Sec. 36(1)(va). The former part is the employers' income, and the later retains its character as an income (albeit deemed), by virtue of Section 2(24)(x) and therefore, subjected to conditions spelt out by Explanation to Section 36(1)(va) 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 contributions - the employer's liabili....