TaxTMI 
TaxTMI 
2022 (4) TMI 1677
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....139(1) and the deduction of the same is allowable to the assessee. Regarding disallowance u/s 40(a)(ia), the Ld. AR placed on record copy of Form 26A and submitted that the due taxes have been paid by the payees and therefore, the disallowance is not justified. The assessee seek benefit of second proviso to Sec. 40(a)(ia). The Ld. Sr. DR supported the impugned order. Having heard rival submissions, our adjudication would be as under. 3. We find that the assessee filed return of income on 30.09.2018. The same was processed u/s 143(1) by CPC, Bengaluru on 01.09.2019 raising certain demand against the assessee. One of the adjustments was for late deposit of employees' contribution to PF and ESI for Rs.10,72,406/- and another adjustment was disallowance u/s 40(a)(ia) for Rs. 2,69,999/- for want of compliance of TDS provisions. The assessee preferred further appeal against the same and submitted that the dues were deposited well before due date of filing of return of income u/s 139(1). However, Ld. CIT(A) upheld the disallowances in terms of amendment brought in by Finance Act, 2021 in Sec. 36(1)(va) as well as in Sec. 43B. The disallowance u/s 40(a)(ia) was also confirmed since the ....
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....ld result into denial of deduction to the assessee. 5. We find that even though the provisions of Sec.43B only covers the Employer's contribution and not employees' contribution, still the higher courts have held that the provisions of Sec.43B would be applicable to employees' contribution as well. In other words, if the employees' contribution has been paid by the assessee before due date of filing of return of income as per Sec.139(1), the deduction would still be available to the assessee notwithstanding the fact that the payment was made beyond the due date as per the applicable Acts & Rules governing the welfare funds. 6. One of such case is the decision of Hon'ble Karnataka High Court in the case of EssaeTeraoka (P.) Ltd. (43 Taxmann.com 33: 04.02.2014). In this decision, the Hon'ble Court distinguished the case law of Hon'ble Gujarat High Court in the case of CIT V/s Gujarat State Road Transport Corpn. (41 Taxmann.com 100; 26.12.2013) and held that employees' contribution so paid by the assessee before due date of filing of return of income u/s 139(1) would be an allowable deduction. The same was on the reasoning that the provisions of Sec.43B provide an ex....
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....ifteen days of the closure of every month pay. It is clear that the word 'contribution' used in clause (b) of section 43B means the contribution of the employer as well as the contribution of the employee. That being so, if the contribution is made on or before the due date for furnishing the return of income u/s 139(1), the employer is entitled for deduction. 7. Similar is the ratio of decision of Hon'ble Rajasthan High Court in the case of Pr. CIT V/s Rajasthan State Beverages Corpn. Ltd. (84 Taxmann.com 173; 04.08.2016) which followed the earlier decision in CIT V/s State Bank of Bikaner & Jaipur (43 Taxmann.com 411; 06.01.2014). The Hon'ble Court, in the case of CIT V/s State Bank of Bikaner & Jaipur (supra) held that the provisions of Sec.43B starts with a notwithstanding clause & would thus override Sec. 36(1)(va) and if read in isolation, Sec. 43B would become obsolete. The Hon'ble Court further held that these provisions were brought in as the due amounts on one pretext or the other were not being deposited by the assessee though substantial benefits had been obtained by them in the shape of the amount having been claimed as a deduction but the said amounts....
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....ce of Employees' Contribution beyond due date as specified in relevant statutes governing those funds, would result into denial of deduction to the assessee in terms of Sec. 36(1)(va) r.w.s. 2(24)(x). 10. So far as the decision of jurisdictional High Court of Madras is concerned, the coordinate bench of Hon'ble Court has rendered similar decision favoring assessee in CIT v. Industrial Security & Intelligence India (P.) Ltd. [TCA No. 585 of 2015, dated 24-7-2015] and held as under: - 5. We find that the Tribunal has rightly relied on the decision of the Supreme Court in the case of CIT V. Alom Extrusions Ltd. reported in 319 ITR 306, whereby, the Supreme Court held that omission of second proviso to Section 43B and amendment to first proviso by Finance Act, 2003 are curative in nature and are effective retrospectively, i.e., with effect from 1.4.1988 i.e., the date of insertion of first proviso. The Delhi High Court in the case of CIT V. Amil Ltd. reported in 321 ITR 508 held that if the assessee had deposited employee's contribution towards Provident Fund and ESI after due date as prescribed under the relevant Act, but before the due date of filing of return u....
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....essee. Accordingly, we would hold that the provisions of Sec.43B would override the provisions of Sec.36(1)(va) and accordingly, the employees' contribution as paid by the assessee before due date of filing of return u/s 139(1) would still be an allowable deduction notwithstanding the fact that the payment was made beyond due date as specified in the relevant statute governing those welfare funds. 12. So far as the effect of amendment brought in by Finance Act, 2021 is concerned, we find that Finance Act, 2021 has proposed amendment to Sec. 36(1)(va) and Sec.43B to clarify the position that Sec.43B would never apply to such contributions. For the same, an explanation-2 has been inserted in Sec. 36(1)(va) which state that Section 43B would not apply and is presumed never to have been applied to establish the due date under this sub-section. Similarly, Explanation-5 has been inserted to Section 43B to explain that the rules of that section do not apply and are never regarded to have applied to any funds received by the assessee from employees. The controversy as to the date of applicability of amendment arises in view of the fact that both the Memorandum as well as the Finan....
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.... 43B encompass within its scope the employees' Contribution as well and therefore any such contribution though not remitted by the employer within due date specified by the PF/ESI Acts, will still be permissible deduction if the same is actually paid in pursuance of sec. 43B. The CIT(A) further noted the decisions in favour of assessee in para 7.7, and the same are as under: 1. CIT v. Alom Extrusions Ltd. [2009] 185 Taxman 416/319 ITR 306 (SC) 2. Aimil Ltd. (supra) 3. CIT v. NispoPolyfabriks [2013] 350 ITR 327/213 Taxman 376/30 taxmann.com 90 (HP); 4. CIT v. Alembic Glass Industries Ltd. [2015] 279 ITR 331/149 Taxman 15 (Guj.); 5. CIT v. Sabari Enterprises [2008] 298 ITR 141 (Kar); 6. CIT v. Pamwi Tissues Ltd. [2009] 313 ITR 137 (Bom.); 7. Spectrum Consultants India (P.) Ltd. v. CIT [2013] 34 taxmann.com 20/215 Taxman 597 (Kar.); 8. CIT v. Udaipur DugdhUtpadak Sahakari Sangh Ltd. [2013] 35 taxmann.com 616/217 Taxman 64 (Mag.)/[2014] 366 ITR 163 (Raj.) and 9. CIT v. Hemla Embroidery Mills (P.) Ltd. [2013] 37 taxmann.com 160/217 Taxman 207 (Mag.)/[2014] 366 ITR 167 (Punj. & Har.). 6.8 In the....