2005 (3) TMI 701 - AT - Income Tax

Summary

Issues:
1. Applicability of section 43B of the Income Tax Act on delayed payment of employer's provident fund contributions.
2. Interpretation of the amendment to the first proviso of section 43B by the Finance Act, 2003.
3. Allowability of deductions for payments made towards contribution to PF, ESI, gratuity, superannuation, and other welfare funds before filing the return of income.

Analysis:
1. The primary issue in this case was the applicability of section 43B of the Income Tax Act on the delayed payment of employer's provident fund contributions. The Assessing Officer added the unpaid amount as income of the assessee-company due to delayed payments. However, the Tribunal noted that the Finance Act, 2003, amended the first proviso to section 43B, making payments towards various funds allowable if made before filing the return of income. The Tribunal relied on the decision of the Delhi Bench in Addl. CIT v. Vestas RRB India Ltd. to support its interpretation. The amendment aimed to remove hardships caused by total disallowance of payments made after the due date, making it retrospective in nature.

2. The Tribunal extensively analyzed the amendment to the first proviso of section 43B by the Finance Act, 2003. The amendment allowed payments made by employers towards various funds to be deductible if paid before filing the return of income, with necessary evidence attached. The Tribunal highlighted that the amendment was curative in nature, aligning the provisions with the objective of allowing deductions for welfare payments. The retrospective application of the amendment was supported by judicial precedents like Allied Motors (P.) Ltd. v. CIT and CIT v. Podar Cement (P.) Ltd., emphasizing the removal of hardships caused by total disallowance.

3. The final issue revolved around the allowability of deductions for payments made towards contribution to PF, ESI, gratuity, superannuation, and other welfare funds before filing the return of income. The Tribunal concluded that the assessee was eligible for deduction for such payments made before the due date of filing the return, provided proof of payment was attached with the return. By considering the legislative history, judicial pronouncements, and the curative nature of the amendment, the Tribunal allowed the appeal of the assessee, granting deductions for the payments made within the specified timeline.

In conclusion, the Tribunal's judgment clarified the applicability of section 43B, interpreted the amendment to the first proviso of section 43B by the Finance Act, 2003, and affirmed the allowability of deductions for timely payments towards various funds before filing the return of income.