2013 (4) TMI 696 - AT - Income Tax

Disallowance of the employer s contribution to provident fund - Held that - Supreme Court in the case of CIT v. Alom Extrusions Ltd. 2009 (11) TMI 27 - SUPREME COURT has held that the amendment to the first proviso and omission of the second proviso to section 43B by the Finance Act 2003 is retrospective. The hon ble Delhi High Court in the case of CIT v. Aimil Ltd. 2009 (12) TMI 38 - DELHI HIGH COURT has allowed deduction in respect of employees share when the amount was paid before the due date. When we consider these two judgments it becomes clear that both the employer s and employees contribution are allowable as deduction if the amount of provident fund etc. though belatedly but is paid before the due date of filing of return under section 139(1) of the Act. Per contra if the amounts are not paid before the due date then the amount cannot be allowed as deduction in the relevant year. However the deduction would be available in the year of payment. Since these two amounts were disallowed in the preceding year on the ground that these were not paid before due date of filing the return for the assessment year 2006-07 naturally the deduction would be available on payment of such amounts falling within the previous year relevant to the assessment year under consideration. We therefore overturn the impugned order on this issue and order for the deletion of both additions. - Decided in favour of assessee.

Summary

Issues involved:
1. Disallowance of employer's contribution to provident fund under section 43B.
2. Disallowance of employees' contribution to provident fund under section 43B.

Analysis:
1. The appeal was against the order of the Commissioner of Income-tax (Appeals) regarding the assessment year 2007-08. The first issue was the disallowance of Rs. 2,47,214 for the employer's contribution to provident fund under section 43B. The assessee claimed deduction for the amount disallowed in the previous year, 2006-07, and deposited it on February 5, 2007. The Assessing Officer disallowed both the employer's and employees' contributions, which was upheld in the first appeal.

2. The Tribunal referred to legal precedents, including the Supreme Court case of CIT v. Alom Extrusions Ltd. and the Delhi High Court case of CIT v. Aimil Ltd. The Tribunal noted that the retrospective amendment to section 43B allowed deductions for both employer's and employees' contributions if paid before the due date of filing the return under section 139(1) of the Act. As the amounts were paid belatedly but before the due date, the deductions were allowable in the relevant year. Since the disallowed amounts were paid within the relevant previous year, the Tribunal ordered the deletion of both additions, overturning the previous decision.

3. The Tribunal's decision was based on the retrospective nature of the amendment to section 43B and the timing of the payments made by the assessee. By considering the legal principles established by the Supreme Court and the Delhi High Court, the Tribunal concluded that both employer's and employees' contributions to provident fund were eligible for deduction if paid before the due date of filing the return. Consequently, the appeal was allowed, and the additions were deleted, providing relief to the assessee for the disallowed amounts related to provident fund contributions.

This comprehensive analysis of the judgment addresses the issues involved, the legal principles applied, and the reasoning behind the Tribunal's decision, ensuring a detailed understanding of the case.