1997 (2) TMI 557 - AT - Income Tax

Summary

Issues Involved:
1. Confirmation of addition as deemed income u/s 2(24)(x) r.w.s. 36(va).
2. Confirmation of disallowance u/s 43B.

Summary:

Issue 1: Confirmation of addition as deemed income u/s 2(24)(x) r.w.s. 36(va)

The learned CIT (A) confirmed the addition of Rs. 4,23,567 as deemed income u/s 2(24)(x) r.w.s. 36(va) (being Employees' Contribution towards Provident Fund). The assessee argued that the payments were made within 15 days from the date of payment of salary, which was on the 7th of every month, and thus were under a bona fide belief that the amounts were to be deposited by the 15th of the next month. The assessee contended that the delay was not intentional and was due to the availability of funds. The ITAT acknowledged the ambiguity in the definition of "month" and the bona fide belief of the assessee. It was held that the payments made within 9 to 22 days from the date of salary disbursement should be deemed as made within the due date, thus no disallowance u/s 43B and addition as deemed income u/s 2(24)(x) should be made.

Issue 2: Confirmation of disallowance u/s 43B

The learned CIT (A) confirmed the disallowance of Rs. 5,98,578 u/s 43B. The assessee argued that the provisions of sections 43B and 2(24)(x) read with section 36(1)(va) should be interpreted to avoid injustice and absurdity. The ITAT noted that the intention behind these provisions was to penalize those who did not pay the deducted amounts or disputed the liability. Since the assessee had made the payments within the relevant assessment year, a strict interpretation would lead to injustice and absurd results. The ITAT, referencing the CBDT Circular No. 372 and the legislative intent, held that the provisions should be interpreted liberally to avoid such outcomes. Consequently, the disallowance u/s 43B was deleted.

Conclusion:

The ITAT concluded that the additions made by invoking sections 43B and 2(24)(x) read with section 36(1)(va) were not justified. The payments made by the assessee within 9 to 22 days from the date of salary disbursement were deemed to have been made within the due date, and thus, no disallowance or addition as deemed income should be made. The ITAT deleted the additions, emphasizing a liberal interpretation of the provisions to avoid injustice and absurdity.