2015 (7) TMI 1063 - HC - Income Tax

Disallowance u/s 43B - delay in payment - retrospectivity - ITAT allowed the claim - Held that - Tribunal has rightly relied on the decision of the Supreme Court in the case of CIT V. Alom Extrusions Ltd. 2009 (11) TMI 27 - SUPREME COURT , whereby 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. 2009 (12) TMI 38 - DELHI HIGH COURT 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 under the Income Tax Act, no disallowance could be made in view of the provisions of Section 43B as amended by Finance Act, 2003. In the present case, the assessee had remitted the employees contribution beyond the due date for payment, but within the due date for filing the return of income. Hence, following the above-said decisions, we find no reason to differ with the findings of the Tribunal. - Decided against revenue

Summary

Issues:
1. Disallowance of expenses claimed by way of Employee's contribution to PF and ESI.
2. Validity of reopening assessments under Section 147 of the Income Tax Act.
3. Interpretation of Section 43B regarding due dates for payment of employee contributions.

Analysis:
1. The case involved appeals by the Revenue against the Income Tax Appellate Tribunal's order for the assessment years 2003-04 and 2004-05, where the Assessing Officer disallowed expenses claimed for Employee's contribution to PF and ESI due to delayed payments. The Commissioner of Income Tax (Appeals) upheld the disallowance, but the Tribunal, citing relevant case laws, allowed the appeals, emphasizing that payments were made before the due date for filing income tax returns.

2. The Tribunal based its decision on the Supreme Court's ruling in CIT V. Alom Extrusions Ltd. and the Delhi High Court's decision in CIT V. Amil Ltd., which clarified that if employee contributions to PF and ESI were made after the due date under the respective Acts but before the income tax return filing due date, no disallowance should occur under Section 43B of the Income Tax Act, as amended by the Finance Act, 2003.

3. The High Court concurred with the Tribunal's interpretation, emphasizing that the curative nature of the Finance Act, 2003 amendments made them effective retrospectively from April 1, 1988. As the assessee had deposited the employee contributions within the due date for filing the income tax return, the disallowance under Section 43B was not justified. Consequently, the High Court dismissed the appeals by the Revenue, finding no substantial question of law for consideration.

This detailed analysis highlights the key issues of disallowed expenses, assessment reopening validity, and the interpretation of Section 43B regarding employee contribution due dates, providing a comprehensive understanding of the judgment's legal reasoning and implications.