2011 (6) TMI 137 - HC - Income Tax

Disallowance u/s 43B - Late payment of the employer s contribution to provident fund - As per the Supreme Court in the case of Commissioner of Income Tax Vs. Alom Extrusions Ltd. 2009 -TMI - 35073 - SUPREME COURT has observed that the omission of the second proviso to section 43B of the Income-tax Act, 1961, by the Finance Act, 2003, operated, retrospectively, with effect from April 1, 1988 and not prospectively from April 1, 2004 - The Appellate Tribunal is right in law and on facts in deleting the disallowance made u/s 43B of Rs.51,05,963/- being late payment of the employer s contribution to provident fund - Decided in favour of assessee.

Summary

Issues:
Challenge to order under section 260A of the Income Tax Act for Assessment Year 2003-04. Formulation of substantial question of law regarding disallowance under section 43B of Rs.51,05,963 for late payment of employer's contribution to provident fund.

Analysis:
The appeal under section 260A of the Income Tax Act, 1961 was filed by the appellant-revenue against the order dated 31.07.2006 by the Income Tax Appellate Tribunal, Ahmedabad Bench 'D' for Assessment Year 2003-04. The substantial question of law formulated by the court pertained to the correctness of deleting the disallowance under section 43B amounting to Rs.51,05,963 for the late payment of the employer's contribution to the provident fund.

In the case, the respondent's advocate referred to the decision of the Supreme Court in Commissioner of Income Tax Vs. Alom Extrusions Ltd., [2009] 319 ITR 306 (SC) to establish that the issue in the present case was settled by the said decision. The appellant's Senior Advocate did not contest this position, leading to a conclusion that the facts and contentions need not be elaborated upon further.

The Supreme Court decision in Commissioner of Income Tax Vs. Alom Extrusions Ltd. clarified that the omission of the second proviso to section 43B of the Income-tax Act, 1961, by the Finance Act, 2003, had retrospective effect from April 1, 1988, not prospectively from April 1, 2004. The amendment was deemed curative in nature, addressing unintended consequences and making the section workable. The Court emphasized interpreting provisions to fulfill legislative intent, even if it required departing from strict construction, to achieve the legislative object effectively.

Applying the Supreme Court's decision to the case at hand, the Court concluded that the deletion of the disallowance under section 43B for late payment of the employer's contribution to the provident fund was justified. Consequently, the appeal was dismissed in favor of the assessee, upholding the decision of the Appellate Tribunal. No costs were awarded in the matter.