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2013 (7) TMI 414 - HC - Income TaxDeduction for contributions under EPF and ESI Act u/s 36 - whether the Assessing Authority and the revision authority were correct in disallowing the deduction towards contributions remitted by the assessee under the EPF and ESI Act, though some of which were remitted beyond the stipulated periods prescribed under the said statutes and the mandatory provisions of Sec.36(1)(va) r/w Sec.2(24)(x) and Sec. A3B of the Act, while the said payments were effected by the assessee before the due date for filing returns of income under Sec. 139(1) - Relying on the judgement of CIT v. Sabari Enterprises (2007 (7) TMI 169 - KARNATAKA HIGH COURT) held that - It is further observed that in order to bring about uniformity in allowing deductions to contributions to welfare funds, the amendment was necessitated, while the reason not to extend such deduction appeared to be that the employer should not sit on the collected contributions and deprive the workman of the rightful benefits under the social welfare legislations by delaying payment, of contribution - regard being had to the words due date there can be no more doubt that the Assessing Officer as well as the revision authority fell in error in disallowing the deduction being the employees contribution remitted by the assessee both under the ESI and EPF Act, partly before 31/3/2006 in the financial year concerned and the balance before the filing of the returns under Sec. 139(1) of the Act, as extended upto 30/ 11/2006 petition is decided in the favour of the assesse
Issues:
1. Disallowance of deduction for late remittance under EPF and ESI Acts 2. Interpretation of Sec.36(1)(va) and Sec.43B of the Income Tax Act 3. Applicability of judgments in Sabari Enterprises and ALOM Extrusions cases --- Issue 1: Disallowance of deduction for late remittance under EPF and ESI Acts The petitioner, an income tax assessee, filed a return of income claiming deduction for employees' contribution under EPF and ESI Acts, remitted late. The Assessing Officer disallowed the deduction as the remittance was beyond the prescribed period. The petitioner invoked Sec. 264 for revision, arguing that a portion was remitted before the due date for filing income tax return. The respondent rejected the plea, citing precedents and the inapplicability of certain provisions. The High Court analyzed the facts and held that the authorities were not justified in disallowing the deduction as the remittances were made before the due date for filing returns under Sec. 139(1) of the Act. --- Issue 2: Interpretation of Sec.36(1)(va) and Sec.43B of the Income Tax Act The petitioner relied on Sec.36(1)(va) and Sec.43B, arguing that the contributions remitted beyond stipulated periods were allowable deductions if paid before the due date for filing returns. Referring to the Sabari Enterprises case, the High Court emphasized the importance of the "due date" in determining deductibility. The court highlighted the non-obstante clause in Sec.43B and the Explanation to Sec.36(1)(va) to support the deduction claim. The court held that the Assessing Authority and revision authority erred in disallowing the deduction based on the interpretation of these provisions. --- Issue 3: Applicability of judgments in Sabari Enterprises and ALOM Extrusions cases The petitioner argued that the Revenue's decision contradicted the Division Bench's judgment in the Sabari Enterprises case, which was affirmed by the Apex Court in the ALOM Extrusions case. The High Court noted that the judgments clarified the meaning of "due date" and upheld deductions for contributions paid before the due date for filing returns. The court rejected the Revenue's plea and held that the Assessing Officer and revision authority were incorrect in disallowing the deduction. The court ruled in favor of the petitioner, quashing the order and allowing the revision petition. --- This detailed analysis of the judgment highlights the key issues surrounding the disallowance of deductions for late remittances under the EPF and ESI Acts, the interpretation of relevant provisions of the Income Tax Act, and the applicability of precedents in similar cases.
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