2015 (10) TMI 1516 - HC - Income Tax

Addition under section 43B - failure to make provident fund contribution payments on due dates - ITAT deleted the addition - Held that - Second proviso to section 43B of the Act came to be deleted and the first proviso came to be amended with effect from assessment year 2004-05. The amended first proviso provided that nothing contained in that section shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return. The Supreme Court in the case of Commissioner of Income Tax Kolkata-III v. Alom Extrusions Limited, (2009 (11) TMI 27 - SUPREME COURT) held that the second proviso to section 43B of the Act, which came into effect from 1st April, 2004 is retrospectively applicable with effect from 1st April, 1988. The controversy involved in the present case stands concluded by the above decision which would be squarely applicable to the facts of the present case. Under the circumstances, the view adopted by the Tribunal being in consonance with the law laid down by the Supreme Court in the above decision, it cannot be said that there is any infirmity in the impugned order passed by the Tribunal in upholding the order passed by the Commissioner (Appeals) in deleting the addition made under section 43B of the Act. Decided in favour of the assessee.

Summary

Issues:
1. Interpretation of section 43B of the Income Tax Act regarding the disallowance of provident fund contribution payments.
2. Applicability of the second proviso to section 43B of the Act.
3. Effect of the Supreme Court decision in Commissioner of Income Tax Kolkata-III v. Alom Extrusions Limited on the present case.

Analysis:

1. The appellant revenue challenged the order of the Income Tax Appellate Tribunal regarding the disallowance of Rs. 5,67,514 under section 43B of the Income Tax Act for the assessment year 2001-2002. The Assessing Officer disallowed the amount as the assessee failed to make provident fund contribution payments on time. However, the Commissioner (Appeals) deleted the disallowance, stating that the payment was made before the due date of filing the income tax return, making it an allowable expenditure. The Tribunal upheld the Commissioner's decision, leading to the appeal.

2. The court noted the amendment to the first proviso of section 43B through the Finance Act, 2003, which stated that if the sum is paid by the assessee before the due date for filing the income tax return and evidence of payment is provided, the disallowance does not apply. Referring to the Supreme Court decision in Commissioner of Income Tax Kolkata-III v. Alom Extrusions Limited, which held the second proviso to section 43B applicable retrospectively from April 1, 1988, the court found that the Tribunal's decision aligned with the law laid down by the Supreme Court. Consequently, the court upheld the Tribunal's decision to delete the addition under section 43B, ruling in favor of the assessee and against the revenue.

3. The judgment clarifies the interpretation of section 43B of the Income Tax Act, emphasizing the importance of timely payment and providing evidence to avoid disallowances. It also underscores the significance of judicial precedent, such as the Supreme Court decision in Commissioner of Income Tax Kolkata-III v. Alom Extrusions Limited, in resolving similar controversies. Ultimately, the court's decision reaffirms the principle that adherence to statutory provisions and legal precedents is crucial in determining tax liabilities and allowable expenditures under the Income Tax Act.