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2014 (9) TMI 1265 - AT - Income TaxBelated payment of employees contribution to PF and ESI in contravention of the provisions of section 36(1)(va) -whether the employees contribution towards PF and ESI paid after the statutory due dates but deposited before the due date of filing of the return prescribed u/s.139(1) is an allowable expenditure or not? - HELD THAT - There is no dispute to the fact that the assessee in the instant case has deposited the employees contribution to PF and ESI before the due date of filing of the return of income although the same were deposited after the due date prescribed under the relevant Act. As in the case of CIT Vs. Hindustan Organics Chemical Ltd. 2014 (7) TMI 477 - BOMBAY HIGH COURT are consistently taking the view that employees contribution to PF and ESI if paid on or before the due date of filing of the return of income is an allowable deduction. Since the assessee in the instant case has admittedly deposited the employees contribution to PF and ESI before the due date of filing of the return a fact submitted before the AO as well as CIT(A) and not controverted by the revenue therefore we are of the considered opinion that no disallowance on account of such delayed payment is called for. We find no infirmity in the order of the CIT(A) deleting the disallowance made by the Assessing Officer on account of delayed payment of employees contribution to PF ESI. We accordingly uphold the same. The grounds raised by the Revenue are accordingly dismissed.
Issues Involved:
1. Deductibility of employee's contribution to PF and ESI if paid after the statutory due dates but before the due date of filing the return of income. 2. Applicability of Section 43B and its amendments to employee's contributions. 3. Distinction between employee's and employer's contributions to welfare funds. 4. Retrospective application of amendments to Section 43B. Detailed Analysis: 1. Deductibility of Employee's Contribution to PF and ESI: The primary issue is whether the employees' contribution towards PF and ESI, paid after the statutory due dates but before the due date of filing the return of income, is allowable as a deduction. The Assessing Officer initially added the unpaid contributions to the total income of the assessee, citing non-compliance with the due dates prescribed under the respective Acts. However, the CIT(A) deleted this addition, referencing the Tribunal's decision in the case of Ghatge Patil Transporters and the assessee's own case for A.Y. 2006-07, which held that contributions paid before the return filing due date are allowable. 2. Applicability of Section 43B and its Amendments: The Revenue contended that the CIT(A) erred by ignoring the provisions of Section 2(24)(x) read with Section 36(1)(va), which mandate that employee's contributions are deductible only if paid before the due date specified in the respective Acts. The CIT(A) held that the amendments to Section 43B, which allow deductions for payments made before the due date of filing the return, apply to employee's contributions as well. The Tribunal upheld this view, citing the jurisdictional High Court's decision in Hindustan Organics Chemicals Ltd., which stated that the amendments to Section 43B introduced by the Finance Act, 2003, are retrospective and apply from April 1, 1988. 3. Distinction Between Employee's and Employer's Contributions: The Revenue argued that the CIT(A) failed to distinguish between employee's and employer's contributions, asserting that the Supreme Court's decision in Alom Extrusions Ltd. applies only to the latter. However, the Tribunal found that the amendments to Section 43B, which deleted the second proviso and amended the first proviso, put employee's contributions on par with employer's contributions concerning deductibility. The Tribunal cited various High Court decisions, including those from Karnataka and Rajasthan, which supported this interpretation. 4. Retrospective Application of Amendments to Section 43B: The Tribunal emphasized that the Supreme Court in Alom Extrusions Ltd. held that the amendments to Section 43B by the Finance Act, 2003, are retrospective, applying from April 1, 1988. This interpretation was crucial in determining that employee's contributions paid before the due date of filing the return are deductible, despite being paid after the statutory due dates. Conclusion: The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to delete the disallowance of the employee's contributions to PF and ESI. The Tribunal relied on the jurisdictional High Court's ruling and other precedents, concluding that the amendments to Section 43B apply retrospectively and allow for the deductibility of contributions paid before the return filing due date. The appeal was pronounced dismissed in the open court on 10-09-2014.
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