2017 (12) TMI 936 - AT - Income Tax

Disallowing the payment of Employees contribution to PF and ESIC with delay - paid on or before due date for filing of the Income tax returns u/s 139(1)- Held that - As regards the allowability of deduction u/s 43B of the Act of Employer s contribution to PF and ESIC, the Hon ble Supreme Court in the case of CIT vs.Vinay Cement Ltd 2007 (3) TMI 346 - Supreme Court of India) has held that if it is paid on or before the due date of the filing of the return u/s 139(1) of the Act, it is allowable. As regards the applicability of such proviso to the disallowance made u/s 36(1)(va) of the Act, we find that decisions are both against and in favour of the assessee. We find that the Coordinate Bench of this Tribunal at Visakhapatnam in the case of DCIT vs. Eastern Power Distribution Company of A.P. Ltd (2016 (9) TMI 1040 - ITAT VISAKHAPATNAM ) has considered all the above decisions referred to by the assessee as well as the DR and has held that there is no distinction between the employees and employer s contribution of PF and if the total contribution is deposited on or before the due date of furnishing the return u/s 139(1) of the Act, then no disallowance can be made of employees contribution to PF.Respectfully following the decision of the Coordinate Bench on similar set of facts, this appeal of the assessee is allowed.

Summary

Issues:
Allowability of deduction for employees' contribution to PF and ESIC paid beyond due date but before filing return u/s 139(1).

Analysis:
1. The appeal was regarding the disallowance of payment of Employees' contribution to PF and ESIC made after the due date but before filing the income tax return u/s 139(1) for A.Y. 2013-14. The AO disallowed the amounts based on different due dates for ESIC and PF payments, citing section 43B and section 2(24)(x) of the Act.

2. The assessee argued that both employees' and employer's contributions should be remitted to the Govt. A/c before the due date for filing the return u/s 139(1) of the Act, relying on various case laws. The CIT (A) upheld the disallowance, citing decisions of High Courts and the Hon'ble Supreme Court, distinguishing the case of Alom Extrusions.

3. The ITAT, Hyderabad analyzed the conflicting decisions and held that if the employer's contribution to PF and ESIC is paid before the due date of filing the return u/s 139(1) of the Act, it is allowable as per section 43B. The Tribunal referred to a similar decision by the Coordinate Bench at Visakhapatnam, which found no distinction between employees' and employer's contributions, allowing the appeal based on this interpretation.

4. The ITAT's decision was based on the Hon'ble Supreme Court's ruling and the interpretation of section 43B, concluding that no disallowance can be made for employees' contribution to PF if the total contribution is deposited before the due date for filing the return u/s 139(1) of the Act. The appeal of the assessee was allowed, overturning the disallowance made by the lower authorities.

5. The ITAT pronounced the order on 30th November 2017, allowing the assessee's appeal and emphasizing the importance of timely payment of contributions to PF and ESIC as per the provisions of the Income Tax Act.