9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (1) TMI 847 - AT - Income TaxDisallowing payment made to ESI/PF being employees share of contribution under section 36(1)(va) - whether this amendment brought by Finance Act, 2003 to the first and second proviso of section 43B was prospective or retrospective? - HELD THAT - Section 36(1)(va) and Section 43B(b) operate on totally different equilibriums and have different parameters for due dates, i.e., employee's contribution is linked to payment before the due dates specified in the respective Acts and employer's contribution is linked to payment before the due dates specified in the respective Acts and employer's contribution is linked to the payment before the prescribed due date for filing of return u/s. 139(1) - The result of any failure to pay within the prescribed dates also leads to different results. In the case of employee's contribution, any failure to pay within the prescribed due date under the respective PF Act or Scheme will result in negating employer's claim for deduction permanently forever u/s.36(1)(va). Delay in payment of employer's contribution is visited with deferment of deduction on payment basis u/s.43B and is therefore not lost totally. This legal distinction between employees' contribution and employer's contribution under the Act was duly recognised by the Courts also. Some judicial pronouncements are to the effect that employees contribution paid belatedly but within due date prescribed u/s.139(1) of the Act should be allowed as deduction on payment basis u/s 43B at par with employers' contribution to PF/ESI. Question whether the employees contribution to Provident Fund and Employees State Insurance which the employer deducts and pays over to the concerned authorities beyond the date prescribed for payment of such contribution but nevertheless the contribution has been paid within the due date prescribed for filing return of income u/s.139(1) of the Income Tax Act, 1961, can be allowed as deduction by applying the second proviso to Sec.43B of the Act, prior to 1.4.2021 was a controversy as the aforesaid amendments were not retrospective Amendments. The said issue (period prior to 1.4.2021) was subject matter of appeal before Hon ble Supreme Court in the case of CHECKMATE SERVICES PVT LTD 2022 (10) TMI 617 - SUPREME COURT In view of the law laid down by the Hon ble Supreme Court, we hold that Section 36(1)(va) and Section 43B(b) operate on totally different equilibriums and have different parameters for due dates, i.e., employee's contribution is linked to payment before the due dates specified in the respective Acts and employer's contribution is linked to payment before the due dates specified in the respective Acts and employer's contribution is linked to the payment before the prescribed due date for filing of return u/s. 139(1) of Income Tax Act, 1961.The result of any failure to pay within the prescribed dates also leads to different results. In the case of employee's contribution, any failure to pay within the prescribed due date under the respective PF Act or Scheme will result in negating employer's claim for deduction permanently forever u/s.36(1)(va). Decided in favour of the Revenue.
Issues Involved:
1. Disallowance of payment made to ESI/PF being employees' share of contribution under section 36(1)(va) of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Disallowance of Payment Made to ESI/PF Being Employees' Share of Contribution Under Section 36(1)(va) of the Income Tax Act, 1961: The core issue in the appeal is whether the Revenue authorities were justified in disallowing the payment made to ESI/PF, which is the employees' share of contribution, under section 36(1)(va) of the Income Tax Act, 1961. The judgment elaborates on the statutory obligations under the Employee Provident Fund and Miscellaneous Provisions Act, 1952, and the Employees State Insurance Act, 1948. These Acts require the employer to deduct the employee's contribution from their salary and deposit it within a specified period. The employer holds this amount in a fiduciary capacity and must deposit it within the due date to claim deductions. The distinction between the employer's contribution and the employee's contribution is highlighted. The employer's contribution is a direct business expenditure and is allowed as a deduction if paid within the due date for filing the return of income under section 139(1) of the Income Tax Act. In contrast, the employee's contribution is treated as income in the hands of the employer and is allowed as a deduction only if deposited within the due date specified in the respective Acts. The judgment refers to various judicial pronouncements that have upheld this distinction, including the Supreme Court's decision in the case of CIT v. Alom Extrusions Ltd., which clarified that amendments to section 43B were retrospective but only applied to the employer's contribution. The Finance Act, 2021, further clarified this distinction by amending section 36(1)(va) and section 43B, stating that the provisions of section 43B shall not apply to the employee's contribution. This amendment was not retrospective and only applied from 1.4.2021 onwards. The Supreme Court's judgment in CHECKMATE SERVICES PVT LTD VS CIT-1 reaffirmed this distinction, stating that the employee's contribution must be deposited within the due date specified in the respective Acts, and failure to do so results in the permanent disallowance of the deduction under section 36(1)(va). In conclusion, the Tribunal held that section 36(1)(va) and section 43B(b) operate on different parameters for due dates. The employee's contribution must be paid before the due dates specified in the respective Acts, and any failure to do so results in the permanent disallowance of the deduction. Consequently, the issue was decided in favor of the Revenue, and the appeal was dismissed.
|
