2023 (10) TMI 666 - HC - Income Tax

Employees contribution concerning provident fund and towards insurance fell due on a National Holiday - HELD THAT - According to us, the submission advanced by Appellant cannot be accepted. Since the due date fell on a date which was a National Holiday, the deposit could have been made by the respondent/assessee only on the date which followed the National Holiday. Revenue as noticed on 12.01.2023, is right that Section 10 of the General Clauses Act would help the respondent/assessee to tide over the objections raised on behalf of the appellant/revenue. Decided in favour of assessee.

Summary

Issues involved:
The issues involved in this case are (i) whether the Tribunal misdirected itself in law regarding the deduction of employees' contribution to provident fund and insurance deposited beyond the prescribed date, and (ii) whether the respondent could claim deduction under Section 36(1)(5)(A) of the Income Tax Act for the provident fund contribution deposited on a national holiday.

First Issue:
The High Court framed two questions of law, the first being whether the Tribunal erred in concluding that late deposits of employees' contribution to provident fund and insurance would be allowable as a deduction to the employer. The Tribunal ruled in favor of the respondent based on previous judgments, stating that as long as the amounts were deposited before filing the income tax return, no disallowance could be made even if the deposits were late. However, the Supreme Court in a separate case took a contrary view, leading the High Court to reverse the Tribunal's decision in favor of the appellant/revenue.

Second Issue:
The second question of law was whether the respondent could claim deduction under Section 36(1)(5)(A) for the employees' contribution to provident fund deposited on a national holiday. The respondent argued that the deposit made on the following day after the holiday should be considered within time, citing Section 10 of the General Clauses Act. The High Court agreed with the respondent, stating that since the due date fell on a national holiday, the deposit could be made on the next working day. Therefore, the second question of law was answered against the appellant/revenue and in favor of the respondent/assessee.

Conclusion:
The High Court allowed the first question of law in favor of the appellant/revenue, citing the Supreme Court's judgment. However, the second question of law was answered in favor of the respondent/assessee, allowing the deduction for the provident fund contribution deposited on a national holiday. The appeal was closed based on these findings.