9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2004 (5) TMI 245 - AT - Income TaxDisallowance u/s 43B for late deposit of employer's contribution to PF - Addition u/s 2(24)(x) for late deposit of employee's contribution to PF - Determination of due date for PF deposit - Deduction of entertainment expenditure incurred on staff members - HELD THAT - In view of the Provident Fund Scheme, 1952 five days of grace period have to be allowed to employer for making contribution to the PF. The Ld. CIT(A) followed the decision in Hunsur Plywood Works Ltd. 1995 (3) TMI 124 - ITAT BANGALORE of Bangalore Bench of the Tribunal. The Hon'ble Madras High Court in CIT v. Salem Co-operative Spg. Mills Ltd. 2001 (12) TMI 11 - MADRAS HIGH COURT has also taken a view by upholding that the amounts paid within the grace period provided under the relevant statute were required to be deducted while computing the taxable income of the assessee. A similar view has also been expressed by the Hon'ble Rajasthan High Court in CIT v. Shiv Dayal Radhey Shyam 2002 (2) TMI 28 - RAJASTHAN HIGH COURT by observing that first proviso to section 43B of the Act inserted by the Finance Act, 1987 is retrospective and if the sales tax had been paid after the due date but during the grace period allowed under the Sales Tax Act that does not attract provisions of section 43B of the Act. In the appellant's case the payments for the months of April 1996 and December 1996 have been made even after the grace period had expired. However, the proviso clause to section 43B stands amended by the Finance Act, 2003. Now as per the present provisions of section 43B the payment made by the employer towards contribution of PF, ESI, Gratuity, Superannuation and other welfare funds (hereinafter called employees welfare payments) are allowable if the same are paid before filing the return of income and necessary evidence of such payment is enclosed with the return of income. In other words now no disallowance of such payment would be made even if the same are made beyond the due dates prescribed in section 36(1)(va) (hereinafter called due date). This amendment has been made to remove the hardship caused at present by the total disallowance of the amount paid for the welfare of employees, if the same had been paid after the due date. The amendment being curative in nature, would have a retrospective application. There is also another angle to look at the problem. In case the amendment is not accepted to be operative retrospectively, then the amendment so brought into statute by the Finance Act, 2003 would produce inequitable and illogical results. For instance in case of assessees where there has been delay in labour welfare payments by a few days after the due date the same attracts total disallowance. However, in the case of an assessee who did not make payment and persisted with the default and deposits said amounts after1-4-2004 he shall be eligible to the benefit of deduction after the date of amendment. This gives a premium on a persistent default vis a vis the small default. According to the rules of interpretation construction should be preferred to the literal construction. Respectfully following this rule of equitable construction, the appellant would be eligible to deduction for all such payments which stand paid before the due date of filing of return. Entertainment expenditure - The Ld. CIT(A) only estimated an amount of 25% as amount attributable towards the employees participation. The same is reasonable. No interference is considered necessary in the decision taken by him. This ground of the revenue also stands rejected. In the result, the revenue's appeal stands dismissed.
Issues Involved:
1. Disallowance u/s 43B for late deposit of employer's contribution to PF. 2. Addition u/s 2(24)(x) for late deposit of employee's contribution to PF. 3. Determination of due date for PF deposit. 4. Deduction of entertainment expenditure incurred on staff members. Summary: Issue 1 & 2: Disallowance u/s 43B and Addition u/s 2(24)(x) for Late Deposit of PF Contributions The revenue challenged the Ld. CIT(A)'s decision that no disallowance could be made u/s 43B for late deposit of employer's contribution to PF and no addition could be made u/s 2(24)(x) for late deposit of employee's contribution to PF. The Ld. CIT(A) observed that the due date for deposit is within 15 days from the close of every month, with a 5-day grace period allowed by the PF Scheme, 1952. The Tribunal's decisions in Fluid Area India Ltd. and Madras Radiators & Pressing Ltd. were followed. The Ld. CIT(A) concluded that payments made within the grace period are allowable. The Tribunal upheld this view, noting that the amendment to section 43B by the Finance Act, 2003, which allows deductions for payments made before the filing of the return, is curative and has retrospective application. The Tribunal cited the Supreme Court's decision in Allied Motors (P.) Ltd. v. CIT, which supports retrospective application for curative amendments. Issue 3: Determination of Due Date for PF Deposit The Ld. CIT(A) held that the due date for PF deposit is the 20th of the following month, including a 5-day grace period, instead of the 15th of the following month for which the salary is payable. The Tribunal agreed, referencing the Provident Fund Scheme, 1952, and decisions from the Bangalore Bench and the Hon'ble Madras High Court, which support the allowance of payments made within the grace period. Issue 4: Deduction of Entertainment Expenditure The revenue contested the deduction of 25% of entertainment expenditure amounting to Rs. 7,79,073 on account of staff participation. The Ld. CIT(A) followed the jurisdictional High Court's decision in CIT v. Expo Machinery Ltd., which allows exclusion of employee-related expenses from section 37(2A) of the Act. The Tribunal found the Ld. CIT(A)'s estimation of 25% as reasonable and upheld the decision. Conclusion: The Tribunal dismissed the revenue's appeal, upholding the Ld. CIT(A)'s decisions on all grounds.
|
