1996 (6) TMI 117 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of Provident Fund (PF) and Employees' State Insurance (ESI) contributions.
2. Interpretation of the term "month" in the context of due dates for PF and ESI contributions.
3. Applicability of section 36(1)(va) and section 43B of the Income-tax Act.

Summary:

1. Disallowance of Provident Fund (PF) and Employees' State Insurance (ESI) Contributions:
The appellant, a company, admitted a total income of Rs. 50,30,350 for the assessment year 1991-92. The Assessing Officer disallowed the PF contribution of Rs. 2,92,094, stating that the contributions were not made within the due date prescribed under the Provident Fund Act and ESI Act. The first appellate authority dismissed the appeal of the assessee, pointing out that the Assessing Officer failed to disallow ESI contribution of Rs. 40,215.

2. Interpretation of the Term "Month" in the Context of Due Dates for PF and ESI Contributions:
The assessee argued that the term "month" in Rule 38 of the Employees Provident Fund Scheme, 1952, is ambiguous, as it does not specify whether it refers to the month for which the salary is paid or the month in which the salary is paid. The ambiguity should be resolved in favor of the taxpayer. The Tribunal upheld this contention, stating that there is ambiguity in the provision and the benefit of doubt must be given to the taxpayer.

3. Applicability of Section 36(1)(va) and Section 43B of the Income-tax Act:
The Tribunal noted that section 36(1)(va) is subject to section 43B, which allows deductions based on actual payment within the previous year. The Tribunal observed that the second proviso to section 43B, as amended, does not include the expression "during the previous year," implying that payments made within the previous year should be allowed as deductions. The Tribunal concluded that even if there was a marginal delay of a few days, no part of the contributions received by the assessee from its employees towards PF and ESI can be disallowed.

Conclusion:
The Tribunal deleted the disallowance, holding that the payments were made within the due date and, therefore, no part of it can be disallowed. The appeal was allowed.