2013 (1) TMI 457 - HC - Income Tax

Addition u/s 43B - Employer s contribution to P.F. and E.S.I - Paid by the assessee before the filing of the return Held that - Following the decision in case of Alom Extrusions Limited (2009 (11) TMI 27 - SUPREME COURT) that that the amendment by Finance Act, 2003, whereby second proviso to Section 43B was deleted, to be curative in nature and was operative from 1.4.1988 (when first proviso came to be inserted). Once that was so, the appellant was entitled to deduction on account of contributions made to ESI and PF fund before the filing of the income tax return. In favour of assessee

Summary

Issues:
Whether the employer's contribution to P.F. and E.S.I. deposited before the filing of the return is allowable under Section 43B of the Income Tax Act, 1961.

Analysis:
The judgment pertains to three appeals concerning the addition of Rs. 23,31,489 under Section 43B for employer's contribution to P.F. and E.S.I. The primary issue revolves around the deductibility of these contributions made before the filing of the return. The assessee, engaged in manufacturing and sale, filed multiple revised returns for the assessment year 1998-99, including carry forward losses. The Assessing Officer added contributions towards Provident Fund and ESI, leading to penalty proceedings and subsequent appeals.

The crux of the matter lies in the interpretation of Section 43B regarding statutory payments for ESI and Provident Fund. The judgment references the Supreme Court's ruling in Commissioner of Income-Tax v. Alom Extrusions Ltd., emphasizing the non-obstante clause in Section 43B and the mandatory nature of deductions for actual payments. The Court highlighted the curative nature of the 2003 amendment, making it retrospective from 1.4.1988, and the need for uniformity in deductions for tax, duty, cess, and welfare fund contributions.

The Supreme Court's detailed analysis in Alom Extrusions Ltd's case elucidates the legislative intent behind Section 43B and the rationale for allowing deductions for contributions to welfare funds. The judgment underscores the importance of retrospective application of the Finance Act, 2003, to prevent undue hardship and discrimination among taxpayers. The Court's reliance on the Allied Motors case further solidifies the retrospective nature of the amendment and its applicability to cases like the present one.

In conclusion, the Court ruled in favor of the assessee, allowing the deductions for contributions made to ESI and PF fund before the income tax return filing. The Tribunal's decision was deemed erroneous, and the substantial questions of law were answered in favor of the assessee, leading to the allowance of the appeals. The judgment provides clarity on the retrospective application of statutory provisions and ensures equitable treatment for taxpayers in similar situations.