2013 (2) TMI 41 - HC - Income Tax

Addition made u/s 2(24)(x) read with Section 36(1)(va) Delay in payment of employees contribution to PF Disallowance u/s 43B read with section 36(1)(iv) Delay in payment of employer s contribution of PF & ESI Held that - Following the decision in case of Alom Extrusions Limited (2009 (11) TMI 27 - SUPREME COURT) wherein it has been held that Second Proviso to Section 43B omitted by F.A, 2003 with effect from 1.4.2004 was clarificatory in nature and was to operate retrospectively. Once that is so, the respondent-assessee was entitled to deduction in respect of employer and employee s contribution to ESI and Provident Fund as the same had been deposited prior to the filing of the return u/s 139(1). In favour of assessee

Summary

Issues:
1. Interpretation of provisions under the Income Tax Act regarding late payment of employees' contribution to Provident Fund.
2. Application of second proviso to section 43B read with section 36(1)(iv) in the case of late payment of employer's contribution.
3. Consistency in the treatment of late payments to provident fund based on previous judgments.

Issue 1:
The appeal involved the interpretation of provisions under the Income Tax Act concerning late payment of employees' contribution to Provident Fund. The Revenue challenged the deletion of additions made by the Assessing Officer under Section 2(24)(x) read with Section 36(1)(va) of the Act. The High Court examined whether the payments made beyond the due dates were eligible for deduction. The Tribunal had upheld the order of the CIT(A) in deleting the additions, leading to the current appeal.

Issue 2:
The second issue revolved around the application of the second proviso to section 43B read with section 36(1)(iv) in the context of late payment of employer's contribution. The Assessing Officer had made additions, which were subsequently deleted by the CIT(A) and upheld by the ITAT. The High Court analyzed whether the decisions of the Kerala High Court were applicable in this case and whether the payments made contravened the relevant provisions.

Issue 3:
The third issue focused on the consistency in the treatment of late payments to provident fund based on previous judgments. The High Court considered the ITAT's decision in another case and the judgment of the Madras High Court to determine the deductibility of provident fund payments made after the due dates. The Court assessed the applicability of the second proviso to section 43B in this scenario.

In the judgment, the High Court noted that the issue raised had been settled by previous judgments, including the Apex Court judgment in Commissioner of Income Tax v. Alom Extrusions Ltd. The Court emphasized that the Second Proviso to Section 43B of the Act, omitted by the Finance Act, 2003, was clarificatory and to operate retrospectively. Consequently, the respondent-assessee was entitled to deduction for employer and employee's contribution to ESI and Provident Fund deposited before filing the return under Section 139(1) of the Act. Therefore, the substantial questions of law were answered against the revenue, leading to the dismissal of the appeals.