2013 (6) TMI 98 - HC - Income Tax

Payments made to the Provident Fund Authority on account of employees contribution disallowed - delay in payment as obligation discharged in the next accounting year but before filing of return for the accounting year when obligation accrued - Held that - The due date referred to in section 36(1)(va) must be read in conjunction with section 43B(b) which states that the due date is the due date any time before filing the return for the year in which the liability to pay accrued alongwith evidence to establish payment thereof. AO proceeded on the basis that due date , as mentioned in section 36(1)(va) is the due date fixed by the Provident Fund Authority, whereas in the matter of culling out the meaning of the word due date , as mentioned in the said section, AO was required to take note of Section 43B(b) and by not taking note of the provisions contained therein committed gross error, which having been rectified by the Appellate Authority and confirmed by the Tribunal, there is no scope of interference.

Summary

Issues:
1. Disallowance of payments made by the assessee to the Provident Fund Authority.
2. Interpretation of sections 36(1)(va), 2(24)(x), and 43(B)(b) of the Income Tax Act, 1961.

Analysis:
1. The Assessing Officer disallowed payments made by the assessee to the Provident Fund Authority due to a delay in payment. The Appellate Commissioner and the Tribunal held that such payments, once made, cannot be considered as income in the hands of the assessee since the money is no longer with the employer. The Department argued that under section 36(1)(va) read with section 2(24)(x) of the Act, these payments should be treated as income of the assessee. However, the Tribunal's view aligned with the Appellate Commissioner's decision, emphasizing that if the employees' contributions are deposited with the Provident Fund Authority by the due date, it qualifies for deduction from the assessee's income.

2. Section 36(1)(va) of the Act deals with deductions for sums received by the assessee from employees if credited to the employees' account in the relevant fund on or before the due date. Section 2(24)(x) includes sums received from employees as income, but section 36(1)(va) allows for a deduction if the contributions are deposited by the due date. Additionally, section 43(B)(b) provides that deductions for sums payable by the employer to funds for employees' welfare are allowed in the year of actual payment, irrespective of the year in which the liability was incurred. The due date in section 36(1)(va) must be read in conjunction with section 43(B)(b), clarifying that payments made before filing the return for the year in which the liability accrued qualify for deduction.

In conclusion, the High Court upheld the decisions of the Appellate Authority and the Tribunal, dismissing the appeal. The Assessing Officer's error in interpreting the "due date" as fixed by the Provident Fund Authority was rectified by considering the provisions of section 43(B)(b) of the Act. The judgment emphasizes the importance of timely deposits to the Provident Fund Authority to avail deductions and clarifies the interplay between different sections of the Income Tax Act in determining the treatment of such payments.