2016 (4) TMI 742 - HC - Income Tax

Delayed payment on account of employees provident fund - treated as income in terms of Section 2(24)(x) read with Section 36(1)(va) - Held that - In view of the aforesaid proposition laid down by the Supreme Court in the case of CIT Vs. Vinay Cements Limited 2007 (3) TMI 346 - Supreme Court of India admitted position being that the aforesaid amounts were credited after the due dates of payment under the relevant Acts but much before the date of filing of the return under the Income Tax Act, the assessee would clearly be entitled to the deletion of the addition. The substantial question of law is, accordingly, answered in the negative against the Revenue and in favour of the assessee.

Summary

Issues:
1. Treatment of delayed payment of employees' provident fund as income under Section 2(24)(x) read with Section 36(1)(va) of the Income Tax Act.

Analysis:
The judgment pertains to an appeal filed by a Public Sector Undertaking of the Government of Bihar regarding the treatment of delayed payment of employees' provident fund as income under the Income Tax Act. The Assessing Officer had treated a delayed payment of a specific amount as income under Section 2(24)(x) read with Section 36(1)(va) of the Act. The Commissioner of Income Tax (Appeals) upheld this order, but the Income Tax Appellate Tribunal partially allowed the appeal. The Tribunal held that certain dues had been paid before the due date, and hence, the addition of that amount was deleted. However, for the remaining balance amount, the Tribunal agreed with the Assessing Officer and the Commissioner of Income Tax (Appeals) that the delayed payment should be treated as income. The Tribunal restricted the addition to the balance amount. The appellant then filed an appeal under Section 260A of the Income Tax Act, and the substantial question of law framed was whether the Tribunal was justified in upholding the addition made under the relevant sections of the Act.

The Court referred to a previous decision and relied on the Supreme Court's judgment in another case to analyze the issue. The Supreme Court's decision highlighted the provisions of section 43B of the Income Tax Act and the importance of actual payment of taxes, duties, and contributions to welfare funds. The Court emphasized that if the contributions were paid before the date of filing the return under the Income Tax Act, the assessee would be entitled to deduction. The Court concluded that since the amounts in question were credited before the date of filing the return, the addition should be deleted. Therefore, the substantial question of law was answered in favor of the assessee and against the Revenue.

In light of the above analysis, the Court allowed the appeal filed by the assessee, thereby overturning the decision of the Tribunal and holding that the delayed payment of employees' provident fund should not be treated as income under the relevant sections of the Income Tax Act.