2017 (11) TMI 512 - AT - Income Tax

Addition in respect of ESI payment - whether the payment of ESI made after the due date prescribed under the ESI, is allowable as deduction or not? - Held that - Assessee was entitled to claim the benefit in Sec.43-B for that period particularly in view of the fact that he has contributed to provident fund before filing of the return. See CIT Vs. Vinay Cement limited 2007 (3) TMI 346 - Supreme Court of India - Decided against Revenue.

Summary

Issues Involved:
1. Whether the CIT(A) is justified in deleting the disallowance of employees' contributions to PF and ESI made after the due date prescribed under the respective Acts but before the due date of filing the return of income.

Issue-wise Detailed Analysis:

ITA No. 6266/Del/2014 for AY: 2010-11

1. Disallowance of ?29,95,149/- for Late Payment of Employees' Contribution to PF and ESI:
- The Revenue questioned the deletion of disallowance by the CIT(A), arguing that employees' contributions to PF and ESI received by the employer constitute income as per section 2(24)(x) and are deductible only if paid within the due date specified in section 36(1)(va).
- The CIT(A) allowed the appeal of the assessee, holding that the payment made before the due date of filing the return is allowable under section 43B, referencing the Supreme Court's decision in CIT Vs. Vinay Cement Ltd.
- The Tribunal upheld the CIT(A)'s decision, noting that section 43B governs the allowability of both employees' and employer's contributions to PF and ESI if paid before the due date for filing the return. The Tribunal cited multiple judicial pronouncements, including the Delhi High Court's decision in CIT Vs. AIMIL Ltd., which supported the deduction of such contributions.

2. Applicability of Section 43B vs. Section 36(1)(va):
- The Revenue contended that section 43B does not apply to employees' contributions, which are governed by section 36(1)(va).
- The Tribunal found that section 43B, as amended by the Finance Act 2003, applies to employees' contributions, allowing deductions if paid before the due date for filing the return. The Tribunal referenced the Supreme Court's decision in CIT Vs. Alom Extrusion Limited and other judicial pronouncements supporting this view.

3. Overriding Effect of Section 43B:
- The Revenue argued that section 43B has an overriding effect only when a deduction is otherwise allowable under the Act.
- The Tribunal held that section 43B applies to employees' contributions, and the deduction is allowable if the contributions are paid before the due date for filing the return, as supported by judicial precedents.

4. Consideration of Case Laws Cited by AO:
- The Tribunal noted that the CIT(A) had considered various judicial pronouncements and provided a detailed analysis in favor of the assessee, thus justifying the deletion of disallowance.

5. Due Date for Payment Under Section 36(1)(va):
- The Revenue contended that the due date for payment is the date prescribed under the respective Acts, not the due date for filing the return.
- The Tribunal upheld the CIT(A)'s view that section 43B allows deductions if the contributions are paid before the due date for filing the return, aligning with judicial interpretations.

6. Amendment in Section 43B and Its Applicability:
- The Revenue argued that the amendment in section 43B does not apply to employees' contributions due to the lack of a corresponding amendment in section 36(1)(va).
- The Tribunal found that the amendment in section 43B applies to employees' contributions, allowing deductions if paid before the due date for filing the return.

ITA No. 6267/Del/2014 for AY: 2011-12

1. Disallowance of ?42,88,215/- for Late Payment of Employees' Contribution to PF and ESI:
- The issues and arguments in this appeal were identical to those in ITA No. 6266/Del/2014, except for the amount involved.
- Following the findings and reasoning in the previous appeal, the Tribunal dismissed the grounds of the Revenue, upholding the CIT(A)'s decision to delete the disallowance.

Conclusion:
- Both appeals by the Revenue were dismissed, with the Tribunal upholding the CIT(A)'s decisions to delete the disallowances of employees' contributions to PF and ESI paid after the due date prescribed under the respective Acts but before the due date for filing the return of income. The Tribunal relied on judicial precedents that supported the applicability of section 43B to such contributions.