Employee's Contribution to Welfare Fund - Section 36(1)(va) - Income Tax - Ready Reckoner - Income Tax

Employee's Contribution to Welfare Fund - Section 36(1)(va) Any sum received by the employer as Employees Contribution to Provident Fund, Superannuation Fund or any other fund set up under the provision of ESI or any other welfare fund for employees is deemed as business income of the employer. Deduction shall be allowed for the same if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date. Very important note:- It is very important for each assessee to know that if he defaults in deposit of PF, ESIC etc, contribution received from employees as per due date as provided in the respective PF/ESIC etc then even a delay of 1 day in depositing it may cause the entire amount in default to be allowed once for all, never ever be allowed again on actual payment of the same after a delay of even 1 day. This unpaid liability is not covered by section 43B(b) . Only contribution of the employer is covered by the section 43B(b) and which can be paid even upto the date of filing of the return u/s 139(1) . The tax auditor must also be careful while filing Form 3CD item no. 20(b), to weed out such contributions paid after due date i.e., the 15th of the next month and take curative steps immediately. Case law on this issue: Checkmate Services Pvt. Ltd. Vs CIT - 1 [ 2022 (10) TMI 617 - SUPREME COURT ] Belated deposit of employees contribution towards the EPF and ESI will not allowed as deduction if it is not paid within the due date and grace period. CIT II Vs Gujarat State Road Transport Corporation [2014 (1) TMI 502 - Gujarat High Court] The assessee did not deposit the amount of contribution with the PF Department / DSI Department within due date under the PF Act and/or ESI Act - HELD THAT:- Employees contribution to PF and ESI assessee shall not be entitled to deduction in computing the income if such sum is not credited by the assessee to the employees account in the relevant fund or funds on or before the due date as per explanation to section 36(1)(va) of the Act Additions confirmed.