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TMI Blog2004 (5) TMI 245X X X X Extracts X X X X X X X X Extracts X X X X ..... Dayal Radhey Shyam [ 2002 (2) TMI 28 - RAJASTHAN HIGH COURT] by observing that first proviso to section 43B of the Act inserted by the Finance Act, 1987 is retrospective and if the sales tax had been paid after the due date but during the grace period allowed under the Sales Tax Act that does not attract provisions of section 43B of the Act. In the appellant's case the payments for the months of April 1996 and December 1996 have been made even after the grace period had expired. However, the proviso clause to section 43B stands amended by the Finance Act, 2003. Now as per the present provisions of section 43B the payment made by the employer towards contribution of PF, ESI, Gratuity, Superannuation and other welfare funds (hereinafter called employees welfare payments) are allowable if the same are paid before filing the return of income and necessary evidence of such payment is enclosed with the return of income. In other words now no disallowance of such payment would be made even if the same are made beyond the due dates prescribed in section 36(1)(va) (hereinafter called due date). This amendment has been made to remove the hardship caused at present by the total disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ys grace period) of the following month in which salary is actually paid to the employees instead of 15th of the following month for which such salary is payable. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding that out of sum entertainment expenditure amounting to Rs. 7,79,073 the assessee is entitled to deduct 25% of such expenditure incurred on staff members particularly when the assessee has failed to give the details of employees which requires examination as per Board's Circular No. 706 dated 18-7-1995. 4. The order of the Assessing Officer may be restored and the order of Ld. CIT(A) may be set aside with respect to the above mentioned grounds. 2. Ground Nos. 1 2 relate to deduction under section 43B read with section 36(1)(va) of the Income-tax Act, 1961 in respect of late deposit of employee's contribution to PF and as well as late deposit of employer's contribution. 3. Briefly the facts are that for the months of April 1996, December 1996 and March 1997 the employees contribution and employer's contribution was deposited on the dates as under: Month Employees contribution Employer's contribution Date of deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e with reference to the earning and the employee has to remit both the contributions to PF within 15 days from the close of the month for which the employees earned their salary i.e., salary payable. 8. On the other hand, the assessee's counsel contends that there is ambiguity in the provision of Act for which benefit should be allowed to him and in that light the decision taken by the Ld. CIT(A) cannot be disturbed. 9. We have heard the parties with reference to material on record and precedents referred. Essentially after the decision of Madras Radiators Pressing Ltd. supra the decision taken by the Madras Bench of the Tribunal could not make the basis for allowing deduction. In the respondent's case all the payments had been made prior to the due date specified for filing of the return of income. The payment for the month of March 1997 for Rs. 50,676 on account of employee's contribution and Rs. 56,553 on account of employer's contribution stood paid on 20-4-1997. In view of the Provident Fund Scheme, 1952 five days of grace period have to be allowed to employer for making contribution to the PF. The Ld. CIT(A) followed the decision in Hunsur Plywood Works Ltd. o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loyees, unless it has been paid within the specified due date. 11. The Finance Act, 2003 has deleted the second proviso and amended the first proviso by the Finance Act, 2003 w.e.f. assessment year 2004-2005 to be read as under: Provided that nothing contained in this section shall apply in relation to any sum which is actually paid by the assessee on or before due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return. 12. This has an affect of deleting the specified clauses as mentioned in the first proviso. This also had the effect of bringing existing clause (b) at par in terms of allowability of expenses. Now as per the present provisions of section 43B the payment made by the employer towards contribution of PF, ESI, Gratuity, Superannuation and other welfare funds (hereinafter called employees welfare payments) are allowable if the same are paid before filing the return of income and necessary evidence of such payment is enclosed with the return of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bill 2003, paras 137 to 144 of the Finance Minister Budget Speech at 260 ITR (St.) 26, 27, will show that the Finance Minister has pointed out to the setting up of the Task Force on Direct-Indirect taxes under the Chairmanship of Dr. Vijay Kelkar and gave due acknowledgement to the work of the Task Force as per para 140 of the Bill. Further in para 143 the Finance Minister has stated that the basic philosophy as laid down by these reports is sound. There is need to eventually move away from an exemption and discretion based system to a different, more current order. That is the ideal that the Task Force, particularly in respect of direct taxes have suggested. The Finance Minister in his speech also stated that the ideal presented by the task force is difficult to achieve in one leap. Finance Minister suggested that the suggestions of the Task Force be implemented in the gradual manner and in phases. In para 144 the Finance Minister has further stated that most of the suggestions made by the Task Force to eliminate procedural complexities, reduce paper work, simplify tax administration and to enhance efficiency, also integrate such tax proposals as the system can, at present absorb. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employed during the search and seizure and during survey by the Income Tax Department. First, hereafter stocks found during the course of a search and seizure operation will not be seized under any circumstances. Second, no confession shall be obtained during such search and seizure operations. Third, no survey operation will be authorized by an officer below the rank of Joint Commissioner of Income Tax. Finally books of account impounded during the survey will not be retained beyond then days, without the prior approval of the Chief Commissioner. Besides the above a number of changes were made in the I.T. Act based on the Kelkar Committee's report as under: 1. Reintroduction to exemption from tax on Dividend income in the hands of shareholder. 2. Scrapping of Chapter XIV-B i.e., special provision relating to assessment of undisclosed income. 3. Amendment in section 36(1)(iii) inserting a proviso providing that interest paid on capital expenditure shall not be allowable. 4. Amendment in section 275 of the Income-tax Act providing that the penalties shall be levied after disposal of appeal by CIT (A)'s and no wait shall be made of IT AT order. 5. No seizure of stock found du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o as to be construed retrospectively. 17. There is also another angle to look at the problem. In case the amendment is not accepted to be operative retrospectively, then the amendment so brought into statute by the Finance Act, 2003 would produce inequitable and illogical results. For instance in case of assessees where there has been delay in labour welfare payments by a few days after the due date the same attracts total disallowance. However, in the case of an assessee who did not make payment and persisted with the default and deposits said amounts after1-4-2004he shall be eligible to the benefit of deduction after the date of amendment. This gives a premium on a persistent default vis a vis the small default. According to the rules of interpretation construction should be preferred to the literal construction. A reference to this is found inApex Courtdecision in the following cases: 1. CIT v. J.H. Gotla [1985] 156 ITR 323 (SC) 2. Goodyear India Ltd. v. State ofHaryana[1991] 188 ITR 402 (SC). 18. In J.H. Gotla's case the Court in unequivocal words has stated as under: Though equity and taxation are often strangers, attempts should be made that these do not remain always so ..... X X X X Extracts X X X X X X X X Extracts X X X X
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