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TMI Blog2006 (3) TMI 262X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be accorded the same treatment as delayed payment of taxes etc. The deduction if denied in a year could not be claimed in subsequent year. On account of various reasons like postal delay, strikes or long holidays, the payment of employer s contributions to the respective authorities at times delayed even though the payment tendered before the due date. Having regard to this unintended hardship, by the Finance Act, 2003 in the first proviso of section 43B, the words, brackets and letters referred to in clause (c) or clause (d) or clause (e) or clause (f) have been omitted and second proviso was also omitted. Legislature removed the differentiation between employee welfare payments and others. Uniform criteria was prescribed for the allowability of the claim. The amendment was made to eliminate unintended consequences that caused undue hardship to the taxpayers. Therefore, amendment in proviso to section 43B by Finance Act, 2003 was curative in nature. Accordingly, it should be applied retrospectively. As regards the intervener, we have not examined the facts of the case. The regular Bench while deciding these appeals may keep in view the principles laid down in this case. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the profits or gains are computed. 5. It had come to the notice of the Government that statutory liabilities such as in respect of sales tax, excise duty, employer's contribution to Provident Fund, Employees State Insurance Scheme, etc., remained pending for a long time, extending sometimes to several years, whereas for the purpose of income-tax assessment these liabilities were claimed on the basis of accrual and deduction was granted on the principle of mercantile accountancy. For some reason or the other these liabilities were disputed and not discharged and in some cases even undisputed liabilities were also not paid on certain grounds. 6. To curb this practice, the Finance Act, 1983 has inserted section 43B to provide that deduction for any sum payable by the assessee by way of tax or duty under any law for the time being in force or any sum payable by the assessee as an employer by way of contribution to provident fund or superannuation fund or gratuity fund or any other fund for the welfare of the employees shall irrespective of the previous year in which the liability to pay such sum was incurred, be allowed only in computing the income c of that previous year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all not apply in respect of the payment of any tax or duty under any law if the sum is actually paid on or before the date on which the return of income is due to be furnished under section 139(1) for the previous year in which the liability to pay such sum was incurred. The second proviso seeks to provide that no deduction shall be allowed in regard to any sum payable by the taxpayer as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of the employees unless such sum has actually been paid during the previous year on or before the due date. The due date for the purposes of this proviso will mean the date by which the assessee is required as an employer to credit such contribution to the employee's account in the relevant fund under the provisions of any law or term of contract of service or otherwise." 10. Again by the Finance Act, 1989 second proviso to section 43B was substituted by the following proviso: "Provided further that no deduction shall, in respect of any sum referred to in clause (b), be allowed unless such sum has actually been paid in cash or by issue of a cheque or dr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntext of payments made by the assessee as an employer by way of contribution to any provident fund or superannuation fund or any other fund for the welfare of the employees, deduction shall be allowed in computing the income of the year in which such sum is actually paid. The sums shall also be allowed as a deduction in the previous year in which the liability to pay the same was incurred in case the same is paid before the due date of filing the return of income for the previous year. 14. After the aforesaid amendment the provisions of section 43B stood as under: "43B. Certain deductions to be only on actual payment.- Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of- (a) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or (b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, or (c) any sum referred to in clause (ii) of sub-section (1) of section 36, or (d) any sum payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come referred to in section 28 of the previous year being a previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him. Explanation 3A.- For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (e) of this section is allowed in p computing the income referred to in section 28 of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1996, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him. Explanation 3B.- For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to convey ones thought. 17. Words are used in the statute as a medium of expression. A particular thought is communicated through the words. Language is often misunderstood even in the ordinary conversation. The person who has spoken the words can be approached for clarification. Legislature cannot be approached. It becomes functus officio after the enactment of the Act. Therefore, for construing the correct meaning of a statute, it may be necessary to determine how its meaning was understood when it was originally enacted. 18. For this purpose recourse could be made to the sources of that time. This is known as contemporanea expositio. This is the abbreviated form of maxim given by Lord Coke in the form contemporanea exposition est optima et fortissimo in lege. It means a contemporaneous exposition is the best and most powerful in law. Maxwell refers to this maxim by saying that the best exposition of a statute or any other document is that which it has received from contemporary authority. The language of statute must be understood in the sense in which it was understood when it was enacted. Those who lived at or near the time of its enactment may reasonably be supposed to be b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elating to labour, the deduction for the payment is disallowed if such payment is made any time after the last date for payment of the labour related liability. Trade and industry across the country represented that the delayed payment of statutory liability related to labour should be accorded the same treatment as delayed payment of taxes and interest i.e., they should be allowed in the year of account. Since the objective of the proviso is to ensure that a taxpayer does not avail of any statutory liability without actually making a payment for the same, we are of the view that these objectives would be served if the deduction for the statutory liability relating to labour are allowed in the year of payment. The complete disallowance of such payments is too harsh a punishment for delayed payments. Therefore, we recommend that the deduction for delayed payment of statutory liability relating to labour should be allowed in the year of payment like delayed taxes and interest." 21. It is a sound rule of construction of a statute firmly established in England as far back as 1584 when Hoyden's case [1584] 76 E.R. 637 was decided that for the sure and true interpretation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permissible deduction. In that view of the matter, the first proviso to section 43B was treated as retrospective in operation for and from assessment year 1984-85 by the Hon'ble Supreme Court in the case of Allied Motors (P.) Ltd v. CIT [1997] 224 ITR 677 reversing Escorts Ltd v. Union of India [1991] 189 ITR 81 (Delhi). In taking the above view, the Apex Court has approved the view taken in Jamshedpur Motor Accessories Stores v. Union of India [1991] 189 ITR 703 (Pat.). 24. Provisos carve things out of the main enacting provision that would otherwise be included within the principal section. It qualifies the generality of the main enactment by providing an exception and taking out from the main provision a portion, which but for the proviso would be the part of the main provision. A proviso must, therefore, be considered in relation to the principal matter to which it stands as a proviso. A proviso should not be read as if providing something by way of addition to the main provision which is alien to the main provision itself. 25. In the case of Allied Motors (P.) Ltd., Hon'ble Supreme Court has held that a proviso which is inserted to remedy unintended consequences and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that contribution to provident fund must be made within the prescribed date. This decision was rendered on 31-12-2002. It is pertinent to note that the amended provision was not available at that point of time. As such on the retrospectivity of the amendment there was no contemplation in the order. In our opinion, this decision is not relevant for deciding the issue which is posed before the Special Bench. The task assigned to this Special Bench is to point out whether the amendment in proviso to section 43B by Finance Act, 2003 could be construed to be curative as such retrospective in nature. Various Benches of the Tribunal allowed both the types of claims giving rise to inherent contradiction on this aspect. As such this Special Bench was constituted. The question raised before the Special Bench is not adjudicated by the jurisdictional High Court p in the case of Madras Radiators & Pressings Ltd. As such we decline to accept the contention of the ld. D.R. on this aspect. 29. The law consists, "not in particular instances and precedents, but in the reason of law as said in the dictum : ubi eadem ratio ibi idem jus - like reason doth make like law - Reason is the life o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T v. Shri Ganapathy Mills Co Ltd. [2000] 243 ITR 879 and CIT v. Salem Co-operative Spinning Mills Ltd. [2002] 258 ITR 360. We are unable to accept the submission made by counsel for the revenue that Parliament had a different intention so far as payments of amounts due under the Employees Provident Fund Act was concerned and that it had intended to treat that amount differently from the amount of tax which the assessees were required to pay. We find no support whatsoever for this submission either in the memorandum or in any other document. When section 43B was introduced all that was sought to be ensured was that the statutory liabilities are to be given deduction to only if they had been discharged by actual payment." 33. In view of the aforesaid decision of the jurisdictional High Court payments of amounts due under the Provident Fund Act cannot be treated on different footings. In our opinion, to eliminate the inequality second proviso was omitted. We have further noted that the substantive provision remained unaltered. Only provisos were amended to dilute the rigour of procedural aspect. 34. We have considered the entire conspectus of the case. As per the prescription o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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