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TMI Blog2015 (9) TMI 560X X X X Extracts X X X X X X X X Extracts X X X X ..... ployer in the matter of crediting the same to the appropriate statutory authorities. In that view of the matter, we are of the considered opinion that the view taken by the Tribunal which affirmed the decision of the 1st Appellate Authority that the Respondent was entitled to get deduction of the contributions received from the employees if paid on or before the filing of the return under Sec. 139(1) was not correct. We are inclined to agree with the judgment of the Gujarat High Court in 'Gujarat State Road Transport Corporation's case (2014 (1) TMI 502 - GUJARAT HIGH COURT) wherein held There is no amendment in Section section 36(1)(va) of the Income Tax Act and considering section 36(1)(va) of the Income Tax Act as it stands, with respect to any sum received by the assessee from any of his employees to which the provisions of clause (x) of sub-section (24) of section 2 applies, assessee shall not be entitled to deduction of such amount in computing the income referred to in section 28 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 - By deleting Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer. After evaluating the facts and circumstances, following the decision of the Hon'ble Apex Court in 'C.I.T. v. Vinay Cement Ltd.' [(2007) 213 CTR SC 268], the first appellate authority held that contribution towards Provident Fund and ESI were made before the due date of filing of return and therefore the same are entitled for deduction under Sec.43B of the Income Tax Act. Therefore the addition made by the Assessing Officer in that regard was deleted. 4. Aggrieved by the order of the 1st Appellate Authority, Revenue preferred appeal before the Tribunal. Tribunal affirmed the order of the 1st Appellate Authority and held that the date of remittance of the contribution was within the due date for filing the return of income under Sec.139(1) of the Act for the assessment year under consideration. It was further held that admittedly, the second proviso to Sec.43B was deleted and the entire sub-clauses under Sec.43B were brought under Explanation (1) to Sec.43B and therefore all payments including employee's and employer's contribution to Provident Fund and ESI paid on or before the due date for filing the return of income under Sec.139(1) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent in 'Gujarat State Road Transport Corporation's case' (supra) and contended that the issue involved therein was with respect to the employees contribution to Provident Fund Account, ESI etc. etc. as provided under Sec.36(1)(va) and Explanation 1 of the Act. The learned Senior Counsel contended that the provisions with respect to the employees contribution and the employer's contribution to the PF, ESI etc. were governed by different provisions and need not be mixed up with the other. According to the learned counsel, with respect to the employer's contribution, Sec.43B of the Act would be applicable, however with respect to the employees' contribution, Sec.36(1)(va) and Explanation 1 r/w Sec.2(24) (x) of the Act would be applicable and further that aforesaid provisions are different and distinct and were governing different situations with respect to contributions referred supra on account of employer and employee respctively. Therefore, the learned Senior Counsel contended that Sec.43B cannot be made applicable under any circumstances to a situation with respect to Sec.36(1)(va) of the Income Tax Act and in that view of the matter, findings of the Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the employee's account in the relevant fund, in the present case, the provident fund and the ESI Fund under the Provident Funds Act and the ESI Act. Section 43B is with respect to certain deductions only on actual payment. It provides that notwithstanding anything contained in any other provisions of the Act, a deduction otherwise liable under the Act in respect of ...(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 the employees in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him. It appears that prior to the amendment of section 43B of the Act, vide the Finance Act, 2003, an assessee was entitled to deductions with respect to the sum paid 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 the employees (employer's contribution) provided such sum--employer's contribution is actually paid by the assessee on or before the due date applicable in his case for furnishing return of income und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited in the accounts of the concerned employees and in the concerned fund such as provident fund, ESI contribution fund, etc., provided the said sum is credited by the assessee to the employees' accounts in the relevant fund or funds on or before the due date under the Provident Funds Act, ESI Act, rule, order or notification issued thereunder or under any standing order, award, contract or service or otherwise. It is required to be noted that as such there is no amendment in section 36(1)(va) and even the Explanation to section 36(1)(va) is not deleted and is still on the statute and is required to be complied with. Merely because with respect to the employer's contribution the second proviso to section 43B which provided that even with respect to the employer's contribution (section 43B(b)), the assessee was required to credit the amount in the relevant fund under the PF Act or any other fund for the welfare of the employees on or before the due date under the relevant Act, is deleted, it cannot be said that section 36(1)(va) is also amended and/or the Explanation to section 36(1)(va) has been deleted and/or amended. It is also required to be noted at this stage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the welfare of the employees on or before the due date under the relevant Act, was deleted, it cannot be said that Sec.36(1)(va) was also amended and/Explanation to Sec.36(1) (va) has been deleted/or amended. 11. Learned Senior Counsel for the Revenue has also invited our attention to the decisions reported in 'Commissioner of Income-Tax v. South India Corporation Ltd. [(2000) 242 ITR 114], 'Commissioner of Income-Tax v. G.T.N. Textiles Ltd.' [(2004) 269 ITR 282], 'Commissioner of Income-Tax v. Jairam and Sons' [(2004) 269 ITR 285] and contended that the said question was considered by this Court and held that so far as the contribution received from the employees were concerned, Sec.36(1)(va) and the Explanation thereto was the applicable provision and the amounts received towards employees contribution shall be credited to the relevant account of the employee within the due date prescribed under the PF and ESI Acts. 12. Even though the assessment years considered in those judgments were before the Finance Act, 2003 was introduced, these judgments have clearly drawn a distinction between Sec.36(1)(va) and Sec.43B of the Act. In 'South India Corporati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsequent to the month in which wages/salary actually disbursed and therefore the liability to deduct employees' contribution arises only on paying salary to employees and not as and when wages and salaries are earned by the employees. It was further contended by the learned counsel that the Respondent can claim deduction under the head subject to the condition that the outstanding statutory payments as shown in the balance as at the end of the relevant previous year were made within the time permitted under Sec.139(1) as prescribed under Sec.43B of the Income Tax Act. 14. Learned counsel for the Respondent, further contended that since Sec.43B takes in both employee's as well as employer's contribution, even if statutory deductions are made by the Respondent during the relevant deduction period, the Respondent was entitled to get deduction, if the same was tendered to the statutory authority before filing of the return under Sec.139(1) of the Act. 15. Learned counsel for the Respondent has also contended that if the shortfall on the Provident Fund or ESI Fund was deposited or made good before the filing of the return, the assessee shall be entitled to deduction un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 408 (Karn.), 'Commissioner of Income-Tax v. South India Corporation Ltd.' [(2000) 242 ITR 114 (Ker.], 'Commissioner of Income Tax v. Ghatge Patil Transports Ltd.' [(2014) 368 ITR 749 (Bom)] and 'Commissioner of Income Tax v. Spectrum Consultants India P. Ltd.' [(2014) 2 ITR-OL 622 (Karn)] and canvassed the proposition that if the employees contribution received by the assessee was paid actually before the filing of the return under Sec.139 (1), the same could not be disallowed under Sec.43B or Sec.36 (1)(va). 17. In order to answer the questions of law raised in this appeal, we think it appropriate that Sec.36(1)(va) Explanation 1 and Sec.43B and sub-section (b) are extracted. 36. Other deductions.--(1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28- x x x x x x x x x x x x x x (va) any sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovident fund or superannuation fund or any fund set up under the provisions of the Employees' State Insurance Act, 1948 (34 of 1948), or any other fund for the welfare of such employees. 19. Therefore, income of the assessee includes any sum received by the assessee from his employee as contribution to any Provident Fund or superannuation fund or funds set up under the provisions of the Employees' State Insurance Act, 1948 (34 of 1948) or any other fund for the welfare of such employees. According to us, on a reading of Sec.36(1)(va) along with Sec.2(24)(x), it is categoric and clear that the contribution received by the assessee from the employee alone was treated as income for the purpose of Sec.36(1)(va) of the Act and therefore we are of the considered opinion that the assessee was entitled to get deduction for the sum received by the assessee from his employees towards contribution to the fund or funds so mentioned only if, the said amount was credited by the assessee on or before the due date to the employees account in the relevant fund as provided under Explanation 1 to Sec.36(1)(va) of the Act. According to us, so far as Sec.43B (b) is concerned, it takes care ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) only, we thought that if 'Alom Extrusions' (supra) is discussed in detail, the question raised in this case can be made clear. In paragraph 3 of the said judgment, the question considered was formulated as follows:: 3. A short question which arises for determination in this batch of civil appeals is whether omission (deletion) of the second proviso to section 43B of the Income-tax Act, 1961, by the Finance Act, 2003, operated with effect from 1st April, 2004, or whether it operated retrospectively with effect from 1st April, 1988? . 21. Therefore, the question that was considered in Alom Extrusions' case' was whether omission of second proviso to Sec.43B of the Income Tax Act by the Finance Act, 2003, operated with effect from 1st April, 2004 or retrospectively with effect from 1st April, 1988. Therefore, the question raised in this appeal has nothing to do with the question considered in the said decision. It is true that Sec.2 (24)(x) as well as Sec.36(1)(va) were discussed in paragraphs 10 and 11 of the said judgment. But it was for the sole purpose of understanding the scheme of the Income Tax Act, 1961 as it existed prior to 1st April, 1984 and as it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so held that consequent to the implementation problems of the second proviso to Sec.43B resulted in enactment of Finance Act, 2003, deleting the second proviso and bringing about uniformity in the first proviso by equating tax, duty, cess and fee with contributions to welfare funds and therefore the Finance Act, 2003 which was made applicable by the Parliament only with effect from 1st April, 2004 would become curative in nature and hence it would apply retrospectively from April, 1988. 24. So also, the learned counsel for the assessee contented that since Sec.43B commences with a non-obstante clause, Explanation 1 to Sec.36(1)(va) was excluded. But in Alom Extrusions' case' (supra), the Apex Court had held that the underlying object of the non-obstante clause was to disallow deductions claimed merely by making the book entry under mercantile system of accounting. Therefore, the contention of the learned counsel for the assessee that since Sec.43B commences with a non-obstante clause, Sec.36(1) (va) stood excluded, cannot be sustained. According to us, the findings of the Apex Court towards the latter part of paragraph 15 makes the intention and purpose behind the amendm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w, when Sec.43B as it stood prior to the amendment and Sec.36(1)(va) Explanation 1 thereto r/w Sec.2(24)(x) are considered together, it is clear that they operate in different fields. So far as the employee's contribution received is concerned, it should have been paid on or before the due date prescribed under the relevant statutes. Then again the learned counsel contended that on a reading of Sec.43B(b), any sum payable by the assessee as an employer by way of contribution to any provident fund meant payment of both employees contribution and employer's contribution, by the employer and therefore the assessee was entitled to pay both contributions together on or before the filing of the return under Sec.139(1) of the Act. We are unable to accept the said contention advanced by the learned counsel. If such a contention is accepted, that would make Sec.36(1) (va) and the Explanation thereto otiose. According to us, there was no indication in Sec.43B as it stood prior to the amendment and thereafter also to deface Sec.36(1)(va) and the Explanation thereto from the Income Tax Act. Thus, it means that both provisions are operative and the contributions have to be paid in acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the employer and the employee was with a clear objective and there is no illegality or other legal infirmity in classifying the contributions of employees and employer in the matter of crediting the same to the appropriate statutory authorities. 29. In that view of the matter, we are of the considered opinion that the view taken by the Tribunal which affirmed the decision of the 1st Appellate Authority that the Respondent was entitled to get deduction of the contributions received from the employees if paid on or before the filing of the return under Sec. 139(1) was not correct. We are inclined to agree with the judgment of the Gujarat High Court in 'Gujarat State Road Transport Corporation's case (supra). We are also of the opinion that the judgments of the other High Courts referred to by the learned counsel for the Respondent do not lay down the law correctly. 30. Learned counsel for the Respondent has also contended that when two views are possible, one in favour of the assessee shall be adopted and our attention was drawn to the decisions in 'Commissioner of Income-Tax v. Podar Cement Pvt. Ltd. and Others' [(1997) 226 ITR 625], 'Manish Maheshwari v. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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