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TMI Blog2016 (12) TMI 1479X X X X Extracts X X X X X X X X Extracts X X X X ..... ing this appeal only in respect to questions 4, 5 and 6 and only the aforesaid three questions need be adjudicated. 3. Questions 4, 5 and 6 read as under:- "(4) Whether on the facts and in the circumstances of the case, the second proviso to the Section 43-B of the Income Tax Act, 1962 does not override the first proviso to the said section and hence the deduction of Rs. 2,62,418/- in respect of employer's contribution to provident fund and ESI was admissible to the Assessee/appellant under the first proviso of Section 43-B itself? (5) Whether the omission of the second proviso to Section 43-B vide Finance Act, 2003 with effect from 01.04.2004, is curative in nature and has retrospective effect and the Assessee/appellant is eligible to claim deduction of Rs. 2,62,418/- being employer's contribution to provident fund and ESI in the Assessment Year 2001-02 in view of such amendment? (6) Whether the provisions of Section 36 and Section 43-B are mutually exclusive and the Assessee/appellant is legally entitled to claim deduction of employees' contribution to provident fund and ESI amounting to Rs. 2,84,261/- under Section 43-B as amended vide Finance Act, 2003, even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 143(3) of Act 1961, appellant preferred appeal before Commissioner of Income Tax (Appeals) (hereinafter referred to as ''CIT (A)') who dismissed appeal vide order dated 21.02.2005. On these two aspects, appellants further appeal, preferred before Tribunal, has also been rejected. 8. Now in order to answer the aforesaid questions, we need to examine relevant statutory provisions and law of precedence wherein similar issues have been considered and decided. 9. Section 2(24) defines "Income" and clause (x) is in respect to the "employees contribution". The relevant provision is quoted herein:- " 2(24) "income" includes-- (i) profits and gains; (ii) dividend; (iia) voluntary contributions received by a trust created wholly or partly for charitable or religious purposes or by an institution established wholly or partly for such purposes or by an association or institution referred to in clause (21) or clause (23), or by a fund or trust or institution referred to in sub-clause (iv) or sub-clause (v) or by any university or other educational institution referred to in sub-clause (iiiad) or sub-clause (vi) or by any hospital or other institution referred to in sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carried on by a mutual insurance company or by a co-operative society, computed in accordance with section 44 or any surplus taken to be such profits and gains by virtue of provisions contained in the First Schedule; (viia) the profits and gains of any business of banking (including providing credit facilities) carried on by a co-operative society with its members; (ix) any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever. Explanation.--For the purposes of this sub-clause,-- (i) "lottery" includes winnings from prizes awarded to any person by draw of lots or by chance or in any other manner whatsoever, under any scheme or arrangement by whatever name called; (ii) "card game and other game of any sort" includes any game show, an entertainment programme on television or electronic mode, in which people compete to win prizes or any other similar game; (x) any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the provisions of the Employees' State Insurance Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the transfer of the Duty Free Replenishment Certificate, being the Duty Remission Scheme under the export and import policy formulated and announced under section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992) ; (iv) the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession; (v) any interest, salary, bonus, commission or remuneration, by whatever name called, due to, or received by, a partner of a firm from such firm : Provided that where any interest, salary, bonus, commission or remuneration, by whatever name called, or any part thereof has not been allowed to be deducted under clause (b) of section 40, the income under this clause shall be adjusted to the extent of the amount not so allowed to be deducted ; (va) any sum, whether received or receivable, in cash or kind, under an agreement for-- (a) not carrying out any activity in relation to any business; or (b) not sharing any know-how, patent, copyright, trade-mark, licence, franchise or any other business or commercial right of similar nature or information or technique likely to assist in the manufacture or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28............... (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 of funds on or before the due date. Explanation- For the purposes of this clause, "due date" means the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise. 12. Section 43B however permits deductions otherwise allowable under Act 1961 in case paid actually before the date of filing of Return under Section 139 and carves out an exception in this regard. Section 43B as it was available at the time of relevant A.Y. Is reproduced as under:- Section 43B: Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contribution in the relevant fund, under any Act, rule, order or notification issued therein. In the present case, 'due date' therefore, shall be the date mentioned in Act 1952 or Act 1948 or Rules framed thereunder etc. by which contributions were to be made. Admittedly, as per 'due date' under the relevant Acts, contributions were not paid by Assessee appellant. Section 36(1)(va) talks of only employee's contribution and allow deduction in respect thereto in computing 'income' under Section 28. 14. So far as Section 43B is concerned, we find that it was inserted w.e.f. 01.04.1984 to allow deductions provided payments are actually made before filing of return as per due date under Section 139(1) of Act 1961. 'Income' defined under Section 2(24) of Act, 1961, includes 'profits and gains'. Under Section 2(24)(x), any sum received by Assessee from his employees as contribution to any provident fund/superannuation fund or any fund set up under Employees State Insurance Act, 1948, or any other fund for welfare of such employees, constitute 'income'. In respect to such contributions deduction was allowed under Section 36(1)(va) when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de with accounting period of Labour Welfare Statutes. In many cases, time to make contribution of funds ended after due date of filing of Returns. On the representation of Industries, again Parliament, vide Finance Act, 2003, w.e.f. 01.04.2004, made amendment by deleting Second Proviso and amending First Proviso. 16. Learned counsel for Assessee argued that the issue in question is covered by Supreme Court judgment in Commissioner of Income-Tax Vs Alom Extrusions Ltd., (2009) 319 ITR 306, but both learned counsels appearing for rival parties admitted that even after the aforesaid judgment, various High Courts have taken divergent views on the question, whether Section 43B can be read alongwith Section 36(1)(va) or both have independent, distinct and separate field of operation. In this back drop, we find it appropriate, first, to examine judgments of various High Courts which have been rendered after considering Supreme Court judgment in Commissioner of Income-Tax Vs Alom Extrusions Ltd. (supra) and thereafter would examine the entire aspect in totality. 17. We find that with respect to employees contribution to Provident Fund, as to whether disallowable or not with reference to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uting income referred to in Section 28. The relevant provision of Section 36 applicable to the case before Gujrat High Court was Section 36(1)(va) with which we are also concerned. It entitles an Assessee for deduction in computing income referred to in Section 28 with respect to any sum received by Assessee (employer) from his employee to which Section 2(24)(x) apply, if such sum is credited by Assessee to employees accounts in the relevant fund before due date i.e. date prescribed in the relevant statute applicable to the concerned fund. Court also noticed that Section 43B is in respect to certain deductions and applies only on actual payment. It held that amendment was made by deletion of Second Proviso of Section 43B only, but no corresponding amendment was made under Section 36(1)(va). It said: "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 (Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowing Rs. 12,51,737/- under Section 36(1)(va) and also disallowing Rs. 1,04,621/- under Section 14A read with Rule 8D. In appeal, CIT (A) reversed findings of Assessing Officer but on appeal preferred by Revenue, Tribunal restored Assessing Officer's order and that is how matter came to Karnataka High Court. The question up for consideration was, "whether Tribunal was justified in affirming finding of Assessing Officer and denying Assessee's claim of deduction of employees contribution to PF/ESI alleging that the payment was not made by appellant in accordance with the provisions of Section 36(1)(va) of Act 1961." The Assessee's counsel relied on earlier judgment of Karnataka High Court in Commissioner of Income-Tax Vs Spectrum Consultants P. Ltd., (2014) 2 ITR-OL 622 while counsel for Revenue attempted to pursue to take a different view following decision of Gujrat High Court. The Division Bench judgment delivered by Hon'ble Dilip B. Bhosale, (as his lordship then was) held, if the contribution of employees fund is deposited within due date the Assessee is straightaway entitled for deduction under Section 36(1)(va). However Section 43B provides for certain dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r view when there is divergence in views of different High Courts, we find it appropriate to examine Supreme Court judgment in Commissioner of Income-Tax Vs Alom Extrusions Ltd. (supra) to find out whether it can be confined only in respect to employers' contribution or is applicable to both 'contributions', whether by employer or employee. 26. The question, whether benefit under Section 43B, as a result of amendment of Finance Act, 2003, is retrospective or not, came to be considered in Commissioner of Income-Tax Vs Alom Extrusions Ltd. (supra). Court considered the intent, purpose and object in the historical back drop of insertion of Section 43B and its progress by way of various amendments. Referring Section 2(24)(x) it said, income is defined under Section 2(24) which includes profits and gains. Further in clause (x) of Section 2(24) any sum received by Assessee from employees as 'contributions' to any provident fund/superannuation fund or any fund set up under Act 1948, or any other fund for welfare of such employees constitute 'income'. This is the reason why every Assessee/Employer was entitled to deduction even prior to April, 1, 1984, keeping ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty, cess and fee. It did not apply to contributions to labour welfare funds. The reason appears to be that the employer should not sit on the collected contributions and deprive workmen of the rightful benefits under social welfare legislations by delaying payment of contributions to the welfare funds. But when implementation problems were pointed out for different due dates, uniformity was brought about in first proviso by Finance Act, 2003. Hence, amendment made by Finance Act 2003 in Section 43B is retrospective, being curative in nature and apply from 01.04.1988. In the result when contribution had been paid, prior to filing of return under Section 139(1), Assessee/employer would be entitled for deduction and since deletion of Second Proviso and amendment of First Proviso is curative and apply retrospectively w.e.f. 01.04.1988. 28. From the aforesaid judgment, we find that irrespective of the fact that deduction in respect of sum payable by employer contribution was involved, but Court did not restrict observations, findings and declaration of law to that context but looking to the objective and purpose of insertion of Section 43B applied it to both the contributions. It als ..... X X X X Extracts X X X X X X X X Extracts X X X X
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