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TMI Blog2018 (8) TMI 133X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. [(2015) 378 ITR 443 (Ker.). The learned Counsel appearing for the appellant, however, urges that the said decision requires reconsideration. 3. The amounts to be remitted by the employer towards the employees' provident fund and employees' state insurance are the employer's contribution and the employees' contribution. The decision of the Division Bench of this Court noticed CIT v. Alom Extrusions Ltd. [(2009) 318 ITR 306 (SC)]; but, however, misread the principle applied by the Hon'ble Supreme Court, is the argument advanced to compel reconsideration. We find that the Division Bench which admitted the appeal also raised a question as to whether a reconsideration of Merchem Ltd. was required. The questions of law framed by a Division Bench, on admission, are as follows: "(i) Whether the term 'amounts payable' as used in the relevant provision of law does take in employee's contribution as well, or will it stand confined to employer's contribution alone? (ii) Whether the separate course of action envisaged under Section 36(1)(v)/(va) of the Income Tax Act in respect of the employees' and employers' contribution will get vanished ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision. The learned Counsel would also specifically point to para 16 of Alom Extrusions Ltd., which speaks of an employer sitting on the collected contributions and depriving the workmen of the rightful benefits under the social welfare legislation, which, according to the Supreme Court, had resulted in the introduction of the proviso; later deleted. This reference can only be to the employee's contribution, is the argument. On such deletion and the Supreme Court holding that the deletion is curative, necessarily the deduction had to be allowed in the year without reference to the "due date". It is specifically pointed out that Section 43B is a non-obstante clause and would have overriding effect and application over the other provisions. Section 30 of EPF&MP Act is also pointed out to argue that whether it be the contribution of the employer or the employee, it is the liability of the employer and, hence, the employer's and employee's contribution cannot be treated differently insofar as the deductions permissible under Section 36. 6. The learned Senior Counsel for Government of India (Taxes), however, would seek to sustain the orders of the Tribunal in the present ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee to the employee's account in the relevant fund or 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". "S.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 - xxx xxx &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und or any other fund for the welfare of employees, unless it stood paid within the specified due date. 10. Here we have to notice that sub-clause (b) of Section 43B speaks of sum payable by the employer which is the 'employer's contribution', payable by the employer without deduction from the salary of the employee. Employees contribution though remitted to the fund by the employer, it is deducted from the employees salary, which deduction is statutorily enabled. Deduction from the salary of the employee, of course, is the liability of the employer and so is the remittance to the fund but it does not change the essential nature of the contribution; which is of the employee. A contribution deducted from the employee's salary and paid by the employer cannot, for a moment, be termed as the employer's contribution. There is a clear distinction insofar as the contributions payable under the EPF&MP Act as also the ESI Act. The employer's contribution has to be paid by the employer himself and there is possible no deduction from the salary of the employee, whereas with respect to the employee's contribution, it has to be deducted from the salary of the employ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Finance Act, 1987 with effect from 01.04.1988, from which date the statute recognised the distinction between employee's and employer's contribution. In this context we have to necessarily dwell upon the various amendments over the years and look at the sequence in which they were brought in. Only on introduction of Section 43B with effect from 01.04.1984, there was an insistence that there should be actual payment of amounts claimed as deductions, enumerated under the provision. Section 43B (b) spoke of sum payable by the employer by way of contribution to a welfare fund. At that point it could be understood that the sub-clause took in both employee's and employer's contribution. The legislature then took note of the circumstance that many claim the deduction on the ground of maintaining accounts on mercantile or accrual basis and fail to discharge the liability. Hence by Finance Act 1987, clause (x) under Section 2 (24) , sub-clause (va) of Section 36 (1) and the 2nd proviso to Section 43B were brought in. From that date the statute treats the employee's and employer's contribution differently. 13. Otherwise there was no requirement for bringing in a sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, 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 of only the contribution payable by the employer/assessee to the respective fund. Therefore, in that circumstances, Sec. 36(1)(va) and Sec. 43B(b) operate in different fields i.e. the former takes care ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Court in Merchem Ltd.. We, hence, answer the substantial question of law raised with respect to reconsideration of Merchem Ltd. in the negative, against the assessee and in favour of the Revenue. 17. The other question of law framed refer to the 'amounts payable', the reference obviously is to "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 funds for the welfare of employees" as found in sub-clause (b) of Section 43B, which refers only to the employer's contribution and not the employee's contribution. Employee's contribution, as has been already held by us, is covered by clause (va) of Section 36(1) and the deduction is restricted by the Explanation below it. With respect to employer's contribution, the deduction is allowable only on actual payment, as per Section 43B restricted only by the proviso as is now available in the Act, which requires payment before the filing of return. Any sum paid as employer's contribution, which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income, under sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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