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TMI Blog2022 (11) TMI 1126X X X X Extracts X X X X X X X X Extracts X X X X ..... by the National faceless appeal Centre Delhi for assessment year 2018 19 on 18/4/2022 wherein the appeal filed by the assessee against the order u/s 143 (1) dated 16/3/2019 issued by the Deputy Commissioner of income tax, central processing Centre, Bangalore (the learned AO) wherein the learned AO disallowed late payment of employees provident fund and employees State insurance scheme of Rs.357,500. 02. Assessee raised following grounds of appeal: - 1 The Honorable CIT(A) erred in confirming the order of the learned Assessing Officer disallowing employer's contribution to Provident Fund of Rs. 3,57,500 though claimed u/s 43B as the same was paid before due date of filing of return of Income Tax. 2. The Honorable CIT(A) erred in passing the order against principles of natural justice as no opportunity of proper hearing was given to the appellant neither by the Honorable CIT(A) nor by the learned assessing officer. 3. The Honorable CIT(A) erred in not allowing the employer's contribution od Rs 3,57,500 the basis of amendment to section 36(1)(VA) and explanation to section 43(B)(b) presuming the same to be retrospective though it was clearly stated in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause in section 43B does not override section 36(1)(va) as both provisions operate in different fields. Section 43B(b) applies to employer's contributions while section 36(1)(va) applies to employees' contributions Therefore, even prior to insertion of Explanation 2 in section 36(1)(va) and Explanation 5 in Section 43B by the Finance Act,2021 w.e.f. 1-4-2021,section 43B will not apply to employees' contributions to PF,ESI etc. vi. The deduction made by employers to approved provident fund schemes, is the subject matter of Section 36(1) (iv). It is noteworthy, that this provision was part of the original IT Act; it has largely remained unaltered. On the other hand, Section 36(1)(va) was specifically inserted by the Finance Act, 1987, w.e.f. 01-04-1988. Through the same amendment, by Section 3(b), Section 2(24) which defines various kinds of income inserted clause (x). This is a significant amendment, because Parliament intended that amounts not earned by the assessee, but received by it, - whether in the form of deductions, or otherwise, as receipts, were to be treated as income. The inclusion of a class of receipt, i.e., amounts received (or deducted from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited with the authorities, the deduction otherwise permissible in law, would not be available. This court was of the opinion that the omission was curative, and that as long as the employer deposited the dues, before filing the return of income tax, the deduction was available. A reading of the judgment in Alom Extrusions, would reveal that this court, did not consider Sections 2(24)(x) and 36(1)(va). Furthermore, the separate provisions in Section 36(1) for employers' contribution and employees' contribution, too went unnoticed. x. When Parliament introduced Section 43B, what was on the statute book, was only employer's contribution (Section 36(1)(iv)). At that point in time, there was no question of employee's contribution being considered as part of the employer's earning. On the application of the original principles of law it could have been treated only as receipts not amounting to income. When Parliament introduced the amendments in 1988-89, inserting Section 36(1)(va) and simultaneously inserting the second proviso of Section 43B, its intention was not to treat the disparate nature of the amounts, similarly. As discussed previously, the memorandum int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mployers' income, and the later retains its character as an income (albeit deemed), by virtue of Section 2(24)(x) - unless the conditions spelt by Explanation to Section 36(1)(va) are satisfied i.e., depositing such amount received or deducted from the employee on or before the due date. In other words, there is a marked distinction between the nature and character of the two amounts the employer's liability is to be paid out of its income whereas the second is deemed an income, by definition, since it is the deduction from the employees' income and held in trust by the employer. This marked distinction has to be borne while interpreting the obligation of every assessee under Section 43B. xii. The non-obstante clause in section 43B would not in any manner dilute or override the employer's obligation under section 36(1)(va) to deposit the amounts retained by it or deducted by it from the employee's income, unless the condition that it is deposited on or before the due date, is correct and justified. The non-obstante clause has to be understood in the context of the entire provision of Section 43B which is to ensure timely payment before the returns are filed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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