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TMI Blog2023 (4) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of Assessment Year 2019-20. 2.1 The appellant has framed and proposed following questions of law as substantial questions of law for this Appeal, urging to admit the Appeal for consideration of the said questions, reproduced below, "(a) Whether the Income Tax Appellate Tribunal erred in law and in facts in not appreciating that payment of employee's contribution to PF/ESI having already been done by the appellant before due date of filing of return, the same ought to have been allowed as deduction under Section 36(1)(va) read with Section 43B of the IT Act? (b) Whether the Income Tax Appellate Tribunal erred in law and in facts in not appreciating that jurisdiction under Section 143(1)(a) of the IT Act is limited in nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e income as above. The Appeal was dismissed on 7.12.2021. When the appellant approached the Income Tax Appellate Tribunal, the Tribunal confirmed the order of the appellate authority as per its judgment dated 17.5.2022, impugned in the present Appeal. 4. The case of the appellant was that once the contribution amount was paid even if with delay, the same could not have been charged as income of the appellant since the amount was not retained by the appellant for its benefit. It was also the contention that the income tax authority including the appellate tribunal erred in appreciating the scope of Section 36(1)(va) and Section 43B of the Income Tax Act, 1961 introduced in the Finance Act, 2021. 4.1 On the other hand, the stand of the depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's income. 5.1. The Supreme Court analysed the relevant provisions in Para.30 to 34 and after noticing the attendant decisions, proceeded to observe, thus, "When Parliament introduced Section 43B, what was on the statute book, was only employer's contribution (Section 34(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, simila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the employer Section 36(1)(va)) was maintained - and continues to be maintained. On the other hand, Section 43B covers all deductions that are permissible as expenditures, or out-goings forming part of the assessees' liability. These include liabilities such as tax liability, cess duties etc. or interest liability having regard to the terms of the contract. Thus, timely payment of these alone entitle an assessee to the benefit of deduction from the total income. The essential objective of Section 43B is to ensure that if assessees are following the mercantile method of accounting, nevertheless, the deduction of such liabilities, based only on book entries, would not be given. To pass muster, actual payments were a necessary pre-conditio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, of certain liabilities which are to be borne by the assessee in the form of tax, interest payment and other statutory liability. In the case of these liabilities, what constitutes the due date is defined by the statute. Nevertheless, the assessees are given some leeway in that as long as deposits are made beyond the due date, but before the date of filing the return, the deduction is allowed. That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees' contributions- which are deducted from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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