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TMI Blog2023 (4) TMI 1095X X X X Extracts X X X X X X X X Extracts X X X X ..... aw from the date of enactment of provision. The auditor in the audit report specifies the due date as prescribed u/s. 36(1)(va) of the Act and the date on which deposit has been made, then in the computation of income, the same cannot be claimed as deduction, because the law envisages that such payment is disallowable, because it has not been paid within the due date. Accordingly, we hold that such an adjustment is permissible under the scope of section 143(1) of the Act Decided against assessee. - ITA NO.33 & 34/MUM/2023 - - - Dated:- 13-3-2023 - SHRI AMIT SHUKLA, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER Assessee: Shri Ashok Mehta Department: Shri Pratap Narayan Sharma ORDER PER BENCH 1. These appeals are filed by the assessee against different orders of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter in short Ld.CIT(A) ] dated 21.12.2022 and 10.11.2022 for the A.Ys. 2018-19 and 2019-20 respectively. 2. Since the issues raised in both these appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 07.12.2022. 9. The relevant observation and finding given by the Hon ble Supreme Court in Para No. 31-37 and Para No. 52-54 of the judgement are summarized as under: - Section 43B falls in Part-V of the IT Act. What is apparent is that the scheme of the Act is such that sections 28 to 38 deal with different kinds of deductions, whereas sections 40 to 43B spell out special provisions, laying out the mechanism for assessments and expressly prescribing conditions for disallowances. In terms of this scheme, section 40 (which too start with a non obstante clause overriding sections 30-38), deals with what cannot be deducted in computing income under the head Profits and Gains of Business and Profession . Likewise, section 40A(2) opens with a non obstante clause and spells out what expenses and payments are not deductible in certain circumstances. Section 41 elaborates conditions which apply with respect to certain deductions which are otherwise allowed in respect of loss, expenditure or trading liability etc. If this scheme is considered, sections 40-43B, are concerned with and enact different conditions, that the tax adjudicator has to enforce, and the assessee has to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 36(1)(vo) differently from those under section 36(1)(iv). The latter (hereinafter, employers' contribution ) is described as sum paid by the assessee as an employer by way of contribution towards a recognized provident fund However, the phraseology of section 36(1)(va) differs from section 36(1)(iv), it enacts that 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 before the due date. The essential character of an employees' contribution, Le.. that it is part of the employees' income, held in trust by the employer is underlined by the condition that it has to be deposited on or before the due date. [Para 33] It is therefore, manifest that the definition of contribution in section 2(c) is used in entirely different senses. In the relevant deduction clauses. The differentiation is also evident from the fact that each of this contribution is separately dealt with in different clauses of section 36(1). All these establish that Parliament. While introducing section 36(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ignificance of this provision is that on the one hand it brought into the fold of income amounts that were receipts or deductions from employees income; at the time, payment within the prescribed time - by way of contribution of the employees' share to their credit with the relevant fund is to be treated as deduction (Section 36(1)(va)). The other important feature is that this distinction between the employers' contribution (Section 36(1)(iv)) and employees' contribution required to be deposited 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 entitles 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. If such interpretation were to be adopted, the non obstante clause under section 43B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee's contribution on or before the due date as a condition for deduction. [Para 54] 10. Thus, once the Hon ble Supreme Court has held that if the payment has been made with respect employees contribution after the due date, the same has to be disallowed and cannot be allowed as deduction and therefore, adjustment has rightly been made. Section 143(1)(a) provides for following adjustment: - i) any arithmetical error in the return; ii). An incorrect claim, if such incorrect claim is apparent from any information in the return; iii) disallowance of loss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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