2016 (12) TMI 1479 - ALLAHABAD HIGH COURT

Entitlement to claim deduction of employees' contribution to provident fund and ESI under Section 43-B - 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 under Section 43-B as amended vide Finance Act, 2003, even if the said deduction was not admissible under Section 36(1) (va) of the Income Tax Act, 1962? - Held that:- By way of First Proviso, an incentive/relaxation was sought to be given in respect of tax, duty, cess or fee by explicitly stating that if such tax duty cess or fee is paid before the date of filing of the return under Act 1961, Assessee would than be entitled to deduction. This relaxation/incentive was restricted only to tax, 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.

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 also observed clearly that Section 43B is with a non-obstante clause and therefore over ride even if, anything otherwise is contained in Section 36 or any provision of Act 1961.

Therefore, we are clearly of the view that Section 43B is rightly applied in respect to both contributions i.e. employer and employee - Decided in favour of Assessee.