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2016 (6) TMI 969

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..... appropriate As far as the employee’s contribution to PF and ESI is concerned the question is as to whether analogy of section 43B of the Act is applicable to the employer’s contribution can be extended to employee’s contribution u/s 36(1)(va) of the Act is a debatable issue. A series of case laws on this issue would also show that this issue is highly a debatable one and outside the purview of the proceedings u/s 154 of the Act. - Decided against revenue - I.T.A No.2380/Kol/2013 - - - Dated:- 1-6-2016 - Sri N.V.Vasudevan, JM Shri M.Balaganesh, AM For The Appellant : S.S.Alam, JCIT, Sr.DR For The Respondent : Shri Manish Tiwari, FCA ORDER Per N.V.Vasudevan, JM This is an appeal by the Revenue against the ord .....

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..... venue expenditure incidental to the business and therefore the same had to be disallowed while computing the income of the assessee. Similarly the AO also was of the view that a sum of ₹ 21,68,000/- which was employee s contribution to PF and ESI had been paid beyond the due date of payment in accordance with law governing payment of PF and ESI and therefore it ought to have be disallowed and deduction of the said sum while computing the total income ought not to have been allowed in view of the provision of section 36(1)(va) of the Act. Sec.36(1)(va) of the Act provides that any sum received by an Assessee from any of his employees to which the provisions of sub-clause(x) of clause (24) of Sec.2 of the Act apply, if such sum is credi .....

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..... ber 2004 @ 13%. Accordingly, under accounting principle the payment was booked as prior period item in assessment year 2005-06. Moreover, bonus is allowable on payment basis according to the provisions section 43B(c). 2. As regards leave encashment it was stated that the system of accounting followed at Noida Factory to disburse on retirement of employee was changed to align with the system followed at Head Office. This resulted in making adjustment of ₹ 2,23,850/ - as prior period adjustment. The Assessee pointed out that adjustment for prior period items is common where system of accounting followed is mercantile. The allowability of prior period expenses was clarified by ITAT in the case of Dy CIT - Vs - Indag Rubber Ltd. 280 .....

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..... the Act was reduced by a sum of ₹ 29,54,842/-. 6. On appeal by the assessee the CIT(A) held that the issues sought to be rectified in the proceedings u/s 154 of the Act were debatable issues on which two views are possible and therefore it cannot be said that there were mistakes apparent on the face of the record which can be rectified in the proceedings u/s 154 of the Act. Accordingly order u/s 154 of the Act was cancelled by CIT(A). 7. Aggrieved by the order of CIT(A) the revenue has preferred the present appeal before the Tribunal. 8. We have heard the submissions of the ld. DR, who reiterated the stand of the AO as contained in the order of assessment. The ld. Counsel for the assessee filed before us a copy of the reply g .....

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..... No. 78/2009 judgment dated December 23, 2009 had to deal with a case of disallowance u/s.36(1)(va) of the Act. The Hon ble Court held that if the employees contribution is not deposited by the due date prescribed under the relevant Acts and is deposited late, the employer not only pays interest on delayed payment but can incur penalties also, for which specific provisions are made in the Provident Fund Act as well as the ESI Act. Therefore, the Act permits the employer to make the deposit with some delays, subject to the aforesaid consequences. Insofar as the Income-tax Act is concerned, the assessee can get the benefit if the actual payment is made before the return is filed. Contrary view has been expressed by some of Hon ble High Court .....

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