2018 (5) TMI 2116 - AT - Income Tax

Delayed payment of employee s contribution to provident fund beyond the due date stipulated under that Act - payment was deposited in the financial year itself and before the filing of return of income u/s 139(1) - HELD THAT - There is no dispute between the parties regarding the dates of deposit of ESI and PF which clearly are beyond the prescribed date of deposit as applicable under the respective acts. However there is no dispute between the parties that these deposits were made before the filing of return of income for the relevant assessment year. Hon ble Allahabad High Court in the case of Sagun Foundry (P.) Ltd 2016 (12) TMI 1479 - ALLAHABAD HIGH COURT has dealt with similar issue and after taking into account the judgment of Hon ble Supreme Court in the case of CIT vs. Alom Extrusion Ltd. 2009 (11) TMI 27 - SUPREME COURT and after taking into account views of different High Courts has decided the similar issue in favour of the assessee .

Issues Involved:
1. Addition of Rs. 2,73,172/- for late payment of employee's contribution to provident fund.
2. Applicability of Section 36(1)(va) and Section 43B of the Income Tax Act.
3. Judicial precedents and interpretation of relevant provisions.

Issue-wise Detailed Analysis:

1. Addition of Rs. 2,73,172/- for Late Payment of Employee's Contribution to Provident Fund:
The primary issue in this appeal is the confirmation of the addition of Rs. 2,73,172/- by the CIT(A), which was made by the Assessing Officer due to the late payment of the employee's contribution to the provident fund. The assessee admitted that the contributions were deposited beyond the due date stipulated under the Provident Fund Act but argued that the payments were made within the financial year and before the filing of the return of income under Section 139(1) of the Income Tax Act.

2. Applicability of Section 36(1)(va) and Section 43B of the Income Tax Act:
The assessee's representative cited the judgment of the Hon'ble Allahabad High Court in Sagun Foundry (P.) Ltd. vs. CIT, which held that if the contributions are deposited before the due date of filing the return of income, the assessee is entitled to a deduction under Sections 43B and 36(1)(va). The Assessing Officer had disallowed the expenditure under Section 36(1)(va) due to the late deposit, and the CIT(A) upheld this addition. However, the Tribunal found that the unpaid amounts for May 2012 and October 2012 were deposited before the due date of filing the return of income, aligning with the precedent set by the Allahabad High Court and the Supreme Court's judgment in CIT vs. Alom Extrusions Ltd.

3. Judicial Precedents and Interpretation of Relevant Provisions:
The Tribunal referred to several judicial precedents, including the Gujarat High Court's decision in CIT vs. Gujarat State Road Transport Corporation, which distinguished between the employer's and employee's contributions. However, the Tribunal also noted that other High Courts, including Karnataka, Rajasthan, Punjab & Haryana, Delhi, Bombay, and Himachal Pradesh, have applied Section 43B to both contributions. The Supreme Court in Alom Extrusions Ltd. emphasized that Section 43B, with its non-obstante clause, overrides other provisions, allowing deductions for contributions paid before the due date of filing the return.

The Tribunal concluded that the law laid down by the majority of High Courts and the Supreme Court supports the assessee's position. Therefore, the appeal was allowed, and the addition of Rs. 2,73,172/- was deleted.

Conclusion:
The Tribunal, following the judicial precedent, allowed the appeal filed by the assessee, ruling that the late payment of the employee's contribution to the provident fund, if made before the due date of filing the return, is deductible under Sections 43B and 36(1)(va) of the Income Tax Act. The appeal of the assessee was thus allowed, and the addition made by the Assessing Officer was deleted.

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