2025 (6) TMI 1942 - AT - Income Tax

Payment of Employees Contribution to Superannuation fund u/s 36(i) (va) - Payment beyond due date - whether the contribution made by the assessee to the Employees Superannuation Fund qualifies for deduction having been paid after the due date prescribed under the scheme but before the due date u/s 139(1). HELD THAT - We find from the record that the assessee had made the payment towards employees contribution to the Superannuation Fund before the due date for filing the return of income u/s 139(1). The fact of such payment and its timing is not disputed. CIT(A) has rightly noted that the critical requirement for allowing the deduction is whether the Superannuation Fund is an approved fund under the provisions of the Act. It is settled law including by several decisions of various High Courts that where employees contributions are deposited before the due date of filing the return under section 139(1) such payments are allowable as deduction provided the underlying fund is duly approved. In the instant case the Ld. CIT(A) has already issued directions to the AO to verify the approval status of the Superannuation Fund and allow the claim accordingly. We therefore find no infirmity in the order of the Ld. CIT(A) and the directions given by the Ld. CIT(A) are fair and reasonable.Appeal of the assessee is allowed for statistical purposes.

Summary

The core legal question considered in this appeal is whether the payment made by the assessee towards employees' contribution to the Employees' Superannuation Fund qualifies for deduction under Section 36(1)(va) of the Income-tax Act, 1961, despite being paid after the due date prescribed under the respective scheme but before the due date of filing the income tax return under Section 139(1) of the Act. A closely related issue is the requirement of the fund's approval status under the Act for such deduction to be allowable.

The relevant legal framework revolves around Section 36(1)(va) of the Income-tax Act, which governs the deductibility of employees' contributions to specified funds, including the Employees' Superannuation Fund. The statute mandates that for such contributions to be deductible, the fund must be an "approved Superannuation Fund." The timing of payment is also critical: judicial precedents have consistently held that contributions made before the due date of filing the return under Section 139(1) are allowable, even if the payment is made after the due date prescribed under the fund's scheme.

The Tribunal examined the factual matrix, noting that the assessee had paid Rs. 1,99,992/- towards the employees' contribution to the Superannuation Fund before the due date prescribed under Section 139(1) but after the due date specified in the fund's scheme. The Assessing Officer (AO), through the Centralized Processing Center (CPC), had disallowed this amount invoking Section 36(1)(va), treating the payment as delayed and thus not deductible. The Commissioner of Income-tax (Appeals) [CIT(A)] partly reversed this disallowance, deleting the addition related to the National Pension Scheme contributions but directing the AO to verify the approval status of the Superannuation Fund before allowing the deduction for the superannuation contribution.

The Court's reasoning emphasized the settled legal position that the timing of payment is governed primarily by the due date of filing the return under Section 139(1), rather than the due date under the respective fund's scheme. The Tribunal noted that the CIT(A) had rightly observed that the critical factor for deduction is the fund's approval status under the Income-tax Act. The absence of such verification on record necessitated a remand to the AO for this determination. The Tribunal found that the CIT(A)'s direction to verify the fund's approval status and allow the deduction if approved was both fair and reasonable.

In addressing competing arguments, the assessee contended that the contribution was voluntary and made well before the return filing deadline, relying on judicial precedents that support deductibility under such circumstances. The Revenue's position was that the payment was delayed as per the scheme's due date and thus not eligible for deduction. The Tribunal reconciled these views by reaffirming that the statutory due date under Section 139(1) prevails for the purpose of deduction eligibility, subject to the fund's approval status.

The key findings include:

• The payment of Rs. 1,99,992/- was made before the due date of filing the return under Section 139(1), although after the due date prescribed under the fund's scheme.
• The deduction under Section 36(1)(va) depends on the fund being an "approved Superannuation Fund."
• The CIT(A) rightly directed the AO to verify the approval status of the fund and allow the deduction accordingly.
• The Tribunal found no infirmity in the CIT(A)'s order and upheld the direction for verification.

The Tribunal's final determination was to allow the appeal for statistical purposes, effectively endorsing the CIT(A)'s approach and remanding the matter for verification of the fund's approval status. The Tribunal stated: "We, therefore, find no infirmity in the order of the Ld. CIT(A) and the directions given by the Ld. CIT(A) are fair and reasonable."

Significant legal principles established or reaffirmed include:

• For contributions to Employees' Superannuation Funds to be deductible under Section 36(1)(va), the fund must be an approved fund as per the Income-tax Act.
• Payments made after the due date prescribed in the fund's scheme but before the due date of filing the income tax return under Section 139(1) are eligible for deduction, subject to fund approval.
• The timing of payment for deduction purposes is governed by the statutory due date under Section 139(1), not by the fund's internal due dates.
• The Assessing Officer must verify the approval status of the fund before disallowing the deduction.

In conclusion, the Tribunal upheld the principle that the timing of payment vis-`a-vis the return filing deadline is determinative for deduction eligibility under Section 36(1)(va), provided the fund is approved. The direction to verify the approval status was affirmed, and the appeal was allowed accordingly.