TMI Blog2004 (5) TMI 245X X X X Extracts X X X X X X X X Extracts X X X X ..... On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding that out of sum entertainment expenditure amounting to Rs. 7,79,073 the assessee is entitled to deduct 25% of such expenditure incurred on staff members particularly when the assessee has failed to give the details of employees which requires examination as per Board's Circular No. 706 dated 18-7-1995. 4. The order of the Assessing Officer may be restored and the order of Ld. CIT(A) may be set aside with respect to the above mentioned grounds." 2. Ground Nos. 1 2 relate to deduction under section 43B read with section 36(1)(va) of the Income-tax Act, 1961 in respect of late deposit of employee's contribution to PF and as well as late deposit of employer's contribution. 3. Briefly the facts are that for the months of April 1996, December 1996 and March 1997 the employees contribution and employer's contribution was deposited on the dates as under: ----------------------------------------------------------------- Month Employees Employer's Date of deposit contribution contribution -------------------------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y reversed the judgment of the Tribunal by holding that the Tribunal was not right in law in reckoning the date of payment (viz.,) 7th of the succeeding month as the date from which the due date of payment to the Government. The deduction has to be made with reference to the earning and the employee has to remit both the contributions to PF within 15 days from the close of the month for which the employees earned their salary i.e., salary payable. 8. On the other hand, the assessee's counsel contends that there is ambiguity in the provision of Act for which benefit should be allowed to him and in that light the decision taken by the Ld. CIT(A) cannot be disturbed. 9. We have heard the parties with reference to material on record and precedents referred. Essentially after the decision of Madras Radiators Pressing Ltd. supra the decision taken by the Madras Bench of the Tribunal could not make the basis for allowing deduction. In the respondent's case all the payments had been made prior to the due date specified for filing of the return of income. The payment for the month of March 1997 for Rs. 50,676 on account of employee's contribution and Rs. 56,553 on account of employer' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Whereas the second proviso restricts the deduction in respect of any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, unless it has been paid within the specified due date. 11. The Finance Act, 2003 has deleted the second proviso and amended the first proviso by the Finance Act, 2003 w.e.f. assessment year 2004-2005 to be read as under: "Provided that nothing contained in this section shall apply in relation to any sum which is actually paid by the assessee on or before due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return." 12. This has an affect of deleting the specified clauses as mentioned in the first proviso. This also had the effect of bringing existing clause (b) at par in terms of allowability of expenses. Now as per the present provisions of section 43B the payment made by the employer towards contribution of PF, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory and background that led to the enactment of the section. This principle was laid down by Their Lordships of the Supreme Court in the case of Imperial Chit Funds (P) Ltd. v. ITO [1996] 219 ITR 498. 14. In this background, a look to the Finance Bill 2003, paras 137 to 144 of the Finance Minister Budget Speech at 260 ITR (St.) 26, 27, will show that the Finance Minister has pointed out to the setting up of the Task Force on Direct-Indirect taxes under the Chairmanship of Dr. Vijay Kelkar and gave due acknowledgement to the work of the Task Force as per para 140 of the Bill. Further in para 143 the Finance Minister has stated that the basic philosophy as laid down by these reports is sound. There is need to eventually move away from an exemption and discretion based system to a different, more current order. That is the ideal that the Task Force, particularly in respect of direct taxes have suggested. The Finance Minister in his speech also stated that the ideal presented by the task force is difficult to achieve in one leap. Finance Minister suggested that the suggestions of the Task Force be implemented in the gradual manner and in phases. In para 144 the Finance Minister has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax payable before they leaveIndia. An Indian citizen, before leaving India, will only have to give his/her permanent account number, and the period of his/her intended visit abroad to the emigration authorities; and (i) Simplifying the procedure and methods employed during the search and seizure and during survey by the Income Tax Department. First, hereafter stocks found during the course of a search and seizure operation will not be seized under any circumstances. Second, no confession shall be obtained during such search and seizure operations. Third, no survey operation will be authorized by an officer below the rank of Joint Commissioner of Income Tax. Finally books of account impounded during the survey will not be retained beyond then days, without the prior approval of the Chief Commissioner." Besides the above a number of changes were made in the I.T. Act based on the Kelkar Committee's report as under: 1. Reintroduction to exemption from tax on Dividend income in the hands of shareholder. 2. Scrapping of Chapter XIV-B i.e., special provision relating to assessment of undisclosed income. 3. Amendment in section 36(1)(iii) inserting a proviso providing that inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayed payment of statutory liability relating to labour should be allowed in the year of payment like delayed taxes and interest." Since the amendment in proviso clause have been done to remove the hardship being caused due to total disallowance, the amendment becomes curative so as to be construed retrospectively. 17. There is also another angle to look at the problem. In case the amendment is not accepted to be operative retrospectively, then the amendment so brought into statute by the Finance Act, 2003 would produce inequitable and illogical results. For instance in case of assessees where there has been delay in labour welfare payments by a few days after the due date the same attracts total disallowance. However, in the case of an assessee who did not make payment and persisted with the default and deposits said amounts after1-4-2004he shall be eligible to the benefit of deduction after the date of amendment. This gives a premium on a persistent default vis a vis the small default. According to the rules of interpretation construction should be preferred to the literal construction. A reference to this is found inApex Courtdecision in the following cases: 1. CIT v. J.H. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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