TMI Blog1996 (6) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... ay salary for the previous month on the 7th of succeeding month (see section 5 of Payment of Wages Act). The employees' contribution to the PF in the following sums were paid on the following dates : Month Amount Payment date of PF in Govt. April 55,703 24-5-1990 May 54,343 25-6-1990 July 54,804 23-8-1990 October 59,857 30-11-1990 December 67,337 31-1-1991 -------------------- 2,92,044 -------------------- Similarly, employees' contribution to ESI in the following sums were paid on the following dates : Month Amount Payment date of ESI in Govt. June 8,130 31-7-1990 July 6,969 31-8-1990 August 7,355 30-9-1990 September 5,161 31-10-1990 October 5,425 30-11-1990 December 7,175 31-1-1991 ------------------------ 40,215 ------------------------ The Assessing Officer took the view that these contributions were not effected within the due date for payment under the relevant provisions of the Provident Fund Act and ESI Act nor within the grace period allowed under that Act. Since the payments were beyond the due date including the grace period allowed for each month, the provisions of section 36(5A) stood attracted and in this view of the matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee from his employees as contribution to PF or any fund set up under the Employee State Insurance Act, 1948 should be treated as income chargeable to tax. Under section 36(1)(va) a deduction is to be allowed if the amount thus received by the assessee is credited to the employees account in the relevant fund or funds on or before the due date, due date being the due date prescribed under the relevant Acts or Rules. In this case the payments were not made within the due date though it had been made within the month. The CIT(A) rightly disallowed the same. Further, the proviso to section 43B only emphasised the payment within the due date. Hence the disallowance was justified. 5. Having regard to the rival submissions, we delete the disallowance. Contributions received from the employees towards PF or the State Insurance Fund are first treated as income of the assessee in the previous year under section 2(24)(x) of the Income-tax Act. Such contributions are to be allowed as deduction under section 36(1)(va) if the same is credited by the assessee to the employees' account in the relevant fund on or before the due date prescribed under the relevant Acts. One of the questions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... member of the Fund for the first time or there is no employee leaving service of the employer during the preceding month, the employer shall send a 'Nil' return. " [Emphasis supplied] Reading together sections 36 and 38, it could be said that there is certain amount of ambiguity over the expression "15 days from the close of the month". There is also force in the submission of the assessee's counsel that in the case of ambiguity the benefit should be given to the taxpayer. Viewed in this context we hold that payments have been made within the due date and, therefore, no part of it can be disallowed. 6. If the due date is taken to refer to the period of 15 days from the end of the month for which salary is payable to the employees, there is no doubt that in the instant case a delay of 4 days in the case of salaries payable for the months of October and December in respect of contributions received from the employees as will be evident from the following table : --------------------------------------------------------------------------------------------------------------------------------------------------- Month Amount Date of Due date Date after Payment Remark payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isdom has redrafted the above second proviso as follows with effect from 1-4-1989 : " Provided further that no deduction shall, in respect of any sum referred to in clause (b), be allowed unless such sum has actually been paid in cash or by issue of a cheque or draft or by any other mode on or before the due date as defined in the Explanation below clause (va) of sub-section (1) of section 36, and where such payment has been made otherwise than in cash, the sum has been realised within fifteen days from the due date. " The notable omission in the amended proviso is the expression "during the previous year". Because of the omission of the expression "during the previous year" in the second proviso to section 43B, we hold that so long as the payments were made within the previous year, the payments are to be allowed as deduction under the main section. In respect of the contributions recovered on the last day of the previous year or any other subsequent date, under the second proviso deduction has to be allowed if the payment had been made within the due date prescribed under the Act. Thus, the second proviso to section 43B has also been made an enabling provision just as the fir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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