TMI Blog1997 (2) TMI 557X X X X Extracts X X X X X X X X Extracts X X X X ..... decided the addition made by the Assessing Officer. The Hon'ble ITAT may order accordingly. 4. We have heard the ld. assessee's counsel as well as the ld. D.R. The assessee's counsel addition to reiterating the submissions made before the lower authorities has submitted that the assessee was advised by its income-tax advisors that the employees and the employers contribution towards EPF, EFPF, ESIS, Insurance Fund, Administrative charges, etc. were to be deposited within 15 days from the date of payment of salary or wages as the case may be and the same being 7th of every month the assessee remained under the bona fide belief that the amounts were to be deposited by 15th day of next month starting after the date of disbursement of salary and wages which in this case was 7th of every month (the assessee was paying salary and wages on 7th of every month). He further supported this aspect by submitting that it was not a case where either the assessee has disputed the liability or has not deposited the same. Rather, as far as payments of EPF are concerned most of the same have been made on 22nd day of the month i.e., within 15 days from the date of disbursement of sala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber, 1983. In view of these facts, he submitted that the above provisions should be construed liberally, otherwise, it will be a great injustice to the assessee. The ld. counsel further submitted that if the legislative intention is not taken into account then the assessee will never get the deduction because by virtue of the provisions of sections 43B and 2(24)(x) read with section 36(1)(va) these amounts will be income for this year and as the assessee has actually paid the amounts in the year relevant to the assessment year 1992-93 itself, it will not get the deduction in any of the subsequent years. He, therefore, emphasised that such interpretation of the provisions will lead to injustice to the assessee and absurd results, which was never the intention of the legislative. Quoting his earlier submission, he submitted that short delay in depositing the amount was because of bona fide belief entertained by the assessee on the advice of its tax consultant, however mistaken it may be. The assessee is entitled to the benefit of doubt. Similarly, the delay having been caused due to want of funds may be considered as genuine and reasonable cause for delay, if any. The assessee' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Adnl. Clzarges April/91 3,612 28,086 2,062 1,586 35,346 27-05-1991 21-05-1991 May/91 3,600 27,914 2,048 1,575 35,137 19-06-1991 27-06-1991 June/91 3,680 28,836 2,097 1,613 36,226 29-07-1991 29-07-1991 July/91 3,789 29,172 1,649 2,143 36,753 22-08-1991 22-08-1991 Aug/91 3,893 30,159 2,218 1,703 37,973 27-09-1991 27-09-1991 Sept/91 3,859 29,324 2,506 1,671 37,360 28-10-1991 28-10-1991 Oct/91 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary/92 11,513 23-03-1992 February/92 11,692 March/92 9,499 III. For the purpose of section 2(24)(x) : Employees' contribution towards EFPF EPF Month EFPF EPF Total Date of Payment 3,612 28,086 31,698 27-05-1991 April/91 3,600 27,914 31,514 19-06-1991 May/91 3,680 28,836 32.516 29-07-1991 June/91 3,789 29,172 32,961 22-08-1991 July/91 3,893 30,159 34,052 27-09-1991 Aug/91 3,859 29,324 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have come to notice where taxpayers do not discharge their statutory liability such as in respect of excise duty, employer's contribution to provident fund, Employees' State Insurance Scheme, etc. for long periods of time, extending sometimes to several years, for the purposes of their income-tax assessments, they claim the liability as deduction on the ground that they maintain accounts on mercantile or accrual basis. On the other hand, they dispute the liability and do not discharge the same. For some reasons or the other, undisputed liabilities also are not paid. 35.3 To curb this practice, the Finance Act has inserted a new section 43B to provide that deduction for any sum payable by the assessee by way of tax or duty under any law for the time being in force or 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 shall, irrespective of the previous year in which the liability to pay such sum was incurred, be allowed only in computing the income of that previous year in which such sum is actually paid by the assessee. 35.4 The section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the effect that no deduction will be allowed in the assessment of the employers unless such contribution is paid to the fund on or before the 'due date'. Due date means the date by which an employer is required to credit the contribution to the employees' account in the relevant fund under the provisions of any law or terms of contract of service or otherwise. 11. As the assessee has deposited the amounts within the period relevant to the assessment year 1992-93 so, if the assessee's claim is not allowed in this year then it will not get any deduction in any of the subsequent years. Therefore, we are in agreement with the submission of the assessee's counsel that if a strict interpretation of sections 43B and 2(24)(x) read with section 36(1)(va) is taken then it will certainly lead to injustice and absurd result which was never the intention of the Legislature. We are, therefore, of the opinion that if on the basis of equitable construction, the construction results in equity and justice, rather than injustice and absurdity then such construction should be preferred to the strict literal construction. To support this proposition, we may usefully refer to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions so that the injustice and the absurdity can be avoided. 13. Another question to be decided in this case is the determination of 'due date' for making payment and for this purpose, we would like to consider the provisions of sections 36(2) and 38 of the Employees' Provident Fund Scheme, 1952 because there seems to be some ambiguity in those provisions. Section 36(2) reads as under : Every employer shall send to the Commissioner within 15 days of the close of each month a return - (a) in Form 5, of the employees qualifying to become members of the Fund for the first time during the preceding month together with the declarations in Form 2 furnished by such qualifying employees, and (b) in such form as the Commissioner may specify, of the employees leaving service of the employer during the preceding month : Provided that if there is no employee qualifying to become a 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. Section 38 reads as under : Mode of payment of contributions. -- (1) The employee shall, before pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so paid. However, first proviso and second proviso were added to section 43B by the Finance Act, 1987 with effect from 1-4-1988. The first proviso reduces the rigour of the main section by enabling the assessee to get the benefit of deduction in respect of taxes, duties, etc, even if they were paid after the end of the previous year but before the due date for furnishing of return under section 139(1) of the Act. The second proviso also introduced along with the first proviso with effect from 1-4-1988 is to the effect that unless the payment in respect of contributions to PF, etc., have been actually made during the previous years on or before the due dates as prescribed under the relevant Act or the Rules, no deduction should be allowed in respect of the same. Thus the first proviso in a sense is an enabling provision. The second proviso would appear to be a disabling provision. It reads as follows : 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 during the previous year on or before the due date as defined in the Explanation... Therefore, it could be argued that in respect of PF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment of wages/salary and therefore the submissions, regarding admissibility of benefits for having a bona fide belief entertained as a result of its advice by the tax advisors that the payment was to be made after 15 days from the date of payment of salaries and wages that the delay; otherwise had been due to financial difficulty as well as the submission that the delay was not intentional or was not to defraud the revenue because by delaying the payments by a few days the assessee was not to get any benefit rather was putting it to the risk of serious penal consequences, as envisaged in sections 43B, 2(24)(x) read with the provisions of section 36(1)(va) which no prudent person would like to do, have got force. We, therefore, are of the opinion that in the light of our decision for liberal interpretation of the provisions of the relevant sections, as observed earlier, by following the decision of the Hon'ble Supreme Court, the delay in depositing the amounts in question being under a bona fide belief and for want of funds can be said to be due to reasonable cause and, therefore, there was no justification in disallowing the assessee's claim for payments of contributions ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
