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2016 (5) TMI 925 - ITAT CHANDIGARH

2016 (5) TMI 925 - ITAT CHANDIGARH - TMI - Addition on account of alleged delayed payment of PF - Held that:- We do not hesitate to hold that the employees' contribution to the EPF deposited by the assessee before the due date of filing the return, is an allowable expenses. Since, in the present case, the same is deposited before the due date of filing of the return the ground raised by the assessee is allowed.

Payments for expenses in cash in violation of provisions of section 40(A)( .....

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e the income earned from the undertaking, therefore, he is eligible for deduction under section 80-IB of the Act. In view of this, we direct the Assessing Officer to give the assessee the benefit of these additions, if the assessee is eligible for deduction under section 80-IB of the Act, since the issue was not in question before us, we are not aware whether the assessee is eligible for said deduction or not. - Decided in favour of assessee for statistical purposes. - ITA No.21/Chd/2016, ITA No .....

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the appeals, the same were heard together and are being disposed off by this consolidated order for the sake of convenience. We will first take the appeal of the assessee in ITA No. 21/Chd/2016. ITA No.21/Chd/2016 : 3. The ground Nos.1 and 4 are general and, hence need no adjudication. 4. The ground No.3 is consequential and no adjudication is required. 5. The ground No.2 reads as under : "2. That in the facts and circumstances of the case the Commissioner of Income Tax (Appeals), Panchkula .....

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Bombay High Court in the case of CIT v. Pamwi Tissues Ltd. [IT Appeal No. 1034 of 2014, dated 4-2-2008]. 7. Before the learned CIT (Appeals), again the same contention was reiterated. However, the learned CIT (Appeals) did not find himself in agreement with the same. He was of the view that Explanation to section 36(1)(va) of the Income Tax Act, 1961 (in short 'the Act') provides the meaning of 'due date' as being the due date prescribed under the relevant fund. Reliance was plac .....

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rom relying on the judgments that were cited before the lower authorities, a copy of the judgment of the Jurisdictional Punjab & Haryana High Court in the case of CIT Vs. Mark Auto Industries Ltd. in ITA No.57 of 2009 was placed on record. 9. The learned D.R. vehemently argued defending the order of the Assessing Officer and that of CIT (Appeals), stating that the Explanation below section 36(1)(va) of the Act has clearly referred to the due date as prescribed under the EPF Act and not the d .....

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of deposits in EPF, the employees' contribution, it cannot be doubted that all the deposits have been made before the due date of filing of the income-tax return by the assessee, though admittedly these were made after the due date of such deposits provided under the EPF Act. These facts have not been disputed by any of the lower authorities, nor before us any such argument was made. In this background, only issue to be decided by us is whether the employees' contribution to EPF made by .....

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) reads as under :- "2(24) Income includes : (x) any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the provisions of the Employees' State Insurance Act, 1948 (34 of 1948), or any other fund for the welfare of such employees;]" 13. At the first instance any amount received by an employer from its employees as their contributions to such funds is treated as income in the hands of that employer. 1 .....

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; 15. It is now clear that the amount which was treated as income in the hands of an assessee under section 2(24)(x) of the Act, is allowed as deduction if the same is paid in the said fund on or before due date. 16. The meaning of 'due date' referred to in section 36(1)(va) of the Act is provided in the Explanation below the same section : Explanation :- for the purpose of this clause, "due date" means the date by which the assessee is required as an employer to credit an empl .....

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re the due date provided for such payment in those respective statutes. 18. Now, the provisions of section 43B(b) of the Act reads as under : Section 43B. : (b) 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, [or] shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of account .....

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eads 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 the 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." 21. Now, it bec .....

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ribution alone. For this, we would like to refer to second proviso to section 43B of the Act, which is omitted by the Finance Act, 2003, w.e.f. 1.4.2004. Prior to its omission, the second proviso as substituted by the Finance Act, 1989 w.e.f. 1.4.1989, read as under : "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 .....

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have the employees' contribution also into the ambit of section 43B of the Act. Further, we may also emphasize that by omitting second proviso, the intention of Legislature also becomes more clear that the amount received by the assessee from his employees' as their contribution towards these funds etc. are to be allowed to him as business expenditure, if he deposits the same in those funds etc. before the due date of filing of return of income. 24. The learned CIT (Appeals) has relied .....

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9; welfare funds etc. on the other hand are curative in nature and hence retrospectively applicable. 25. In view of the above, we understand that the employees' contribution to EPF paid by the assessee before the due date of filing return of income is an allowable expenditure. For this, we are also supported by the judgment of the Jurisdictional Punjab & Haryana High Court in the case of CIT Vs. Lakhani India Ltd. (2010) 39 DTR 210 (P&H) and also a latest judgment in the case of CIT .....

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297 ITR 320 (Del ) 4, CIT Vs. P.M. Etcronics Ltd. (2008) 15 DTR (Del ) 258. After elaborating the provisions and their interpretation, holding the case in favour of the assessee, the Hon'ble High Court observed as under : "17. We may only add that if the employees' contribution is not deposited by the due date prescribed under the relevant Acts and is deposited late, the employer not only pays interest on delayed payment but can incur penalties also, for which specific provisions a .....

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ibution to such fund, the fact that the same is deposited after the due date as provided under there respective Statute, there are consequences provided in those respective Statute, however, the allowability of those expenses for the purpose of Income Tax are to be looked under the Income Tax Act only. 28. In view of the above, we do not hesitate to hold that the employees' contribution to the EPF deposited by the assessee before the due date of filing the return, is an allowable expenses. S .....

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the addition of ₹ 3,26,550/- made by the ld. Assessing Officer on the alleged ground that EPF was deposited late." 32. It is relevant to observe here that the issue in ground No. 2 is similar to the issue in ground No. 2 raised by the assessee in ITA No. 21/Chd/2016 and the findings given in ITA No. 21/Chd/2016 shall apply to this case also with equal force. The ground No.2 raised by the assessee is allowed. 33. The ground No.3 raised by the assessee reads as under : "3. That in .....

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of provisions of section 40A(A)(3) [sic] of the Act. The Assessing Officer disallowed an amount of ₹ 40,400/- being 20% of such payments. 35. Before the CIT (Appeals), it was stated that though this amount may be disallowable but since it becomes gross income and deduction under section 80-IB of the Act is allowable on the same. The CIT (Appeals) decided the issue against the assessee stating that the assessee had failed to correlate the payments in cash as against their respective bills. .....

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