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DCIT, Circle-3 (1) , Visakhapatnam Versus M/s. Eastern Power Distribution Company of A.P. Ltd. and Vica-Versa

2016 (9) TMI 1040 - ITAT VISAKHAPATNAM

Additions towards belated payment of employees’ contributions to PF - whether the assessee would be entitled to claim deduction for the employees’ contribution made to PF after the due date prescribed under the PF Act, but before the due date prescribed for filing of income tax return in the light of the provisions contained in section 36(1)(va) of the Act and section 43B(b) of the Act? - Held that:- Under the said Act, the employer shall contribute both employees and employer share along with a .....

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dent Fund Act does not differentiate employees and employer contribution and contribution means both employees and employer contribution under the PF scheme. - Section 43B of the Act provides for certain deductions to be allowed only on actual payment basis. Sub clause (b) of section 43B of the Act covers 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 the employees. The p .....

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ifference between employees and employer contribution to PF and if such contribution is made on or before the due date of furnishing return of income u/s 139(1) of the Act, then deduction is to be allowed under the provisions of section 43B of the Act. - Considering the facts and circumstances of this case and also following the judicial precedents as discussed above, we are of the view that there is no distinction between employees’ and employer contribution to PF, and if the total contribu .....

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O. No.9/Vizag/2015 - Dated:- 29-7-2016 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Appellant by : Shri M.B. Reddy, DR For The Respnodent : Shri G.V.N. Hari, AR ORDER PER G. MANJUNATHA, Accountant Member: This appeal filed by the revenue and cross objection filed by the assessee are directed against the order of CIT(A), Visakhapatnam dated 11.9.2014 and it pertains to the assessment year 2011-12. 2. The brief facts of the case are that the assessee compa .....

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after called as the Act ). The case has been selected for scrutiny and accordingly, a notice u/s 143(2) of the Act was issued which was duly served upon the assessee on 16.8.2012. In response to notice, the authorized representative of the assessee appeared from time to time and furnished relevant information as called for and also produced the books of accounts and other information. During the course of assessment proceedings, the A.O. noticed that as per the enclosure to tax audit report and .....

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duced on line payments of PF remittances. The assessee further submitted that because of new system of online payment of PF remittances, its staff is not acquainted with the knowledge of submission of returns because of which it has hired outsiders to remit the payment, therefore, there is a delay in remittances of PF contribution. The assessee further submitted that though, there is a delay in remittances of employees contribution to PF within the due date specified under the respective Act, th .....

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scribed under the Provident fund Act. The A.O. further observed that the assessee sought to distinguish between the employer and employee contribution to Provident fund, but, the fact is that both contributions are dealt under different provisions and accordingly, the employer contribution is dealt under the provisions of section 43B of the Act and employees contribution is dealt under the provisions of section 36(1)(va) of the Act. Therefore, there is no merit in the contention of the assessee .....

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r submitted that second proviso to section 43B of the Act, provides that no deduction shall be allowed unless such sum has actually been paid on or before due date as defined in explanation 36(1)(va) of the Act, which was omitted by the Finance Act, 2003 w.e.f. 1.4.2004 and accordingly there was no special provision regarding employees provident fund to PF. It was further submitted that as per the amended provisions of section 43B of the Act, any sum payable by the assessee as an employer by way .....

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the knowledge of procedure of epayment of PF. Therefore, there is a delay in remittances which cannot be considered as purposeful delay in remittances of PF contribution. The CIT(A) after considering the submissions of the assessee and also following certain judicial decisions, held that the assessee would be entitled for deduction of employees contribution to PF made before the due date of filing return of income u/s 139(1) of the Act. With these observations, Ld. CIT(A) directed the A.O. to d .....

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ontribution to PARTNERSHIP FIRM, as the said section is applicable only in respect of employer contribution to PF which operates on a different platform as compared to the provisions of section 36(1)(va) of the Act which is applicable to employees contribution. The D.R. further argued that the CIT(A) considered the case laws which is in favour of the assessee, but at the same time ignored the case laws relied upon by the A.O. which are in support of the revenue. There are divergent views taken b .....

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and gone through the orders of the authorities below. The A.O. made additions towards belated payment of employees contributions to PF. According to the A.O., employees contribution to provident fund is deductible under the provisions of section 36(1)(va) of the Act, if the same is paid on or before the due date specified under the provident fund Act. The A.O. further was of the opinion that in view of the clear provisions of section 2(24)(x) r.w.s. 36(1)(va) of the Act, any recovery from emplo .....

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w.e.f. 1.4.2004 and accordingly, there was no special provision regarding employees contribution to PF. It is further contended that as per the amended provisions of section 43B of the Act, any sum payable by the assessee as an employer by way of contribution to PF shall be allowed, if the same is paid on or before the due date of filing of return of income u/s 139(1) of the Act. 6. The only issue to be resolved is whether the assessee would be entitled to claim deduction for the employees cont .....

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reason that there is no difference between employees and employer contribution under the PF Act. Section 6 of Provident Fund Act provides for contribution and the manner in which such contribution shall be made. Paragraph 30 of the PF Scheme provides for payment of contributions. As per the said scheme, the employer at the first instance shall make the total contribution including employees share. Paragraph 32 provides for recovery of member share of contribution and as per the scheme, the emplo .....

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Act. Under the said Act, the employer shall contribute both employees and employer share along with administrative charges before the due date specified under the PF Act. The Act prescribed only one due date for depositing the contribution i.e. 15th of subsequent month with the grace period of 5 days which indicates that there is no difference between employee and employer contribution. If the legislature intends to differentiate employees and employer contribution, then there would have been tw .....

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or superannuation fund or gratuity fund or any other fund for the welfare of the employees. The proviso to section provides that any sum paid by the assessee on or before the due date of furnishing return of income u/s 139(1) of the Act, then no disallowance can be made under the provisions of section 43B of the Act. A careful consideration of section 43B of the Act, it is clear that an extension is granted to the assessee to make the payment of PF contributions or any other fund till the due d .....

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section 43B of the Act would include employees contribution to PF in the light of the definition of the word contribution as per the provisions of section 2(c) of the PF Act. As per the said section, contribution would mean both employer s contribution and employees contribution. Accordingly, it was held that the provisions of section 43B of the Act allowing deduction for payment made before the due date of filing of Income Tax return cannot be ignored. Similarly, the ITAT, Hyderabad Tribunal i .....

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o the due date as prescribed under relevant statute, but before due date of filing of return no disallowance could be made in view of the provisions of section 43B of the Act. In the case of CIT Vs. Udaipur Dugdh Utpadak Sahakari Sangh Ltd. 35 Taxman 616, the Hon ble High Court of Rajasthan, after referring to the apex court decision in the case of CIT Vs. Alom Extrusions Ltd. 319 ITR 306 & CIT Vs. Vinay Cement Ltd. held that the deductions should be allowed for the payment of employees cont .....

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mitted that employees contribution to provident fund is allowed as deduction, if the same is deposited on or before the due date specified under the provisions of provident fund Act. The D.R. also relied upon the decision of Gujarat High Court, reported in (2014) 366 ITR 170, wherein the Hon ble Gujarat High Court held that since assessee had not deposited said contribution to respective fund account on the date as prescribed in explanation to section 36(1)(va) of the Act, disallowance made by t .....

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