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TMI Blog2018 (10) TMI 1386X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 43B of the Income Tax Act. The return filed by the petitioner was processed under Section 143(3) of the said Act and the impugned order was passed by the respondent, disallowing the said sum of Rs. 12,25,257/- paid by the petitioner towards employees provident fund and ESI on the reason that it was paid beyond the due date mentioned in the relevant enactment. The petitioner sent a letter dated 28.07.2017 to the respondent informing that though the said contribution was remitted beyond the due date, but the same has been done in accordance with the respective acts and that the remittance was before the due date for filing the returns of income for the assessment year 2015-2016. Therefore, the petitioner requested the respondent to reconsider the disallowance. However, the respondent sent a notice dated 16.02.2018 impugned in this writ petition demanding payment of the amount determined in the assessment order. Hence, the present writ petition. 3. The respondent filed a counter affidavit, wherein it is stated as follows: The writ petition is not maintainable, since an efficacious and statutory alternative remedy of appeal is available to the petitioner. A cumulative reading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s contention, the learned counsel relied on the following decisions: i) 2010(1) SCC 489, Commissioner of Income Tax vs Alom Extrusion Ltd. ii) (2008) 298 ITR 41 (KAR), Commissioner of Income Tax vs Sabari Enterprises. iii)(2014) 366 ITR 167 (P&H), Commissioner of Income Tax vs Hemla Embroidery Mills (P) Ltd., iv)(2017) 291 CTR (ALL) 557, Sagun Foundry Private Ltd. Vs Commissioner of Income Tax; 5.Per contra, Mr.Rajkumar Jhabak, the learned Standing Counsel appearing for the respondent submitted as follows: The due date referred under section 36(1)(va) is very clear. It means the contribution should have been paid before such due date contemplated under the relevant Act for the purpose of getting deduction. Payment made after the due date, however, before filing the return, is not entitled to get deduction under Section 36(1)(va). None of the decisions referred to by the learned counsel for the petitioner has considered the scope of Section 36(1)(va) and on the other hand, the Apex Court's decision relied on by the petitioner in Alom Exclusion Ltd.'s case is in respect of an issue relating to Section 43B only. Further, Circular No.22 of 2015 dated 17.02.2015 issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d such payment represents "employees contribution" and not "employer's contribution". It is true that such payment was made by the assessee before filing the return. Therefore, the question is as to whether, based on such admitted position of the fact, the petitioner is entitled for deduction. 10.In order to answer the said question, it is better to quote the relevant provisions under the Income Tax Act, 1961 as follows: 11.Section 2(24)(x) defines the income as follows: "2.Definitions. (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;]" 12. Section 36 of the said Act deals with other deductions out of which, section 36(1)(va) reads as follows: "36. Other deductions: (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in Section 28- ..[(va) any sum received by the assessee from any of his employees to which the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of the sum received by the assessee from any of his employees to which the provisions of sub section 2(24)(x) applies, provided such sum is credited by the assessee to the employee's account in relevant fund on or before the due date. The "due date" is defined under the explanation to Section 36(1)(va) by stating that the due date referred under the relevant Act and certainly not the due date for filing the return. There is no dispute to the fact that this provision has not been amended. 16.A combined reading of Section 2(24)(x) and Section 36(1)(va) would thus clearly indicate that both are in respect of employees contribution received by the assessee and not the employer's contribution, which alone is dealt with under Section 43B(b). A careful perusal of Section 43B(b) would undoubtedly show that it deals with the sum payable by the assessee as an employer by way of his contribution to any provident fund or superannuation fund or gratuity fund or any other fund for welfare of employees. It is relevant to note at this juncture that Section 43B, which deals with certain deductions to be only on account of actual payment, does not include the payment made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... va) specifically contemplate and mandate that such payment should be made on or before the due date fixed at the relevant enactment only, the employer is not entitled to claim benefit of deduction towards such payment, merely he made the same before filing return. Time limit stipulated for making such payment under both enactments is not directory and on the other hand, mandatory. If the payment was not done within the stipulated time prescribed under the relevant enactment, the benefit of deduction cannot be claimed, since such belated payment is not a valid payment to attract deduction, under the purview of the Income Tax Act. However, insofar as the employer's contribution is concerned, no doubt, an amendment has been introduced to Section 43B, whereby the actual date of payment is enough for considering deduction, if such date falls before the date for filing return. The provisions under the Income Tax itself viz., Section 43B gives such scope and benefit to the employer/assessee in respect of the employers contribution alone, specifically by not extending such benefit in respect of payment made towards employees contribution. Therefore, in the absence of any amendment made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed by the Department for the following reasons: firstly, as stated above, Section 43-B [main section], which stood inserted by Finance Act, 1983, with effect from 1st April, 1984, expressly commences with a non-obstante clause, the underlying object being to disallow deductions claimed merely by making a Book entry based on Merchantile System of Accounting. At the same time, Section 43-B [main section] made it mandatory for the Department to grant deduction in computing the income under Section 28 in the year in which tax, duty, cess, etc., is actually paid. However, Parliament took cognizance of the fact that accounting year of a company did not always tally with the due dates under the Provident Fund Act, Municipal Corporation Act [octroi] and other Tax laws. Therefore, by way of first proviso, an incentive/relaxation was sought to be given in respect of tax, duty, cess or fee by explicitly stating that if such tax, duty, cess or fee is paid before the date of filing of the Return under the Income Tax Act [due date], the assessee(s) then would be entitled to deduction. However, this relaxation/incentive was restricted only to tax, duty, cess and fee. It did not apply to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the instance of the revenue against them, viz., in the negative (sic). Accordingly, we answer the substantial question No.1 framed in these appeals in the negative (sic)." 23. In (2014) 366 ITR 167 (P&H), Commissioner of Income Tax vs Hemla Embroidery Mills (P) Ltd., it is held at paragraph No.4 as follows: "4. Learned counsel for the appellant could not dispute that the issue raised herein finally stands settled by the Apex Court judgment in Commissioner of Income Tax v. Alom Extrusions Ltd. [2009] 319 ITR 306 (SC) and this Court in Income Tax Appeal No. 663 of 2005 (The Commissioner of Income Tax, Patiala v. M/s Rai Agro Industries Ltd. Sangrur), decided on 30.11.2010 wherein it has been held that Second Proviso to Section 43B of the Act omitted by Finance Act, 2003 with effect from 1.4.2004 was clarificatory in nature and was to operate retrospectively. Once that is so, in the present case, the respondent-assessee was entitled to deduction in respect of employer and employee's contribution to ESI and Provident Fund as the same had been deposited prior to the filing of the return under Section 139(1) of the Act. In view of the above, the substantial questions of law are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r fee, if payment is made after closing of accounting year but before date of filing of Return under Section 139(1), Assessee would be entitled to deduction on actual payment basis. This proviso did not include within its ambit, contributions under labour welfare statutes. By Finance Act, 1988, Second Proviso thus Second Proviso was further amended by Finance Act, 1989, w.e.f. 01.04.1989. ..28. From the aforesaid judgment, we find that irrespective of the fact that deduction in respect of sum payable by employer contribution was involved, but Court did not restrict observations, findings and declaration of law to that context but looking to the objective and purpose of insertion of Section 43B applied it to both the contributions. It also observed clearly that Section 43B is with a nonobstante clause and therefore over ride even if, anything otherwise is contained in Section 36 or any provision of Act 1961. 29. Therefore, we are clearly of the view that law laid down by High Courts of Karnataka, Rajasthan, Punjab & Haryana, Delhi, Bomaby and Himachal Pradesh have rightly applied Section 43B in respect to both contributions i.e. Employer and employee. Otherwise view taken by G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to explanation below clause (va) of sub-section (1) of section 36 in second proviso of section 43B (which has been deleted by Finance Act, 2003), only for the purpose of defining due date as per explanation below clause (va) of sub-section (1) of section 36. Therefore, by deleting Second Proviso to section 43B by Finance Act, 2003, it cannot be said that Section 36(1)(va) is amended and/or explanation below clause (va) of sub-section (1) of section 36 is deleted, which is with respect to employees' contribution. Under the circumstances, we are not in agreement with the view expressed by the Himachal Pradesh High Court; Karnataka High Court; Rajasthan High Court and Punjab and Haryana High Court in the cases referred to hereinabove." 26. In 2015 280 CTR 381 (KER), Commissioner of Income Tax vs Merchem Ltd. , it is held at paragraphs 24 and 26 as follows: "...24.So also, the learned counsel for the assessee contended that since s.43B commences with a non obstante clasue, Expln.1 to s.36(1)(va) was excluded. But in Alom Extrusions' case' (supra), the apex Court had held that the underlying object of the non obstante clause was to disallow deductions claimed merely by ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loyer's contribution, by the employer and therefore the assessee was entitled to pay both contributions together on or before the filing of the return under s.139(1) of the Act. We are unable to accept the said contention advanced by the learned counsel. If such a contention is accepted, that would make s.36(1)(va) and the Explanation thereto otiose. According to us, there was no indication in s.43B as it stood prior to the amendment and thereafter also to deface s.36(1)(va) and the Explanation thereto from the IT Act. Thus, it means that both provisions are operative and the contributions have to be paid in accordance with the mandate contained under s.36(1)(va) and Explanation thereto and under s.43B, respectively." 27.I have already pointed out that the scope of Section 43B and Section 36(1)(va) are different and thus, there is no question of reading both provisions together to consider as to whether the assessee is entitled to deduction in respect of the sum belatedly paid towards such contribution, especially when such sum is, admittedly, a sum received by the assessee/employer from his employee. Therefore, for considering such question, application of Section 36(1)(va) r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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