TMI Blog1996 (12) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... he provident fund and contribution to the employees' State insurance fund when the same are paid after the due dates in the respective Acts. The petitioner is a private limited company. It is engaged in the business of manufacture and sale of electronic connectors for the defence sector and it is registered as a small scale industry. It is an assessee under the Income-tax Act. The petitioner has employed about 400 persons in its establishment. It is covered by the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (for short the E.P.F. Act ), and the Employees' State Insurance Act, 1948 (for short the E.S.I. Act ). It is under an obligation to remit the employer's as well as employees' contribution under the said Acts before the date prescribed thereunder. In the assessment year 1991-92, it faced some difficulties in remitting the amounts on or before the specified date (hereinafter referred to as the due date ). It states that for the month of April, 1990, to February, 1991, the petitioner paid the contribution within the same financial year, however, the dues for the month of March, 1991, had been paid on April 9, 1991, which is before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the salaries of the workers towards provident fund and have defaulted in contributing their matching share. So to check such malpractice Parliament enacted the above provision. Parliament only seeks to disallow deduction of expenditure where the assessee infracted the relevant law. Therefore, the provisions cannot be said to be expropriatory nor can it be said that there was imposition of any penalty or damages. The said provisions are not violative of any of the articles of the Constitution, much less articles 14, 19 and 21. In the circumstances, it is prayed that the writ petitions be dismissed. Mr. S. Ravi, learned counsel for the petitioners in W. P. Nos. 7516 of 1992 and 21142 of 1994 and Mr. Krishna Koundinya, learned counsel for the petitioners in W. P. Nos. 11774 of 1995 and 3051 of 1996 have contended that under section 145 of the Income-tax Act chargeability of tax is based on the method of accounting and in these cases the method of accounting is accrual basis and accordingly contributions were paid though not within the due dates, therefore, the amount should have been allowed as permissible deduction. It is also contended that payment (sic) of deduction by the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on-compliance with the provisions of the Act and the Rules, section 7Q of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, makes the employer liable to pay simple interest at the rate of twelve per cent. per annum or at such higher rate as may be specified in the Scheme on any amount due from him under the Act, from the date on which the amount has become so due till the date of its actual payment. A safeguard is provided to the employer, that the rate of interest shall not exceed the lending rate of interest charged by any scheduled bank. Further, sub-section (1A) of section 14 of the said Act prescribes punishment which shall not be less than one year and a fine of ten thousand rupees in case of default in payment of the employees' contribution which has been deducted by the employer from the employees' wages and in any other case it shall be not less than six months and a fine of five thousand rupees. In the case of contravention of the provisions of section 6C or clause (a) of sub-section (3A) of section 17 in so far as it relates to the payment of inspection charges, the employer shall be punishable with imprisonment for a term which may exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny 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 (c) any sum referred to in clause (ii) of sub-section (1) of section 36, or (d) any sum payable by the assessee as interest on any loan or borrowing from any public financial institution or a State Financial Corporation or a State Industrial Investment Corporation, in accordance with the terms and conditions of the agreement governing such loan or borrowing, 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 accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him ; Provided that nothing contained in this section shall apply in relation to any sum referred to in clause (a) or clause (c) or clause (d) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be allowed as deduction in computing the income under section 28 of that previous year only in which such sum is actually paid by the assessee irrespective of the fact that the said deduction is otherwise allowable under the Act and irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him. The first proviso to section 43B relaxes the rigour of the section if the sum referred to in clause (a) or (c) or (d) is actually paid by the assessee 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 and the evidence of such payment is furnished by the assessee along with such return. The second proviso imposes further restriction on allowability of deduction of any sum referred to in clause (b) ; it empowers that 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 it shall not be allowed as deduction. For this purpose the definition of due date as given in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to him under the scheme of the provisions of the Act. We find no substance in the contention of learned counsel for the petitioners that this would result in double jeopardy because the provisions deal with different aspects and different benefits, whereas the relevant beneficial legislations in favour of the employees provide for compliance on the pain of payment of interest, damages and prosecution, the Income-tax Act provides for compliance by denying the benefit of deduction which is otherwise available. This is only meant to ensure prompt payment. We find no substance in the contention of learned counsel that the provisos (1) and (2) are discriminatory inasmuch as the sum referred to in clause (b) is treated differently from the sums referred to in clauses (a), (c) and (d). There can be no doubt that article 14 cuts at the root of discrimination either by legislation or by administrative action. Though the rule of equality contained in article 14, prohibits class legislation, it permits classification. For permissible classification two conditions must be satisfied, viz., (i) it must be founded on intelligible differentia which distinguishes persons or things that are gr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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