9911796707
TMI Blog2023 (7) TMI 168X X X X Extracts X X X X X X X X Extracts X X X X ..... m 178 (SC) dated 12.10.2022, wherein, it has been held that "deduction u/s 36(1)(va) in respect of delayed deposit of amount collected towards employees' contribution to PF cannot be claimed even though deposited within the due date of filing of return even when read with Section 43B of the Income-tax Act,1961. The Hon'ble Supreme Court has held that by virtue of section 2(24)(x) of the Act, the amounts received or deducted by an employer u/s 36(1)(va), it retains its character as an income (albeit deemed) by virtue of section 2(24)(x), unless the condition stipulated by Explanation to section 36(1)(va) are satisfied i.e. depositing such amount received or deducted from the employee on or before the due date. The Hon'ble Supreme Court held that there is a marked distinction between the nature and character of the two amounts - the employer's liability is to be paid out of its income, whereas, the second is deemed an income, by definition, since it is the deduction from the employee's income and held in trust by the employer. The Hon'ble Supreme Court thus held that the conditions of section 43B prescribing the due date as the date of filing of return of income in case the employers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w question as to what would be the due date for deposit of employees' contribution to provident fund. He, in this respect, has contended that as per relevant provisions of Employees Provident Funds Miscellaneous Provisions Act, 1952 (in short, "the EPF Act") read with Employees' Provident Fund Scheme 1952 (in short, "the EPF Scheme"), the employer has to first collect/deduct the receipts out of the salary of the employees, therefore, the due date applicable for deduction of the employees' contribution will be the 'date of payment of salary' and unless the amount is not received by the assessee/employer from the salary of the employees, the same cannot be treated as income of the assessee. He has submitted that the due date of 15th of every month, therefore, is to be construed in reference to the 15th of the month succeeding to the month in which the salary is disbursed and employees' contribution received out of that salary. He has contended that since in this case the salary was usually disbursed on 7th day or thereafter of the subsequent month to the month in which the salary becomes due and since the 15 days have to be calculated from the close of the month in which the employee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see and consequently section 36(a)(va) will not apply. Once the amount is received in the next month on disbursement of salary, it becomes income of the assessee and the assessee has then to pay the said amount before the due date. Therefore, the due date is to be calculated from the date of actual disbursement. Attention is also invited to section 38 of the PF Scheme to find out the due date which is as under:- "38. Mode of payment of contributions (1) The employer shall, before paying the member his wages in respect of any period or part of period for which contributions are payable, deduct the employee's contribution from his wages which together with his own contribution as well as an administrative charge of such percentage [of the pay (basic wages, www.epfmdia.gov.in 4 dearness allowance, retaining allowance, if any, and cash value of food concessions admissible thereon) for the time being payable to the employees other than excluded employee and in respect of which provider! fund contribution payable, as the Central Government may fix. He shall within fifteen days of the close of every month pay the same to the fund [electronic through internet banking of the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 15 days of the month. There is no other provision fixing the time limit for payment of the contribution." Not only that section 38(2) and 38(3) also says the same thing, that the employer shall forward within 25 days and one month respectively of the close of the month an abstract of the recoveries made from wages. This also shows that the days are counted from the month in which recovery/collection is made. This clearly says that the amount is to be paid within 15 days of the next calendar month in which the amount is collected/received form the employer. The calculation of the contribution has to include all types of payments of wages and salary and payments in lieu of the salary/wages actually drawn for the whole month which can be seen from sec 29(2) of PF Scheme. That calculation is possible only after the end of the month. Therefore, there is no question of calculation of PF payable before the end of the month. The relevant month for the purpose of limitation shall therefore be the month of actual disbursement of salary/wages. Sec 31(3) may also be seen which says that any sum deducted shall be deemed to have been entrusted to him for the purpose of paying the contribut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Hamilton Research & Technology Ltd. in ITA No 477/Cal/96 dated 7.1.2000 an unreported decision a copy of which is attached Reliance is also placed on the decision of Kanoi Paper and Industries Ltd. (kol) 75 TTJ 448 wherein it was held as under:- "6. Clause 38 of the Employees' Provident Fund Scheme, 1952, fixes the time limit for making payment in respect of contribution to the provident fund to be 15 days from the close of the month concerned. However, the issue here is whether the "month" should be considered to be the month to which the wages relates or the month in which the actual disbursement of the wages is made, we are of the considered opinion that the expression "month " should mean here the month during which the wages/salary is actually disbursed irrespective of month to which the same relates. Thus, the scheme of the government in this regard is that once a deduction is made in respect of the employees' contribution to the provident fund from the salary/wages of the employee or the employer also makes his contribution, factually at the time of disbursement of the salary the payment in respect of such contribution should be made forthwith. If for som ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns 36 and 38 it could be said that there is certain amount of ambiguity over the expression "15 days from the close of the month". There is also force in the submission of the assessee's counsel that in the case of ambiguity the benefit should be given to the assessee. 15. As the term 'month' has not been defined in the Act, so had the assessee paid the salary and wages on the last day of the month, there would have been no difficulty' in defining the month or the due date. But in the case before us, the salary and wages had been paid on the 7th day from the end of the month to which it relates. So, there arises certain amount of ambiguity with regard to the period of 15 days from the close of each month. From reading of sections 36 and 38 reproduced above it can easily be said that there is ambiguity. Therefore, we are of the opinion that there is force in the submission of the assessee that benefit of ambiguity should be given to the assessee. Viewed in this context we hold that most of the payments having been made within 9 to 22 days from the date of payment of salary and wages will be deemed to have been made within due date and, therefore, no disallowance could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as provided in Para 38 of the EPF Scheme 1952 and that the benefit of the said ambiguity should be given to the assessee. Apart from the case laws, as referred to in the above reproduced written submissions, the Ld. Counsel has also relied upon the decision of the co-ordinate Madras Bench of the Tribunal, in the case of "Madras Radiators and Pressing Ltd." reported in 59 ITR 515. 8. The ld. DR, on the other hand, has relied upon the decision of Hon'ble Supreme Court in Checkmate Services Pvt. Ltd. Vs. CIT (2022) 143 taxmann.com 178 (SC) dated 12.10.2022. 9. We have considered the rival contentions and gone through the record. Before proceeding further, it will be relevant to reproduce the relevant provisions of the EPF Act 1952 and EPF Scheme 1952. Section 2(b) of the EPF Act, 1952, defines the 'Basic Wages' as under: "Section 2 (b) : "basic wages" means all emoluments which are earned by an employee while on duty or [on leave or on holidays with wages in either case] in accordance with the terms of the contract of employment and which are paid or payable in cash to him, but does not include-....." The above definition would show that the emoluments earned by an employee, whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dmissible thereon) for the time being payable to the employees other than excluded employee and in respect of which provident fund contribution payable, as the Central Government may fix. He shall within fifteen days of the close of every month pay the same to the fund [electronic through internet banking of the State Bank of India or any other Nationalized Bank] [or through PayGov platform or through scheduled banks in India including private sector banks authorized for collection on account of contributions and administrative charge:" 10. A perusal of the above definitions of basic wages and contributions as envisaged in the Act would reveal that the contribution are required to be payable on basic wages whether paid or which have become payable. Therefore once the employee has earned basic wages, the Act under Section 6 r/w Para 30, 32 &38 of the 'Scheme' casts a duty upon the employer to deposit the contribution with the Employees Provident Fund Organisation. As per Para 30 of the Scheme, the employer at the first instance has to pay both the contribution payable by himself and also on behalf of the member employed by him. Under Para 32, the employer is authorised before payin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... member employed by him. Under para 38, the employer is authorised before paying the member employee his wages in respect of any period or part of period for which contributions are payable, to deduct the employee's contribution from his wages. It further provides that the deposit of such contribution shall be made by the employer within fifteen days of the close of every month, i.e., a contribution for a particular month has got to be deposited by the 15th day of the month following. A breach of any of these requirements is made a penal offence. Section 14 of the Act provides for penalties. Failure to comply with the requirements of s. 6 is punishable with various terms of imprisonment which may extend to a period of six months, or with fine which may extend to one thousand to two thousand rupees, under the provisions of s. 14, depending upon the nature of the breach, viz., failure to pay the contributions, or failure to submit the necessary returns, or failure to pay administrative charges. Section 14A provides for offences by companies and other corporate bodies. Para 76 of the Scheme provides for punishment for failure to pay contributions etc., and in particular by cl. (d) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Mills v. Regional Provident Fund Commissioner, Faridabad and other" L.P.A. No. 891 of 1986, decided on June 30, 1998 and further held that the deposit of provident fund dues by the stipulated time of 15th of the month following to which the dues relate as provided under para 38 of the E.P.F. Scheme, 1952 is an unqualified absolute statutory obligation of the employer. 13. It is to be noted that Ld. Counsel for the assessee, has relied upon certain decisions of the Coordinate Benches of the Tribunal, however, the issue is found squarely covered against the assessee by the various decisions on the issue of the hon'ble Apex Court and different High Courts of the country. One of the decisions relied relied upon by the counsel is the decision of the Madras Bench of the Tribunal in the case of "Madras Radiators & Pressings Ltd." reported in 59 ITR 515 which has also been referred to in its order by the Mumbai Bench of the Tribunal in this case of "Fluid Air India Ltd."(supra) which has also been strongly relied upon by the counsel. However, we find that the said decision of the Tribunal in the case of "Madras Radiators & Pressings Ltd." (supra) has been overruled by the Hon'ble Madras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ara 32 empowered the employer to recover the employees' contributions from the wages of the employees. As per para 38 of the Scheme, the employer is required to remit both the contributions together with the administrative charges thereon within 15 days before the close of every month. 7. Thus as seen from the above provisions, it is clear that it is the responsibility of the employer to make payment of the contributions at the first instance irrespective of the fact, whether the wages are paid in time or not. Hence the actual payment of wages on the 7th day of succeeding month would not any way alter the situation and give room for interpreting that the "close of 15th day" has to be calculated from the end of the month in which the wages were actually paid. The payment of wages on the 7th day of succeeding month would not in any way alter the initial responsibility of the employer for making payment of contributions, which he is statutorily authorised to recover from the employees salary, whether the salary is paid in time or not. Hence the one and only reasonable conclusion is that the employer has to remit both the contributions to the Provident Fund within 15 days from th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
