TMI Blog2009 (12) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act permits the employer to make the deposit with some delays, subject to the aforesaid consequences. Insofar as the Income Tax Act is concerned, the assessee can get the benefit if the actual payment is made before the return is filed, as per the principle laid down by the Supreme Court in Vinay Cement – Decided in favor of assessee - ITA No. 1063 of 2006, 755 of 2008, 204 of 2009, 1214/2008, 1246/2008, 50/2009, 78/2009 - - - Dated:- 23-12-2009 - MR. A.K. SIKRI and MR. SID DHA RTH MRIDUL, JJ. ITA No. 1063 of 2006 , 755 of 2008 , 204 of 2009 , 1214/2008 ,1246/2008 , 50/2009 , 78/2009 Ms. Prem Lata Bansal with Mr. Paras Chaudhry, Ms. Rashmi Chopra, Mr. Sanjeev Sabharwal , Mr. N.P. Sahni for the Revenue. Dr. Rakesh Gupta with Ms. Poonam Ahuja, Mr. Satyen Sethi with Mr. Johnson Bara, Mr. Prakash Kumar for the Assessee. JUDGEMENT A.K. SIKRI, J. Though the assessees are different in these appeals, the aforesaid question is common in all these cases, which falls for consideration in almost identical factual backdrop. In fact, it is a matter of pure interpretation of the provisions of the Income Tax Act, 1961 (for short, the 'Act'), p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ident fund and ESI is paid before the due date of filing of return, no disallowance can be made by the AO. 4. In some other appeals preferred by the assessees, the ITAT has taken contrary view and upheld the addition made by the AOs. Under these circumstances, all these appeals were admitted and heard on the following question of law :- "Whether the ITAT was correct in law in deleting the addition relating to employees' contribution towards Provident Fund and ESI made by the Assessing Officer under Section 36(1)(va) of the Income Tax Act, 1961?" 5. Section 36 of the Act deals with certain deductions which shall be allowed in respect of matters dealt with therein, in computing the income referred to in Section 28 of the Act. Different types of deductions are provided therein in various clauses of Section 36. Clause (iv) of sub-section (1) deals with deductions on account of contribution towards a recognized provident fund or an approved superannuation fund made by the assessee as an employer, subject to certain limits and also subject to certain conditions as the CBDT may think fit to specify. Clause (v) of sub-section (1) of Section 36 enables the assessee to seek deduction i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." 7. During the period in question with which we are concerned, Section 43B contained second proviso also, which stands omitted by the Finance Act, 2003 with effect from 1.4.2004. Since, this provision existed at the relevant time, it also needs to be reproduced :- "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 date as defined in the Explanation below clause (va) of sub-section (1) of section 36, and where such payment has been made otherwise than in cash, the sum has been realized within fifteen days from the due date." 8. As per the first proviso, if the payment is actually made on or before the due date applicable in his case for filing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Insurance Act, 1948 (34 of 1948), or any other fund for the welfare of such employees. It is clear from the above that as soon as employees contribution towards provident fund or ESI is received by the assessee by way of deduction or otherwise from the salary/wages of the employees, it will be treated as income‟ at the hands of the assessee. It clearly follows therefrom that if the assessee does not deposit this contribution with provident fund/ESI authorities, it will be taxed as income at the hands of the assessee. However, on making deposit with the concerned authorities, the assessee becomes entitled to deduction under the provisions of Section 36(1)(va) of the Act. Section 43B(b), however, stipulates that such deduction would be permissible only on actual payment. This is the scheme of the Act for making an assessee entitled to get deduction from income insofar as employees‟ contribution is concerned. It is in this backdrop we have to determine as to at what point of time this payment is to be actually made. 12. Since the ITAT while holding that the amount would qualify for deduction even if paid after the due dates prescribed under the Provident Fund/ESI Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e special leave petition is dismissed." 13. It is clear from the above that in Vinay Cement (supra), the SLP preferred by the Revenue against the judgment of the Guwahati High Court was dismissed making the aforequoted observations. The reasons are given and, thus, it amounts to affirmation of the view taken by the High Court of Guwahati. 14. When we keep that proposition in mind and also take into consideration various judgments where Vinay Cement (supra) is applied and followed, it will not be possible to accept the contention of the Revenue. 15. In CIT v. Dharmendra Sharma, 297 ITR 320, this Court specifically dealt with this issue and relying upon the aforesaid judgment of the Guwahati High Court, as affirmed by the Supreme Court in Vinay Cement (supra), the appeal of the Revenue was dismissed. More detailed discussion is contained in another judgment of this Court in CIT v. P.M. Electronics Ltd. (ITA No. 475/2007 decided on 3.11.2008). Specific questions of law which were proposed by the Revenue in that case were as under :- "(a) Whether amounts paid on account of PF/ESI after due date are allowable in view of Section 43B, read with Section 36(1)(va) of the Act? (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 338 (SC). The said submissions found favour with the Division Bench of the Guahati High Court and relying on earlier decisions of its own Court in CIT v. Assam Tribune: (2002) 253 ITR 93 and CIT v. Bharat Bamboo and Tiber Suppliers: (1996) 219 ITR 212 the Division Bench dismissed the appeal of the Revenue. It transpires that the aforesaid matter was taken up in appeal alongwith other matters including Vinay Cement (supra). The order in Vinay Cement (supra) was passed by the Supreme Court on 7.3.2007 wherein it observed as follows:- "Delay condoned. In the present case we are concerned with the law as it stood prior to the amendment of Section 43-B. In the circumstances, the assessee was entitled to claim the benefit in Section 43-B for that period particularly in view of the fact that he has contributed to provident fund before filing of the return. Special Leave Petition is dismissed." 10. In view of the above, it is quite evident that the special leave petition was dismissed by a speaking order and while doing so the Supreme Court had noticed the fact that the matter in appeal before it pertain to a period prior to the amendment brought about in Section 43B of the Act. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Constitution. 12. We are in respectful agreement with the reasoning of the Madras High Court in Nexus Computer Pvt Ltd (supra). Judicial discipline requires us to follow the view of the Supreme Court in Vinay Cement (supra) as also the view of the Division Bench of this Court in Dharmendra Sharma (supra). 13. In these circumstances, we respectfully disagree with the approach adopted by a Division Bench of the Bombay High Court in M/s Pamwi Tissues Ltd (supra). 14. In these circumstances indicated above, we are of the opinion that no substantial question of law arises for our consideration in the present appeal. The appeal is, thus, dismissed." It also becomes clear that deletion of the 2nd proviso is treated as retrospective in nature and would not apply at all. The case is to be governed with the application of the 1st proviso. 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 are made in the Provident Fund Act as well as the ESI Act. Therefore, the Act permi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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