TMI Blog2003 (2) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... en along with the return of income. The Assessing Officer was of the view that since payments were made after the due dates as prescribed under the relevant Rules, the assessee was not entitled to deduction in respect of the above-mentioned payments and therefore the entire sum of Rs. 11,62,131 was disallowed. The ld. CIT(A) has referred to the relevant provisions of IT Act in this regard and he rejected assessee's contentions that section 43B is applicable only in such cases where accounts are maintained as per mercantile system. The ld. CIT(A) has also stated that there is no dispute about the fact that the payments have been made after the expiry of the prescribed time limits in the respective Acts under which contributions to various funds have been made. Referring to the second proviso to section 43B, the ld. CIT(A) concurred with the Assessing Officer that deductions are not allowable. He has also drawn support from the Hon'ble Calcutta High Court decision in the case of CIT v. Sree Kamakhya Tea Co. (P.) Ltd. [1993] 199 ITR 714. Thus, the disallowance was sustained. 2. The ld. counsel appearing for the assessee opened his arguments by forcefully pleading that section 43B is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid by him : 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 realised within fifteen days from the due date. 36(1)(va) any sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date. Explanation - For the purpose of this clause, 'due date' means the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise. 2(24)(x) any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose of payment of a sum by way of any contribution towards an approved gratuity fund or for the purpose of payment of any gratuity, that has become payable during the relevant previous year. Such an exception carved out in section 40A(7)(b) enabling grant of deduction in respect of provision for payment towards any approved gratuity fund, etc., have an overriding effect by virtue of non obstante clause at the beginning of section 40A(1) and will prevail over any contrary provision contained in any provision of the Act. However, section 43B provides that such deduction will be allowed only in the year in which it is actually paid. Thus, exception carved out in section 40A(7)(b) and section 43B are mutually contradictory. In such a situation, exception carved out in section 40A(7)(b) being a provision of special nature dealing with provision made for payment of a sum by way of any contribution towards an approved gratuity fund, etc., will prevail over the general provisions of section 43B(b) dealing with contribution to any gratuity fund. The rule of construction which is relevant to the present enquiry is expressed in the maxim, generalia specialibus non derogant, which means that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respective of the fact as to whether it is employer's contribution or employees' contribution and also irrespective of the method of accounting followed. 5. We have given a very careful consideration to the rival submissions vis-a-vis the facts of the case and have also gone through the decisions cited before us. In our view, the proposition of the ld. counsel for the assessee, that section 43B has no application in cases where cash system of accounting is followed, cannot be accepted. From a plain reading of section 43B, it is clear that this mandatory provision is of overriding nature and is applicable to the sums specified therein irrespective of the method of accounting followed by the assessee. The section clearly lays down that a deduction which may otherwise be allowable under the IT Act in respect of the specified sums shall be allowed in the year in which such sum is actually paid. There can be no assumption in the absence of any specific provision to this effect, that the section is applicable only to cases where mercantile system of accounting is followed. We, therefore, hold that section 43B would be applicable to the present case. Coming to the second proposition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 36 is adopted. Sub-clause (x) of clause (24) of section 2 includes within the meaning of 'income' 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, or any other fund for the welfare of such employees. Thus, it is clear that the employees' contribution received by the employer would be 'income' in his hands and that would be allowed as permissible deduction under clause (va) of sub-section (1) of section 36 in computing the business income under section 28 provided the assessee credits the same to the relevant fund. Under section 43B, the sum referred to in clause (b) of section 43B is treated differently, as it relates to the sum payable by the assessee as an employer which includes the employer's contribution as well as employees' contribution. If such contributions which are payable to any provident Fund or superannuation fund or any fund are paid within the due date, the employer will be able to avail of the benefit of deduction under section 43B. Though the general rule embodied in section 43B is one of allowability of deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employer to credit an employee's contribution to the employee's account in the relevant fund. The amount is deductible only if the assessee credits the amount to the employee's account in the relevant fund on or before the date by which he is legally or contractually required to do so. The right to deduction would be lost even if the sum is credited after the due date. It cannot be an indefinite date left to the choice of the assessee. It is to be noted that under the main provision of section 43B of the Act, the payments made during the currency of the financial year relevant to the assessment year qualify for deduction in certain cases. But in the case of payments relating to PF, etc., stress has been made on payment within the 'due date'. Therefore, it cannot be said that payment made beyond the due date also qualifies for deduction, in view of the prescription in the main provision itself. Had that been the legislative intent, there was no necessity to enact the proviso. The Legislature in its wisdom has incorporated the proviso and it cannot be said to be without a purpose. There is nothing repugnant between the main provision and the proviso. They operate in different situat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed gratuity fund, as defined in section 2(5) of the Act, created by the employer for the exclusive benefit of his employees under an irrevocable trust. After the insertion of section 40A(7), for claiming deduction for gratuity payment, the assessee was required to fulfil the conditions laid down in section 40A(7) and, without fulfilling the conditions laid down therein, no assessee was entitled to deduction under section 36(1)(v). This has undergone a change after the insertion of section 43B for and from the assessment year 1984-85. The provisions of section 43B(b) are relevant and apposite in the context of the provisions of section 36(1)(v). Section 43B has overriding effect over the provisions of section 40A(7). Under the provisions of section 43B, a deduction in respect of any sum payable by the assessee as an employer by way of contribution, inter alia, to a gratuity fund is to be allowed in computing the business income of that previous year in which such sum has been actually paid by him. There is no dispute in this case that the assessee made a payment of a sum of Rs. 9,99,560 on March 27, 1985. It is also admitted that, in respect of this amount, no deduction was claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the circular is reproduced below: "Unlike other payments referred to in section 43B of the IT Act, the deduction regarding employer's contribution, if denied in a year, is not available as a deduction in any subsequent year also. On account of various reasons like postal delay, strikes or long holidays, the payment of employer's contribution to the respective authorities is delayed even though the payment by a cheque or draft is tendered before the due date. To avoid any hardship being caused in such cases, it has been provided by substituting the second proviso to section 43B that, if payment of any sum payable by an employer by way of contribution to any PF or superannuation fund or gratuity fund or any other fund for the welfare of employees is made by a cheque, draft or any other mode, deduction shall be allowed if the cheque, etc., has been tendered by the due date, and the actual payment has been realised within fifteen days of the due date." From this circular explaining provisions of the relevant Finance Act, it is clear that the second proviso will be applicable to contributions made by an employer to any PF or superannuation fund or gratuity fund or any other fund ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
