Tuesday, July 23, 2013

Due date under sec. 36(1)(va) for payment of employee’s contribution to PF is same as contemplated under section 43B

Employee's contribution towards Provident Fund if paid before due date of filing return is allowable under section 36(1)(va) to employer-assessee
In the instant case the AO had disallowed the payment made by the assessee to the Provident Fund Authority on account of employee's contribution towards Provident Fund since there was delay in payment.  On appeal, the CIT (A) held that since the money had already been paid by the assessee and was no longer in the hands of assessee it could not be taken as income. Further, the Tribunal confirmed the decision of CIT (A). Aggrieved revenue filed the instant appeal.

The HC held in favour of assessee as under:

1) Any sum received by the assessee from his employees towards contributions to the Provident Fund is the income of the assessee, however, section 36(1)(va) allows deduction if contribution thus received is deposited on or before the due date;

2) The due date referred to in section 36(1)(va) is to be read in conjunction with section 43B(b) and a reading of the same would make it amply clear that the due date as mentioned in section 36(1)(va), is the due date as mentioned in section 43B(b), i.e., payment or contribution made to the Provident Fund Authority before the filing the return for the year in which the liability to pay has accrued;

3) The AO proceeded on the basis that 'due date', as mentioned in section 36(1)(va) was the due date fixed by the Provident Fund Authority, whereas he was required to take note of section 43B(b).  By not taking note of the provisions contained therein, he committed gross error, which had been rectified by the appellate authority and confirmed by the Tribunal. So, there was no scope of interference in the order of the Tribunal – CIT v. Kichha Sugar Co. Ltd [2013] 35 taxmann.com 54 (Uttarakhand)