Facts of the Case

The assessee company filed its return of income declaring taxable income for the relevant assessment year. During processing/assessment proceedings, it was observed that employees’ contributions toward Provident Fund (PF) and Employees’ State Insurance (ESI) had been deposited after the due dates prescribed under the respective welfare statutes.

The Assessing Officer disallowed the delayed payments under Section 36(1)(va) read with Section 2(24)(x), treating such contributions as income of the assessee.

The appellate authority confirmed the disallowance, leading the assessee to approach the Tribunal.

Issues Involved

  1. Whether employees’ contributions to PF/ESI deposited after statutory due dates are allowable if paid before filing the return of income.
  2. Whether Section 43B overrides Section 36(1)(va) in respect of employees’ contributions.
  3. Whether the disallowance made by the Assessing Officer was legally sustainable.

Respondent’s (Revenue’s) Arguments

  • Employees’ contributions are governed specifically by Section 36(1)(va).
  • Deduction is allowable only if deposited within the due date prescribed under the relevant PF/ESI laws.
  • Section 43B applies only to employer’s contribution, not employees’ contribution.
  • Hence, the disallowance was justified.

 Court Order / Findings (ITAT)

  • The issue stands conclusively settled by the Supreme Court.
  • Employees’ contributions received by the employer constitute income under Section 2(24)(x).
  • Deduction under Section 36(1)(va) is allowed only if payment is made within statutory due dates.
  • Payment before the return filing date does not cure the default.

 Important Clarification by the Tribunal

  • Employer’s contribution and employees’ contribution are governed by different provisions.
  • Section 43B cannot override Section 36(1)(va) for employees’ contributions.
  • Statutory due date under labour laws is decisive for allowability.
  • Judicial uncertainty on this issue now stands resolved by the Supreme Court.

Link to download the order - https://itat.gov.in/public/files/upload/1654151378-SBW%20Udyog%20Limited.pdf

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