“Due date” in s. 36(1)(va) for payment of employees’ Provident Fund, ESIC etc contribution should be read with s. 43B(b) to mean “due date” for filing ROI

CIT vs. Kichha Sugar Company Ltd (Uttarakhand High Court)

“Due date” in s. 36(1)(va) for payment of employees’ Provident Fund, ESIC etc contribution should be read with s. 43B(b) to mean “due date” for filing ROI

The assessee collected employees’ Provident Fund contribution for payment to the provident fund authorities. However, the amount was not paid to the provident fund authorities within the “due date” specified in the Provident Fund Act though it was paid before the due date of filing the return of income. The AO assessed the amounts received as income u/s 2(24)(x) but refused to allow a deduction u/s 36(1)(va) on the ground that the amounts were not paid within the prescribed “due date“. The CIT(A) and Tribunal allowed the assessee’s claim for deduction u/s 43B(b). The Department filed an appeal in the High Court claiming that s. 43B did not apply to employees’ contribution. HELD by the High Court dismissing the appeal:

           

S. 2(24)(x)	provides that the amounts of employees’ contribution to PF etc collected by the employer shall be assessed as his income.
S. 36(1)(va)	provides that the said employees’ contribution shall be allowed as a deduction if paid within the “due date” specified in the relevant legislation.
S. 43(B)(b)	provides that any sum payable by the assessee as an employer by way of contribution to any provident fund etc shall be allowed if paid before the due date of filing the ROI.

The “due date” referred to in s. 36(1)(va) must be read in conjunction with s. 43B(b) to mean the “due date” of filing the ROI. The AO wrongly proceeded on the basis that the “due date” in s. 36(1)(va) is the due date fixed by the Provident Fund authority, whereas read in the context of s. 43B(b) it is the “due date” fixed for filing the ROI.

Please note:        

Similar view  taken in AIMIL 321 ITR 508 (Del) & Bharati Shipyard 132 ITD 53 (Spl Bench) (ITAT Mum).
However, the ITAT Mumbai has refused to follow this law in LKP Securities on the ground that s. 43B applies only to “employer’s contribution”