Clause (va) of section 36(1) provides for deduction of any sum received by the assessee from any of his employees to which the provisions of section 2(24)(x) apply, if such sum is credited by the assessee to the employees account in the relevant fund or funds on or before the due date.
The Explanation to clause (va) clarifies that for the purposes of this clause, ‘due date’ means date by which the assessee is required as an em-ployer to credit an employees 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.
Section 43B provides that a deduction in respect of any sum payable by the assessee by way of :
(ii) any sum payable by an assessee as an employer for contribution to provident fund or gratuity fund or superannuation fund or any other fund for the welfare of employees;
will not be allowed as deduction if not paid during the previous year and will be allowed as a deduction in computing the income of only that year in which it is actually paid. This provision will be applicable irrespective of the method of accounting regularly employed by the assessee.
Section 43B deals with employers contribution while section 36(1)(va) deals with employess contribution.
The observations of the Kolkata bench of ITAT in the case of Bengal Chemicals & Pharmaceuticals Ltd. (2011) 41 (II) ITCL 345 (Kol C-Trib), are noteworthy that a claim/deduction which is otherwise not allowable under section 36(1)(va) or for that matter any other provision of the Income-tax Act can neither be considered nor is allowed under section 43B. The opening words of section 43B, namely “notwithstanding anything contained in any other provision of this Act a deduction otherwise allowable under this Act. ..... make it amply clear that section 43B comes into play only when deduction is otherwise allowable under the Income-tax Act. The purpose of section 43B is:
(i) to bar the deduction of the sums referred to therein unless they are actually paid, and
(ii) not to allow deduction which is otherwise not allowable under the Income-tax Act. Therefore, section 43B cannot be pressed into service where deduction is not otherwise allowable under section 36(1)(va). Moreover, section 43B is a general provision which merely bars deduction of specified sums, unless they are actually paid and whereas provisions of section 36(1)(va) specifically deal with deduction in respect of payment of employees contribution to the Provident Fund. Therefore, the provisions of section 36(1)(va), being special provisions enacted to deal with specific matter would prevail over the general provisions of section 43B on the principle that a general clause does not explain to those things that have been previously provided for specifically.
ITAT benches in the following cases held the view that employees contribution is controlled by section 36(1)(va)
Jt. CIT v. ITC Ltd.(2008) 299 ITR (AT) 341 (Kol-Trib)
Dy. Commissioner of Income Tax v. Bengal Chemicals & Pharmaceuticals Ltd. (2011) 41 (II) ITCL 345 (Kol C-Trib)
ICI India Ltd. v. Addl. CIT (2012) 43 (II) ITCL 339 (Kol B-Trib)
Dy. CIT v. Ashika Stock Broking Ltd. (2011) 44 SOT 556 (Kol-Trib) : (2011) 139 TTJ (Kol-Trib) 192
South Eastern Coalfields Ltd. v. Joint CIT (2003) 85 ITD 608 (Nag-Trib)
ITO v. LKP Securities Ltd. ITA No. 638/2012, dt. 17-5-2013 (Mum-Trib)
High Courts however has taken the opposite view
CIT v. Sabari Enterprises (2008) 298 ITR 141 (Karn)
Spectrum Consultants India (P) Ltd. v. Commissioner of Income Tax (2013) 215 Taxman 597 (Karn)
CIT v. Kichha Sugar Company Ltd. (2013) 356 ITR 351 (Uttarakhand–HC)
CIT v. AIMIL Ltd.(2010) 321 ITR 508 (Del)
CIT v. Nipso Polyfabriks Ltd. (2013) 350 ITR 327 (HP)
CIT v. Udaipur Dugdh Utpadak Sahakari Sangh Ltd. (2013) 53 (I) ITCL 433 (Raj-HC)
Technically speaking speaking employees’ contribution is controlled by section 36(1)(va), therefore, the provisions of that section will prevail and thus, employees’ contribution if not paid according to scheme of section 36(1)(va) will not be allowed.
ALMOST ALL HIGH COURTS EXCEPT GUJARAT AND Kerala HIGH COURT HAS SO FAR RULED IN FAVOUR OF ASSESSEE.
REFERENCE CAN BE MADE TO
CIT v. Sabari Enterprises (2008) 298 ITR 141 (Karn)
Spectrum Consultants India (P) Ltd. v. Commissioner of Income Tax (2013) 215 Taxman 597 (Karn)
CIT v. Kichha Sugar Company Ltd. (2013) 356 ITR 351 (Uttarakhand'HC)
CIT V AIMIL LTD 321 ITR 508 DELHI
CIT v. Nipso Polyfabriks Ltd. (2013) 350 ITR 327 (HP)
CIT v. Udaipur Dugdh Utpadak Sahakari Sangh Ltd. (Raj-HC)
Commissioner of Income Tax v. REI Agro Ltd. (Cal-HC).
Commissioner of Income Tax v. Hemla Embroidery Mills (P.) Ltd. (P&H-HC),
Commissioner of Income Tax v. State Bank of Bikaner & Jaipur (Raj-HC)
Commissioner of Income Tax v. Jaipur Vidyut Vitran Nigam Ltd. (Raj-HC)
Essae Teraoka (P.) Ltd. v. Deputy Commissioner of Income Tax (Karn-HC)
CIT v. Hindustan Organics Chemicals Ltd. (Bom-HC)
CIT V. GHATGE PATIL TRANSPORTS LTD (BOM-HC)
GUJARAT HIGH COURT IN THE CASE OF Commissioner of Income Tax v. Gujarat State Road Transport Corporation (Guj-HC) and Kerala High Court in the case of Commissioner of Income-tax, Cochin
v.
Merchem Ltd.HAS HOWEVER TAKEN AN OPPOSITE VIEW.
GOING BY THE ACT I BELEIVE VIEW OF GUJARAT And Kerala HIGH COURT IS CORRECT ONE.
CA MANOJ GUPTA
JODHPUR
09828510543
CA MANOJ GUPTA
JODHPUR
09828510543
