Employees’ PF/ ESI Contribution is also covered by s. 43B & allowable as a deduction if paid by “due date” of filing ROI. ITC Ltd 112 ITD 57 (Kol) (SB) impliedly reversed

CIT vs. Vijay Shree Ltd (Calcutta High Court)

The assessee collected ESI & PF from its employees but did not pay the sum to the respective funds within the due date prescribed in relevant legislation. The amount was, however, paid before the due date u/s 139(1) for filing the ROI. The AO & CIT(A) disallowed the payment u/s 36(1)(va) read with s. 2(24)(x). Before the Tribunal, the department justified the disallowance by relying on Ashika Stock Broking Ltd 139 TTJ 192 (Kol) (which in turn relied on ITC Ltd 112 ITD 57 (Kol) (SB) where it was held that s. 43B does not apply to employees’ contribution). However, the Tribunal declined to follow that law and allowed the appeal by relying on Sabari Enterprises 298 ITR 141 (Kar) and P.M. Electronics Ltd 220 CTR 635 (Del) where it was held that s. 43B applied also to employees’ contribution to ESI and PF and that if a payment was made within the due date u/s 139(1) of filing the ROI, the disallowance cannot be made. On appeal by the department to the High Court HELD dismissing the appeal:

 

The only issue involved in this appeal is as to whether the deletion of the addition by the AO on account of employees’ contribution to ESI and PF by invoking the provision of s. 36(1)(va) read with s. 2(24)(x) of the Act was correct or not. In CIT vs. Alom Extrusion Ltd 390 ITR 306 the Supreme Court has held that the amendment to the second proviso to s. 43(B) as introduced by Finance Act, 2003, was curative in nature and is required to be applied retrospectively with effect from 1st April, 1988. Such being the position, the deletion of the amount paid by the Employees’ Contribution beyond due date was deductible by invoking the aforesaid amended provisions of s. 43(B) of the Act. We, therefore, find that no substantial question of law is involved in this appeal and consequently, we dismiss this appeal

Note: Though the judgement is old it does not appear to have been reported so far. This impliedly reverses the Special Bench verdict in ITC Ltd 112 ITD 57 (Kol) and impliedly affirms the Special Bench verdict in Bharati Shipyard 132 ITD 53 (SB)(Mum).