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Income Tax Appellate Tribunal, BANGALORE BENCHES : “B”, BANGALORE
Before: SHRI B.R. BASKARAN & SHRI PAVAN KUMAR GADALE, JUDICAL MEMBER
PER B.R.BASKARAN, ACCOUNANT MEMBER
This appeal filed by the revenue is directed against the order passed by the ld. CIT(A)-5, Bengaluru, vide order dated 22-1-2017 and it relates to assessment year 2014-15.
The revenue is aggrieved by the decision of the ld. CIT(A) in deleting the disallowance made by the AO u/s 43B of the IT Act, 1961 for delayed payment of employees contribution to PF and ESI beyond the due dates prescribed under the respective Acts.
2 3. We have heard the parties and perused the record. The AO noticed that the assessee has remitted the employees’ contribution towards PF and ESI beyond the due date prescribed under the Act. Accordingly, by invoking provisions of sec.36(1)(va) of the Act, the AO disallowed a sum of Rs.83.11 lakhs. The ld. CIT(A), however, allowed the same by following the decision rendered by the Hon'ble Karnataka High Court in the case of M/s Essae Teraoka Pvt.Ltd., Vs DCIT ( in dated 04-02-2014. The revenue is aggrieved by the said decision.
We have noticed that an identical issue was considered by the Hon'ble Karnataka High Court in the case of M/s Essae Teraoka Pvt.Ltd., Vs DCIT ( in (Supra), wherein the Hon’ble jurisdictional High Court has held that the employees’ contribution is also not liable to be disallowed u/s 43B of the Act, if the same is paid on or before the due date prescribed for filing the return of income u/s 139(1) of the IT Act, 1961. For the sake of convenience, we extract below the relevant portion of the order passed by the Hon'ble Karnataka High Court as under; “14. Section 43-B of the IT Act provides for certain deductions to be allowable only on actual payment. We have perused Section 43-B of the IT Act very carefully. The relevant portion of the said Section, for our purpose, reads thus:
"43-B. Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of-
3 (a)xxxxxx (b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, (c) xxxxxx (d) xxxxxx (e) xxxxxx (f) xxxxxx shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him: Provided that nothing contained in this section shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section(1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return."
From bare perusal of this provision, it is clear that under the provision, for IT Act, an extension is given to the employer to make payment of contribution to provident fund or any other fund till
4 the "due date" applicable for furnishing the return of income under sub- section(1) of section 139 of the IT Act in respect of the previous year in which the liability to pay such sum was incurred and the evidence of such payment is furnished by the assessee along with such return. In short, this provision states, notwithstanding anything contained in any other provision contained in this Act, a deduction otherwise allowable in this Act in respect of any sum payable by the assessee as an employer by way of contribution to any fund such as provident fund shall be allowed if it is paid on or before the due date as contemplated under Section 139(1) of the IT Act. This provision has nothing to do with the consequences, provided for under the PF Act/PF Scheme/ESI Act, for not depositing the "contribution" on or before the due dates therein.
In the present case, admittedly, though the employer did not deposit the contribution, within the stipulated time, as contemplated by paragraph- 30 of the PF Scheme or before the due date under the provisions of the PF scheme/Act, he deposited the contribution to the PF/ESI fund before the due date contemplated under Section 139(1) of the Act.
Section 6 of the PF Act provides for contributions and matters which may be provided for in Schemes. Paragraph-29 of the PF Scheme states what is "Contribution". The expression
5 "contribution" is also defined under the PF Act by Section 2(c) of the PF Act, which means a contribution payable in respect of a member under the Scheme or the contribution payable in respect of an employee to whom the Insurance Scheme applies. If this definition is read with sub-para(1) of paragraph-29 in Chapter-V of the PF Scheme, it would mean that the contributions payable by the employer under the Scheme shall be at a particular rate and the contribution payable by the assessee shall be equal to the contribution payable by the employer.
Paragraph-30 of the PF Scheme provides for payment of contributions. Sub-para(1) of paragraph-30 states that the employer shall, in the first instance, pay both the contribution payable by himself (in this Scheme referred to as the employer's contribution) and also, on behalf of the member employed by him directly or by or through a contractor, the contribution payable by such member (in this Scheme referred to as the member's contribution).
From bare perusal of sub-para(1) of paragraph- 30, it is clear that the word "contribution" is used not only to mean contribution of the employer but also contribution to be made on behalf of the member employed by the employer directly.
6 20. Paragraph-38 of the PF Scheme provides for Mode of payment of contributions. As provided in sub-para(1), the employer shall, before paying the member, his wages, deduct his contribution from his wages and deposit the same together with his own contribution and other charges as stipulated therein with the provident fund or the fund under the ESI Act within fifteen days of the closure of every month pay. It is clear that the word "contribution" used in Clause(b) of Section 43-B of the IT Act means the contribution of the employer and the employee. That being so, if the contribution is made on or before the due date for furnishing the return of income under sub-section(1) of Section 139 of the IT Act is made, the employer is entitled for deduction.
The submission of Mr.Aravind, learned counsel for the revenue that if the employer fails to deduct the employees' contribution on or before the due date, contemplated under the provisions of the PF Act and the PF Scheme, that would have to be treated as income within the meaning of Section 2(24)(x) of the IT Act and in which case, the assessee is liable to pay tax on the said amount treating that as his income, deserves to be rejected.”
We notice that the Hon’ble jurisdictional Karnataka High Court has held that the employees’ contribution also would be covered by the 7 relaxation given in sec.43B of the Act, if the same is paid on or before the due date prescribed u/s 139(1) of the Act for filing return of income. In the instant case, there is no dispute with regard to the fact that the impugned amounts were paid by the assessee before the due date prescribed u/s 139(1) of the Act for filing return of income. Further we notice that the ld. CIT(A) has followed the above said decision rendered by the jurisdictional High Court, which is binding on all authorities below the High Court. Accordingly, we do not find any reason to interfere with the order passed by Ld CIT(A) on this issue.
In the result, the appeal filed by the revenue is dismissed.