Case Law Details
It was held that if the employees contribution is not deposited by the due date prescribed under the relevant Act and is deposited late, the employer not only pays interest on such delayed payment but could incur penalties also. Those Acts permit the employer to make deposit with some delays. Therefore, these amounts could not be disallowed under section 43B if the payment is made before the due date prescribed for filing the return. Precedent could be found in CIT Vs. Vinay Cement Ltd (2007) 213 CTR (SC) 268.
Background and facts of the case:-Under the Indian Tax Law (ITL), any sum received by a taxpayer from its employees as contributions to any of the SSS is treated as income of the taxpayer. The taxpayer is eligible for deduction of such sums if it deposits them to the relevant SSS before the statutory due date.
Under a separate provision of the ITL, the employer’s contributions are allowed as deduction on actual payment made on or before the due date of filing ROl. Prior to tax year 2003-04, the employer’s contributions were also required to be paid before the statutory due date for being allowed as deduction. However, in view of the amendment by Finance Act 2003, effective from tax year 2003-04, these sums are currently allowed as deduction if paid on or before the due date of filing ROl.
Dismissing the Special Leave Petition (SLP) of the Tax Authority in the case of CIT Vs Vinay Cement Ltd. (213 CTR 268) (Vinay Cement ruling), the Supreme Court (SC) held, by a short decision, that the employer’s contributions paid before the due date of filing ROl are allowable even prior to tax year 2003- 04 (Refer Note 1).
The present ruling relates to tax year 2002- 03 i.e. before the amendment by Finance Act 2003. The Taxpayer deposited its employees’ and employer’s contributions after the statutory due date but before the due date of filing ROl. The Tax Authority denied the deduction in respect of both the contributions.
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