Case Law Details
DCIT Vs. M/s. Bengal Chemicals & Pharmaceuticals Ltd. (ITAT Kolkata), ITA No. 1680/Kol/2010, Date- 7th January, 2011
Issue- Deletion of employees contribution to P.F. and E.S.I under section 43B taking it to be employer’s contribution.
‘Due date’ as appearing in section 36(1)(va) read with Explanation specifies the due date as the date by which the assessee is required as an employer to credit an employee’s contribution under the employees a/c to the relevant fund. As regards the term “due date” as appearing in section 36(1)(va), the Explanation to section 36(1)(va) specifies the “due date” as the “date by which the assessee is required as an employer to credit an employee’s contribution to the employee’s account in the relevant fund under any Act, rule, order or notification issued there-under or under any standing order, award, contract of service or otherwise.” The term “due date” as specified in the Explanation to section 36(1)(va) does not refer to the due date fixed for filing the return of income u/s 139(1). Hence the “due date” as fixed for filing the return of income u/s 139(1) cannot be read into the Explanation to section 36(1)(va). The “due date” for crediting any sum received by the assessee from his employees as contributions towards any provident fund or superannuation fund or any fund for the welfare of the employees by the employer-assessee to the employee’s account in the relevant fund or funds must be the one specified in the Explanation to section 36(1)(va) and not the “due date” for filing the return of income under section 139(1). In the case before us there is no dispute that the assessee company has neither credited the impugned contribution received by it from its employees to the employees’ account in the relevant fund nor it has done so on or before the due date specified in the Explanation to section 36(1)(va) and hence we are of the considered view that the claim of the assessee for deduction cannot succeed. Further section 43B, we are of the considered view, does not apply in respect of the employees contribution for the following reasons :
(i) Section 43B opens with a non obstante clause which means that it controls the operation of other provisions of the Income-tax Act in that section 43B will have overriding effect notwithstanding other provisions under which a deduction may otherwise be allowable.
(ii) The opening words of section 43B make it clear that the said section would have overriding effect and apply only when a deduction is otherwise allowable under the Income-tax Act. In other words, the very applicability of the nonobstante clause would come into play only when a deduction is otherwise allowable under the Income-tax Act. Thus section 43B cannot be pressed into service to allow a deduction which is otherwise not allowable under the Income-tax Act including section 36(1)/(va) thereof. In order to avail the beneflt of section 43B upon actual payment, the assessee must show that the deduction claimed by it u/s 43B is otherwise allowable under the provisions of the Income-tax Act including section 36(1)/(va) thereof.
(iii) Section 43B bars deduction, which is otherwise allowable under the Income-tax Act, of any sum referred to in clauses (a) to (f) unless it is actually paid. Thus the factum of actual payment of any sum referred to in clauses (a) to (f) is relevant only when the deduction is otherwise allowable under the Income-tax Act. There are several provisions in the Income-tax Act, which set out the conditions for the allowability of deductions of those very sums which are referred to in section 43B. Those provisions would be rendered otiose if a view was to be taken that deductions of the aforesaid sums would be allowed as and when they are actually paid irrespective of the fact that they are not otherwise allowable under the Income-tax Act. The plain and unambiguous language used in section 43B makes it absolutely clear that the allowability of deduction of any sum referred to in clauses (a) to (f) upon actual payment is restricted to those deductions only, which are otherwise allowable under the Income-tax Act. Thus the factum of actual payment by itself is not sufficient to successfully claim a deduction u/s 43B, which is otherwise not allowable under the Income-tax Act. In other words, all those deductions, which are otherwise not allowable under the Income-tax Act, cannot be allowed even on actual payment u/s 43B.
(iv) The proviso to section 43B carves out an exception and allows deduction in respect of any sum referred to in clauses (a) to (f) which is actually paid by the assessee on or before the due date for furnishing the return of income u/s 139(1) in respect of the previous year in which the liability to pay such sum was incurred. However, the proviso applies only to those matters which are specifically referred to in section 43B to which it has been added. Proviso to section 43B cannot therefore be made applicable to those deductions which are otherwise not allowable under the Income-tax Act.”
From the above we are of the view that a claim/deduction which is otherwise not allowable u /s 36(1)(va) or for that matter any other provision of the Income Tax Act can neither be considered nor is allowed u/s 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 in a case like the one before us where deduction is not otherwise allowable u /s 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, in our view, 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.
We have gone through the decisions (cited supra) in which it is held that employees’ contribution to provident fund would be eligible for deduction if it is paid before due date prescribed u /s 139(1) for filing the return of income. However, we do not find any such observation in the said cases (cited supra) that deduction u /s 43B would have to be allowed even if the deductions in respect of which payments have been made in terms of section 43B are otherwise not allowable under the Income Tax Act. In fact it has not even the question raised in those decisions as to whether deduction which is not otherwise allowable under the Income Tax Act, could at all be allowed on payment basis u /s 43B. It is well-settled principle that a judgment must be read as a whole and the observations in the judgment have to be construed in the light of the question raised before the Court. It is the judicial principle found upon reading the judgment as a whole in the light of the question raised before the Court which forms precedent and not particular words or phrases.
In view of the above we hold that the assessee is not entitled to deduction u /s 36(1)(va) of the employees’ contribution to provident fund which was paid after the due date as specified in Explanation to Section 36(1)(va) of the Act as section 43B cannot be pressed into service because section 43B comes into play only when a deduction is otherwise allowable under the Income Tax Act.
