Employee’s contribution to EPF is covered by section 36(1)(va) r.w. s. 2(24)(x)

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.

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