Due date for crediting the contribution of employees to the respective fund–Section 36(1)(va) read with Section 2(24)(x)
The employee’s contribution credited to the employees account in the relevant fund after the due date specified under section 36(1)(va) are disallowed to the employer. Further, any payments made by the employer after the due date is also NOT allowed as a deduction in the year of payment. This causes undue hardship to the assessee especially during the economic turbulence.
Further, the Employer’s contribution made after the due date specified under the relevant social security legislation but deposited within the due date of filing return of income are allowed under the Act by virtue of Section 43B.
It may be noted that the statutory laws under the respective contribution schemes have provisions to levy interest, penalty etc. for the delayed payment. Hence, disallowing a genuine business expenditure merely on the ground that it has been paid after relevant due date is not justified.
On the subject there have various conflicting judgments. Where Hon’ble Uttarakhand High Court and Hon’ble Delhi High Court have considered the due date under section 36(1)(va) to be read in sync with the due date mentioned in section 43B, Hon’ble Gujarat High Court has given a different view.
To remove the hardship caused to the assessee and to reduce avoidable litigations, it is suggested that deduction be allowed on the employee’s contribution made before the due date of filing the return of income.
It is suggested that the due date defined under Explanation to Section 36(1)(va) shall be amended and acordingly the due date shall mean the due date for filing return of income under section 139(1), thereby bringing it at par with the due date specified for the Employer’s contribution under Section 43B of the Act.
(SUGGESTIONS FOR RATIONALIZATION OF THE PROVISIONS OF DIRECT TAX LAWS)