INCOME TAX ACT, 1961

Section 36(1)(va) read with Section 2(24)(x)

Business deduction under section 36(1)(va) - Employees' contribution towards PF, ESIC etc. - Payment beyond due date prescribed under section 36(1)(va) -

AO made addition by invoking provisions of section 36(1)(va) read with section 2(24)(x) on account of late payment of employees' contribution towards PF, ESIC etc. Further, CIT (A) upheld such addition holding that the employee's contribution towards PF, ESIC etc. was deposited beyond the due date prescribed under section 36(1)(va). However, Tribunal allowed the appeal of the assessee holding that relevant due date was to be seen not from the relevant month of salary but the one pertaining to its payment. Held: Section 38 of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 makes it obligatory for the employer before paying him his wages to deduct the employees' contribution along with the employer's own contribution as fixed by Government. The employer is further obliged to pay the same within fifteen days of the close of every month pay i.e. such contribution and administrative charges. The reference to fifteen days of the close of the month must be in relation to month during which the payment of wages is to be made and corresponding liability to deduct employee's contribution to the fund arises. In such circumstances, the finding recorded by the Tribunal that if such wages were paid for the following month, the liability to deposit the employee's contribution to the fund would get differed by another month was not the correct statement of law. Therefore, the order passed by the Tribunal was quashed.

Followed:M/s. Checkmate Facility and Electronic Solutions (P) Ltd. v. Dy. CIT (Tax Appeal No. 1256 of 2018)

REFERRED :

FAVOUR : Against the assessee

A.Y. :

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