INCOME TAX ACT, 1961

Sections 36(1)(va) & 43B

Business deduction under section 36(1)(va) - Employees' contributions to PF - Paid after due date prescribed under relevant Act -

AO made disallowance of employees' contributions to PF on the ground that said payment was made after due date prescribed under relevant Act, even though the payment was made within the time prescribed under section 139(1). On appeal, CIT (A) confirmed such disallowance. Held: There is a marked difference between nature and character of employer's contribution and amounts retained by the employer out of employees' income by way of deduction, wherein one is liability to be paid by the employer and second is deemed income as per section 2(24)(x), which is held in trust by the employer. Thus, the said marked difference was to be borne while interpreting obligation of the employer under section 43B. For assessment years prior to assessment year 2021-22, non-obstante clause under section 43B could not apply in case of amounts, which were held in trust as was case of employees' contributions that were deducted from their income and was held in trust by employer as per section 2(24)(x), and therefore, said clause would not absolve the employer from its liability to deposit the employees' contributions on or before due date as a condition for deduction. Accordingly, disallowance made on account of the employees' contributions to PF was justified.

Followed:Checkmate Services (P) Ltd. v. CIT (2022) 143 taxman.com 178 (SC) : 2022 TaxPub(DT) 6647 (SC) and M/s. Harrisons Malayalam Ltd. v. CIT (2022) 145 taxmann.com 608 (SC) : 2022 TaxPub(DT) 8299 (SC)

REFERRED :

FAVOUR : Against the assessee

A.Y. : 2018-19

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