Business Expenditure Overarching Powers of Section 37

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The Tax Publishers Income Tax--Business Expenditure Overarching Powers of Section 37 Srivatsan Ranganathan The author has discussed the overarching powers of Section 37(1) arising out of a Supreme Court decision in this write-up. 1. First talk Section 2(24(x) treats employee contributions deducted by the employer from Provident fund/Superannuation or ESI funds by the employer first as an income in the hands of the employer. Subsequently if these are credited to the respective employee's account in the relevant fund on or before the due date as prescribed by the respective legislations they are allowed as an expenditure under Section 36(1)(va). The due date or time limit is as prescribed under the respective ESI/PF is to be noted. Employer's contribution for such PF/ESI/Superannuation funds are allowed if 'actually' paid on or before the due date of filing return of income vide Section 43B. The law has carved out a clear dichotomy in the manner of treating employee's contributions and the employer's contributions distinctly. 2. Controversies galore There were a number of controversies which arose on this topic especially given the reading that payment of employee's contribution cannot be done without paying the employer's contribution or simply said both payments are made generally through one single remittance. Thus, the intent of Section 43B would also, encompass the scope of Section 36(1)(va) was one plausible reading which was lingering for a long time. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

Income Tax--Business Expenditure

Overarching Powers of Section 37

Srivatsan Ranganathan

The author has discussed the overarching powers of Section 37(1) arising out of a Supreme Court decision in this write-up.

1. First talk

Section 2(24(x) treats employee contributions deducted by the employer from Provident fund/Superannuation or ESI funds by the employer first as an income in the hands of the employer. Subsequently if these are credited to the respective employee's account in the relevant fund on or before the due date as prescribed by the respective legislations they are allowed as an expenditure under Section 36(1)(va). The due date or time limit is as prescribed under the respective ESI/PF is to be noted.

Employer's contribution for such PF/ESI/Superannuation funds are allowed if 'actually' paid on or before the due date of filing return of income vide Section 43B. The law has carved out a clear dichotomy in the manner of treating employee's contributions and the employer's contributions distinctly.

2. Controversies galore

There were a number of controversies which arose on this topic especially given the reading that payment of employee's contribution cannot be done without paying the employer's contribution or simply said both payments are made generally through one single remittance. Thus, the intent of Section 43B would also, encompass the scope of Section 36(1)(va) was one plausible reading which was lingering for a long time.