In section 43B if the amounts were not paid before the due date, then the deduction would be available in the year of payment

INCOME-TAX APPELLATE TRIBUNAL - MUMBAI "E" BENCH

I. T. A. No. 7547/Mum/2011 (assessment year 2007-08).

EURO PRATIK ISPAT P. LTD. .......................................................................Appellant.
v.
COMMISSIONER OF INCOME-TAX ...........................................................Respondent

R. S. SYAL (Accountant Member) and SANJAY GARG (Judicial Member)

Date : April 5, 2013.

Appearances

I. P. Rathi, for the appellant.
Rajarshi Dwivedy, for the respondent.

Section 36(1)(va) & 43B of the Income Tax Act, 1961 — Business Expenditure - Deduction Only on Actual Payment — In section 43B if the amounts were not paid before the due date, then the deduction would be available in the year of payment.

FACTS

In A.Y. 2007-08, assessee claimed deduction u/s 36(1)(va) in respect of the amount disallowed towards employees contribution under the same section for immediately preceding A.Y. 2006-07. The deduction was claimed on the ground that said sum was deposited on February 5, 2007. Similarly, assessee claimed deduction in respect of employer's contribution to PF which was disallowed u/s 43B for A.Y. 2006-07, but paid on February 5, 2007. A.O. made disallowance. On appeal by assessee, CIT(A) affirmed the order of A.O. being aggrieved, assessee went on appeal before Tribunal.

HELD

That both the employer's and employee's contribution were allowable as deduction if the amount of PF though belatedly but paid before the due date of filing of return u/s 139(1). If the amounts were not paid before the due date, then the amount cannot be allowed as deduction in the relevant year. However, the deduction would be available in the year of payment. Since these two payments were disallowed in the preceding year on the ground that these were not paid before due date of filing return for the A.Y. 2006-07, naturally the deduction would be available on payment of such amounts falling with previous years relevant to assessment year under consideration. In the result, appeal was answered in favour of assessee.

ORDER

The order of the Bench was delivered by

R. S. SYAL (Accountant Member).-This appeal by the assessee is directed against the order passed by the Commissioner of Income-tax (Appeals) on August 16, 2011 in relation to the assessment year 2007-08.

Ground No.1 of the appeal is against the confirmation of disallowance of Rs. 2,47,214 on account of the employer's contribution to provident fund, etc., under section 43B and ground No.2 of the appeal is against the confirmation of disallowance of Rs. 1,15,029 under section 43B on account of employees' contribution to provident fund, etc.

Briefly stated the facts of the case are that the assessee claimed deduction under section 36(1)(va) amounting to Rs. 1,15,029 in respect of the amount disallowed towards employees' contribution under the same section for the immediately preceding assessment year, Le., 2006-07. The deduction was claimed on the ground that the said sum was deposited on February 5, 2007. Similarly the assessee claimed deduction for a sum of Rs. 2.47 lakhs in respect of employer's contribution to provident fund, which was disallowed under section 43B for the 'assessment year 2006-07, but paid on February 5, 2007. The Assessing Officer made disallowance for the abovesaid two sums, which came to be upheld in the first appeal.

After considering the rival submissions and perusing the relevant material on record, we find that the hon'ble Supreme Court in the case of CIT v. Alom Extrusions Ltd. [2009] 319 ITR 306 (SC) has held that the amendment to the first proviso and omission of the second proviso to section 43B by the Finance Act, 2003 is retrospective. The hon'ble Delhi High Court in the case of CIT v. Aimil Ltd. [2010] 321 ITR 508 (Delhi) has allowed deduction in respect of employees' share when the amount was paid before the due date. When we consider these two judgment -it becomes clear that both the employer's and employees' contribution are allowable as deduction if the amount of provident fund, etc., though belatedly, but is paid before the due date of filing of return under section 139(1) of the Act. Per contra, if the amounts are not paid before the due date, then the amount cannot be allowed as deduction in the relevant year. However the deduction would be available in the year of payment. Since these two amounts were disallowed in the preceding year on the ground that these were not paid before due date of filing the return for the assessment year 2006-07, naturally the deduction would be available on payment of such amounts falling within the previous year relevant to the assessment year under consideration. We, therefore, overturn the impugned order on this issue and order for the deletion of both additions.

5 In the result, the appeal is allowed.

6 The order pronounced on this 5th day of April, 2013.

[2013] 27ITR [Trib] 432 (MUM)