Commissioner of Income Tax and Others vs Magus Customers Dialog Pvt. Ltd.

N. Kumar, J.—The Revenue have preferred this appeal against the order passed by the Tribunal holding that even the employees'' contribution made by the assessee on or before the due date for filing the return under section 139(1) of the Income-tax Act, 1961, would be eligible for the benefit conferred under section 43B(b) of the Act. The substantial questions of law that is raised in this appeal are as under:

"(1) Whether the appellate authorities were correct in holding that in view of the provisions of section 43B of the Act deduction in respect of the employees'' contributions made to PF and ESI belatedly was an allowable deduction?

(2) Whether the appellate authorities were correct in applying section 43B of the Act which was applicable to the employer''s contribution and failing to apply section 36(1)(va) and section 2(24)(x) of the Act under which the employees'' contribution would become the income of the assessee at the end of the year if the same is not deposited within the stipulated time?"

This court had an occasion to consider the said question of law in the case of CIT v. Spectrum Consultants India Pvt. Ltd. decided on December 9, 2013 in Commissioner of Income Tax Vs. Spectrum Consultants India (P) Ltd., where, after referring to sections 29, 30 and 31 of the Provident Fund Act, has held as under (page 626 of 2 ITR-OL):

"A reading of the aforesaid provisions makes it clear that the contributions payable by the employer under the scheme shall be at the rate of 10 per cent of the basic wages, dearness allowance. The contribution payable by the employee shall be equal to the contribution payable by the employer in respect of such employee. However, the employer shall, in the first instance, pay both the contribution payable by himself, i.e., the employer''s contribution as well as the employee''s contribution and, thereafter, he is entitled to recover by means of deduction from the employee the contribution which he has paid as employee''s contribution. Therefore, in law, the payment of contribution by the employer to the fund under the scheme means both employer''s contribution and employee''s contribution. Whether he deducts the employee''s contribution from the salary or not, in law, he is liable to pay the said amount. Therefore, section 2(24)(x) of the Act makes it clear that the employee''s contribution which the employer deducts from his salary before it is paid into the fund, is treated as the income of the employer, and the employer by contributing can get the deduction. That payment must be made within the due date, i.e., the due date prescribed under section 139(1) of the Act. Because it was causing lot of problem as discussed in the judgment of the apex court, on a representation made by the industry, subsequent amendment was carried out to mitigate the difficulties caused to the employer under section 43B of the Act. Though such contributions are not paid within the time prescribed under the relevant act, if those contributions are paid before the due date prescribed under section 139(1) of the Act the employer shall be entitled to the deductions as provided under section 36(1) of the Act. While extending such benefit, Parliament has not made any distinction between the employee''s contribution and the employer''s contribution. It is for the simple reason, under the provident fund scheme, an employer has to pay both the contribution and then recover from the salary of the employee. Therefore, in view of the aforesaid judgment, we do not find any substance in this appeal. Therefore, the appeal is dismissed." In that view of the matter, the substantial questions of law are answered in favour of the assessee and against the Revenue. There is no merit in this appeal. The appeal stands dismissed.