Commissioner of Income Tax vs Seth B.D. Gupta

We have heard learned Counsel for the Income Tax Department. The question referred in this case is:

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is legally correct in holding that liability relating to the employeer''s contribution to Provident Fund, Family Pension, State Insurance and Deposit Linked Insurance is not disallowable u/s 43B of the I.T. Act, 1961?

The issue precisely is whether the contribution "payable, but not actually paid, is entitled to be claimed as deduction by the employer/assessee.

The words of Section 43B in the title to that section, as also at the end of that section limit the allowing of deductions only to actual payments.

Reliance is placed in the Tribunal''s order, upon a decision of the Andhra Pradesh High Court in the case of Srikakollu Subba Rao and Co. and Others Vs. Union of India and Others, , for the conclusion that deductions can be made although actual payment has not been made, if the contribution is payable.

The Andhra Pradesh High Court has not held any such proposition in that decision and the Tribunal''s order dated 6.10.1989 is based upon a total misreading and misapplication of that decision.

The view taken by the Karnataka High Court in the case of The Commissioner of Income Tax Vs. Amco Batteries, at the end of para 7 of that law report lays down the correct law in the following words:

Therefore, unless the aforesaid sums are paid, as a matter of fect, the employer/assessee is not entitled to claim deductions.

We approve the decision of the Karnataka High Court in respect of the contribution contemplated u/s 43B of the Income Tax Act.

Thus our answer to the referred question is that the Appellate Tribunal was not right in saying that the employer''s contribution to Provident Fund, Family Pension, State Insurance and deposit linked insurance was not disallowable u/s 43B. In fact, the said contributions, which may have been payable had not been actually paid during the relevant year, were liable to be disallowed.

Reference disposed of accordingly.