INCOME TAX ACT, 1961

Section 36(1)(va)

Business disallowance under section 36(1)(va) - Delay in depositing employees' contribution to Provident Fund (PF) and Employees' State Insurance Corporation (ESIC) - 36(1)(va) But depended before the due date of filing of return of income -

During the course of assessment proceedings on perusal of the tax audit report it was found that assessee did not comply with the provisions of section 36(i)(va) and section 2(24)(X) on account of payment to be made of employees contribution towards provident fund in State insurance claim. It was noted that assessee had not deposited the sum of Provident Fund and a sum on account of Employees State Insurance within due date prescribed under the Provident Fund Laws. According to AO, same was required to be deposited within due date prescribed under the respective laws. Therefore, AO disallowed the same. Held: In this case, issue was that whether the amount of employee's contribution deposited beyond the due date prescribed in the respective provident fund laws is allowable to the assessee as a reduction or not. In case of CIT v. Aimil Ltd. 2010 TaxPub(DT) 1237 (Del-HC) wherein, it was held that payment of even employees contribution before the due date of filing of return of income was allowable as deduction to assessee despite all facts that such contribution was not deposited within the due date prescribed under the respective Provident Fund Laws. Therefore, disallowance made by the lower authorities was not sustainable in law.

Followed:CIT v. Alom Extrusions Limited (2009) 319 ITR 306 (SC) : 2009 TaxPub(DT) 2109 (SC), CIT v. Merchem Limited (2015) 378 ITR 443 (Ker-HC) : 2015 TaxPub(DT) 3586 (Ker-HC), CIT v. Aimil Limited, Nirmala Swami, Spearhead Digital Studio, M/s. Net 4 India Ltd., Modipon Ltd., & Ekta Agro Industries Ltd. 2010 TaxPub(DT) 1237 (Del-HC) and CIT v. Vinay Cement Ltd. (2007) 213 CTR 268 (SC) : 2007 TaxPub(DT) 1068 (SC).