INCOME TAX ACT, 1961

Business disallowance under section 43B- Deductions allowable only on actual payment-Premium paid under

Group Gratuity Scheme to LIC-Applicability of Explanation to section 36(1)(va)

Assessee, a partnership firm, was carrying on the business as shipping agents. It claimed deduction in respect of the expenditure by way of premium payable under the Group Gratuity Scheme to the LIC. AO was of view that as per the second proviso to section 43B, the claim was not allowable as assessee had not made the payment before the due date as per the Explanation to section 36(1)(va). CIT (A) confirmed the disallowance, while Tribunal was of view that the due date as defined in the Explanation applied only to the employees contribution to be credited to the employees account. It would not be correct to say that the employers contribution also should be made before the same due date. Therefore, he reversed the order of CIT (A). Held:By following CIT v. South India Corpn. Ltd. [2000] 242 ITR 114/ 108 Taxman 322 (Ker.) it was viewed that as per the Explanation to section 36(1)(va) for the purpose of the clause due date means the date by which assessee is required as an employer to credit an employees contribution to the employees account in the relevant fund. The amount is deductible only if assessee credits the amount to the employees account in the relevant fund on or before the date by which he is legally or contractually required to do so. The right to deduction would be lost if the sum is credited after the due date. Therefore, Tribunal was not justified in allowing the claim of assessee.

Income Tax Act, 1961 Section 43B read with section 36(1)(va)

Case Law Analysis:followed:CIT v. South India Corpn. Ltd. [2000] 242 ITR 114/ 108 Taxman 322 (Ker.) [Para 4].

Decision: In favour of Revenue.

CIT v. Jairam & Sons