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PF Deposit After Due Date

Deepak Kumar (Chartered Accoountant) (270 Points)

23 February 2010  

If assessee  deducted PF of  employees & deposited after Due Date but before grace period, what is tax treatment as per income Tax.

Eg Pf  Deducted  7.1.2010, Due Date 15.1.2010, Grace Period 5 Days , Actual Deposit Date 16.1.2010. . Will Employee Contribution allow or not.


 25 Replies

Amir (Learner) (4011 Points)
Replied 23 February 2010

Dear Ajay,

Employee contribution is first treated as income u/s 2(24) & when deposited within due date - it is allowed as deduction u/s 36(1)(va)

Now if it is not deposited in time then EmployEES contribution is dissallowed forever as aginst emploYER contribution which can be claimed u/s 43B in the year of deposit.

Sec36(1)(va)   any sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply, if  such sum is credited by the assessee to the employee’s account in the relevant fund or funds on or before the due date.

 

Now in present case question is whether payment made in Grace period should be considered as Payment made in Due date or not......

I think YES, payment made within Grace period will be considered as payment made in Due date...............

CA Sandeep Kumar (PROFESSIONAL) (1111 Points)
Replied 23 February 2010

Dear, As per sec 43B of Income tax Act, 1961. Contribution to PF is allowed if it is deposit either during the financial year or up to last date of filing the income tax return. So it is allowed.

CA Sandeep Kumar (PROFESSIONAL) (1111 Points)
Replied 23 February 2010

Dear, As per sec 43B of Income tax Act, 1961. Contribution to PF is allowed if it is deposit either during the financial year or up to last date of filing the income tax return. So it is allowed.

Ameet (L) (1678 Points)
Replied 23 February 2010

If it is not deposited within due date then Employees contribution will be dissallowed forever as aginst Employer contribution which can be claimed u/s 43B in the year of deposit.

Ameet (L) (1678 Points)
Replied 23 February 2010

If it is not deposited within due date then Employees contribution will be dissallowed forever as aginst Employer contribution which can be claimed u/s 43B in the year of deposit.

Ameet (L) (1678 Points)
Replied 23 February 2010

If it is not deposited within due date then Employees contribution will be dissallowed forever as aginst Employer contribution which can be claimed u/s 43B in the year of deposit.

Max Payne (employed) (2569 Points)
Replied 23 February 2010

Hello Friends

 

There has been a recent ruling where employee's share has also been allowed if paid after due date, i.e there is no disallowance for employer's and employee's share....

 

Link is below...

 

/forum/sec-43b-employees-contri-to-pf-paid-before-deu-date-ofroi-67859.asp

Ameet (L) (1678 Points)
Replied 23 February 2010

If it is not deposited within due date then Employees contribution will be dissallowed forever as aginst Employer contribution which can be claimed u/s 43B in the year of deposit.

Aditya Maheshwari (CA in Practice) (35817 Points)
Replied 23 February 2010

Payment made within the grace period is considered as payment made within the due date and the same is allowable even for employees contribution.

Max Payne (employed) (2569 Points)
Replied 23 February 2010

Even employees’ contribution to PF paid before due date of filing ROI is allowable u/s 43B

S. 2 (24) (x) provides that amounts received by an assessee from employees towards PF contributions etc shall be “income”. S. 36 (1) (va) provides that if such sums are contributed to the employees account in the relevant fund on or before the due date specified in the PF etc legislation, the assessee shall be entitled to a deduction. The second Proviso to s. 43B (b) provided that any sum paid by the assessee as an employer by way of contribution to any provident etc fund shall be allowed as a deduction only if paid on or before the due date specified in 36(1)(va). After the omission of the second Proviso w.e.f 1.4.2004, the deduction is allowable under the first Proviso if the payment is made on or before the due date for furnishing the return of income. The High Court had to consider whether the benefit of s. 43B can be extended to employees’ contribution as well which are paid after the due date under the PF law but before the due date for filing the return. HELD deciding in favour of the assessee:

(i) Though the revenue has argued that a distinction is to be made between “employers’ contribution” and “employees’ contribution” and that employees’ contribution being in the nature of trust money in the hands of the assessee cannot be allowed as a deduction if not paid on or before the due date specified in the PF etc law, the scheme of the Act is that employees’ contribution is treated as income u/s 2 (24) (x) on receipt by the assessee and allowed as a deduction u/s 36 (1) (va) on making deposit with the concerned authorities. S. 43B (b) stipulates that such deduction would be permissible only on actual payment;

 

(ii) The question as to when actual payment should be made is answered by Vinay Cements 213 CTR 268 where the deletion of the second Proviso to s. 43B w.e.f 1.4.2004 was held applicable to earlier years as well. As the deletion of the 2nd Proviso is retrospective, the case has to be governed by the first Proviso. Dharmendra Sharma 297 ITR 320 (Del) & P.M. Electronics 313 ITR 161 (Delhi) followed;

 

(iii) If the employees’ contribution is not deposited by the due date prescribed under the relevant Acts and is deposited late, the employer not only pays interest on delayed payment but can incur penalties also, for which specific provisions are made in the Provident Fund Act as well as the ESI Act. Therefore, the Act permits the employer to make the deposit with some delays, subject to the aforesaid consequences. Insofar as the Income-tax Act is concerned, the assessee can get the benefit if the actual payment is made before the return is filed, as per the principle laid down in Vinay Cement.

Source

Decided By: High Court of Delhi, In the case of: Commissioner of Income Tax VERSUS AIMIL Limited, Appeal No.: ITA No. 1063/2008, Reserved on: December 04, 2009, Pronounced on: December 23, 2009.



Read more: https://www.taxguru.in/income-tax-case-laws/even-employees%e2%80%99-contribution-to-pf-paid-before-due-date-of-filing-roi-is-allowable-us-43b.html#ixzz0erXpINcK
 

2 Like

Amir (Learner) (4011 Points)
Replied 23 February 2010

G.K. Bhai

Thanks 4 sharing.............

But do you also think that ways................

I seriously doubt..........Law is so clear in terms of Sec 36(1)(va)......Further there are many instances were penalties are prescribed by other laws but then the same are dissallowed under Income Tax.........Say penalty for delay in deposit of sales tax, excise duty, etc..............

God knows..........I think I should better leave this forum..........:))

Plz say something brother...............

Aditya Maheshwari (CA in Practice) (35817 Points)
Replied 23 February 2010

Dear G. K.

I am also aware of the judgement but section 43B(b) clearly provide as under:

          (b)  any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, 62[or]

So the words expressed here are employers contribution. So am not really sure that the judgement is applicable currently though the judgement takes a contrary rule to the section.

And Amir no need to leave the forum. You call yourself a learner but are very good in interpreting the law. So no need to leave the forum. You just need to keep updated with the latest jugements. That will solve the purpose.

1 Like

Amir (Learner) (4011 Points)
Replied 23 February 2010

Thanks Adita sir for saying that...............

Max Payne (employed) (2569 Points)
Replied 23 February 2010

hi Amir bro,

 

I just shared the case here thats all... u r correct in saying that the judgement is contrary to the indications of the Act.

 

This case was news to me also :)

 

PLUS, like Aditya Sir has pointed out, Liberal judgement is not necessarily landmark, and need not be taken as precedent by other courts..... Here there is a very wide interpretation of what the due date is under PF act.... which need not find favour always with other authorities.

 

The observation here is that the employee's contribution is also payable AS AN EMPLOYER...... The trigger to section 36(1)(va) is also actually resting in the PF Act....


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