Whether Section 43 B covers employees’ contribution to Provident Fund and whether the deduction is allowable if it is paid before due date for filing the Return of Income?

Last updated: 28 July 2014

Court :
Bombay High Court

Brief :
The Assessee Company is engaged in the business of manufacturing basic chemicals and chemical intermediates and is a Government of India enterprise.The present Appeal is a case of disallowance of payment of employees' contribution to the P.F. amounting to Rs.1,82,77,138/- and expenses of Rs.10,00,300/- towards bond registration charges. The CIT (Appeals) directed the Assessing Officer to allow deduction in respect of payments made within grace period and disallow payments made after the grace period. As regards bond registration charges, the CIT (Appeals) observed that the issue was covered by the order in the Assessee's own case for Assessment Year 2003-04 wherein appeal orders for Assessment Years 1998-99, 2001-02 and 2002-03 were followed and accordingly deleted the disallowance towards the bond registration charges. Aggrieved with the order of the CIT (Appeals), the Revenue appealed before the ITAT. It was held that a plain reading of the second proviso to s. 43B clarifies that the assessees – employers were entitled to deductions only if contribution to any fund for welfare of employees stood credited on or before the due date given in the relevant Act. The amendments to s. 43B which came into force w.e.f. 01.04.2004 clearly applied to the assessee’s case.

Citation :
Commissioner of Income Tax – Appellant – Versus – M/s Hindustan Organics Chemicals Ltd. - Respondent