SC on deductibility of Employees' contribution to PF & ESI

Last updated: 08 November 2022

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This document contains a Supreme Court of India judgment concerning the deductibility of employee contributions to Provident Fund (PF) and Employees' State Insurance (ESI) from an employer's income. It clarifies the legal interpretation of Sections 36(1)(va) and 43B of the Income Tax Act, 1961, addressing whether belatedly deposited employee contributions can be claimed as deductions. The judgment is essential for employers, tax consultants, and legal professionals dealing with employee welfare fund compliance and income tax assessments.

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The Supreme Court in its judgement dated 12.10.2022 has held that employeeâ€™s contribution towards PF and ESI has to be paid on or before due date to claim deduction u/s 36(1)(via) read with Section 43B of Income Tax Act 1961. There is a marked distinction between the nature and character of the two amounts viz. the employers' contribution and employees' contribution required to be deposited by the employer - the employer's liability is to be paid out of its income whereas the second is deemed an income, by definition, since it is the deduction from the employees' income and held in trust by the employer. #pdf

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Submitted by P C Agrawal · Posted 08 November 2022 · Other files by P C Agrawal · Report

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