Employee/ Employer Contribution to PF deposited within Due Date of furnishing Income Tax Return can’t be Disallowed: ITAT [Read Order]

ITAT- Order - Assessment - barred - taxscan

The Kolkata bench of the Income Tax Appellate Tribunal in the case of DCIT, Circle-1(1), versus M/s Lexicon Auto Ltd. raised various grounds of appeal wherein ruled that there is no distinction between employees’ and employer contribution to PF, No Disallowance If contribution is deposited on or before the due date of furnishing Income Tax return.

In the instant case, the Assessing Officer disallowed the employees’ contribution to PF / ESI since the assessee has failed to do so same u/s 36(1)(va) and added an amount to the total income of Assessee.

Aggrieved Assessee preferred the matter before CIT (A) who deleted the addition made by AO by observing the contention of assessee regarding the identical issue involved in High Court in the case of CIT v Shree Vijay Shree Limited wherein the High Court held that employees contribution to provident fund paid before the due date of filing of return is to be allowed as expenditure u/s. 36(1)(va) of the Income Tax Act.

AO was of the opinion that while invoking the section 2(24)(x) r.w.s. 36(1)(va) of the Act then any recovery from employees towards provident fund contribution is deemed to be income of the assessee and also added that no distinction between employer and employee contribution after omission of the second provision of section 43B of the Act by Finance Act, 2003.

The bench while invoking section 36(1)(va) of the Act clearly stated that deduction will be allowed to the assessee when the sum is credited to the employee’s account under the provident fund Act and at the same time Section 43B of the Act provides for certain deductions to be allowed only on actual payment basis.

The Tribunal bench comprising Accountant Member Waseem Ahmed and Judicial Member S.S.Viswanethra Ravi pressed the various decision of the court and made a considered opinion that no distinction between employees’ and employer contribution to PF, and if the total contribution is deposited on or before the due date of furnishing return of income u/s 139(1) of the Act, then no disallowance can be made towards employees’ contribution to provident fund.

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