The Kolkata Income Tax Appellate Tribunal ( ITAT ) has held that delayed deposit of amount collected towards employees’ contribution to Provident Fund ( PF ) renders claim of deduction under section 36(1)(va) of the Income Tax Act, 1961 ineligible.
Supreme & Co. Pvt. Ltd , the assessee company had preferred an appeal contending that even though the deposits towards PF and ESI totalling to Rs.85,23,450/- consisted of employees’ contribution and employer’s contribution, the AO treated the entire amount as employees’ contribution towards Provident Fund and Employees State Insurance and disallowed the entire amount under section 36(1)(va) r.w.s 2(24)(x) of the Act on account of delayed deposit of employees’ contribution to PF/ESI i.e. after the due date as provided under the respective welfare enactments.
Section 36(1)(va) of Income tax Act states that if the amount received towards employees’ contribution to PF is not deposited by the employer in the respective welfare account within the due date, then the same will be treated like income from business/profession.
The two member Bench of Sanjay Garg ( Judicial Member ) and Sanjay Awasthi ( Accountant Member ) reiterated that deduction under section 36(1)(va) in respect of delayed deposit of amount collected towards employees’ contribution to PF cannot be claimed even though deposited within the due date of filing of return even when read with Section 43B.
It was found from the AR’s submission that the employer’s contribution was duly deposited well within the due date of filing of Income Tax Return and the same was allowable as deduction under section 43B of the Act.
While allowing the appeal, the Bench directed the AO to allow deduction under section 43B read with Sec 36 if it is verified that the employer’s contribution has been deposited before the due date of filing of return of income.
The Bench held that deduction under section 36(1)(va) in respect of delayed deposit of amount collected towards employees’ contribution to PF cannot be claimed even though deposited within the due date of filing of return even when read with Section 43B of the Income Tax Act.
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