The Amritsar bench of Income Tax Appellate Tribunal (ITAT) quashed the assessment order as there was no delay in the payment of the employer contribution and disallowed the addition.
The bench observed the Central Board of Direct Taxes (CBDT) circular No. 22/2015 dated 17.12.2015 which covered allowability of employer’s contribution to funds for the welfare of employees in terms of section 43B(b) of the Income Tax Act, 1961.
As per the circular, the deduction is allowable to the employer assessee if he deposits the contributions to welfare funds on or before the ‘due date’ of filing of return of income.
According to Section 43B(b) of Income Tax Act, any sum payable by the taxpayer as an employer towards the contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees shall be allowed as a deduction only in the year of payment.
The assessee has, in actuality, filed returns in accordance with Section 139(1) for the contested assessment year. By accepting the assessee’s audit report, the CPC processed the return in accordance with Section 143(1), added Rs. 48,07,613 to account for the late deposit of contributions made in accordance with the Employee State Insurance and Provident Fund under Section 36(1)(va) of the Income Tax Act.
The assessee divided the additions into three parts: Rs. 28,91,068 for employer contributions and the remainder Rs. 19,16,345 and Rs. 837424.90 for the late credit of a cheque that had been submitted to the bank on time. Also maintained that paying the employee contribution late does not constitute violation.
The representative of the assessee placed that the amount Rs.837424.90 was paid by cheque within the due date but the clearance was made after the due date of the relevant act. Accordingly, considering the Board Circular, addition the amount to Rs.837424.90 should be quashed.
Considering the submissions of both sides, relying on the CBDT circular of 2015, the Coram of Dr. M.L. Meena and Anikesh Banerjee ruled that the addition is liable to be quashed.
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