In the case M/S Central Office Mewar Palace Organization Pvt. Ltd., City Palace, Udaipur V. The Joint Commissioner of Income-Tax, Udaipur, the division bench of the Rajasthan High Court held that the employer can claim deduction under the Income Tax Act for the amount paid towards ESI Contribution Fund under the provisions of the ESI Act, even if the payment was made after the due date.
The bench comprising of Justice Sangeet Lodha and Justice Deepak Maheswari set aside the order of the ITAT, wherein the Tribunal, sustained disallowance in respect of employee’s contribution but allowed the deduction towards employer’s contribution observing that assessee was entitled to claim benefit under Section 43B of the Income Tax Act, keeping in view the fact that it has contributed to PF before filing of the return.
The appellant-assessee claimed that they are entitled to deduction according to the amend provision of s.43B as per which if the payment having been made before the closure of financial year, the deduction as claimed cannot be disallowed.
The bench noted that Section 43B(b) of the Income Tax Act, refers to ‘sum payable by the assessee as an employer by way of contribution’ to any provident fund, superannuation fund or gratuity fund or any other fund for the welfare of the employees. Further, under the relevant statutes, both the employer’s contribution and employee’s contribution is required to be paid by the employer before the due date and therefore, the expression ‘sum payable by the assessee as an employer by way of contribution’ as used in Section 43B (b) cannot be given restricted meaning as suggested by the Revenue so as to include within its ambit, only the employer’s contribution and not the both the employer’s contribution and the employee’s contribution.
“Thus, we are of the considered opinion that the provisions as incorporated in Section 43B (b) allowing deduction in respect of any sum payable by the assessee as an employer by way of contribution to provident fund etc. include both the employer’s contribution and the employee’s contribution, if the same is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of the income under sub-section (1) of Section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return.”
Read the full text of the Judgment below.
