Cit v. The Amounts To Be Remitted By The Employer Towards

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT:- THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY, THE 2ND DAY OF JULY 2018 / 11TH ASHADHA, 1940 I.T.A.No.172 of 2016 ----------------------------- AGAINST THE ORDER IN I.T.A.NO.275/COCH/2014 DATED 19-07-2016OF INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN. --------------------- APPELLANT(S)/ RESPONDENT IN ITA:- -------------------------------------------------------- M/S.POPULAR VEHICLES & SERVICES PVT.LTD., MAMANGALAM, KOCHI - 682 019 REPRESENTED BY ITS CHIEF MANAGER ACCOUNTS, MR. ANTONY.V.V. BY ADVS.SRI.M.GOPIKRISHNAN NAMBIAR SRI.P.GOPINATHSRI.P.BENNY THOMASSRI.K.JOHN MATHAISRI.JOSON MANAVALANSRI.KURYAN THOMASSRI.RAJA KANNAN RESPONDENT(S)/ APPELLANT IN ITA:- ------------------------------------------------------- THE COMMISSIONER OF INCOME TAX, C.R. BUILDINGS, I.S. PRESS ROAD, ERNAKULAM, KOCHI - 682018 BY SRI.P.K.R.MENON, SENIOR COUNSEL, GOVERNMENT OF INDIA (TAXES) BY SRI.JOSE JOSEPH, STANDING COUNSEL FOR G.O.I. (TAXES) THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 02-07-2018,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:- I.T.A.No.172 of 2016 APPENDIX ---------------- APPELLANT'S ANNEXURES:- ------------------------------------------- ANNEXURE-A THE TRUE COPY OF THE ASSESSMENT ORDER DATED 06.12.2010ISSUED UNDER SECTION 143(3) OF THE ACT BTY THE DEPUTYCOMMISSIONER OF INCOME TAX, RANGE-4, CIRCLE 4(1), KOCHI FOR THE A.Y.2008-09. ANNEXURE-B THE TRUE COPY OF THE APPEAL MEMORANDUM (WITHOUT ANNEXURES) DATED 24.12.2010 FILED BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS), CHALLENGING ANNEXURE-A ORDER.ANNEXURES) DATED 24.12.2010 FILED BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS), CHALLENGING ANNEXURE-A ORDER. ANNEXURE-C THE TRUE COPY OF THE ORDER DATED 14.01.2014 ISSUED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-II, KOCHI FOR THE A.Y.2008-09.THE COMMISSIONER OF INCOME TAX (APPEALS)-II, KOCHI FOR THE A.Y.2008-09. ANNEXURE-D THE TRUE COPY OF THE APPEAL MEMORANDUM (WITHOUT ANNEXURES) DATED 15.05.2014 FILED BY THE APPELLANT BEFORE THE APPELLATE TRIBUNAL.ANNEXURES) DATED 15.05.2014 FILED BY THE APPELLANT BEFORE THE APPELLATE TRIBUNAL. ANNEXURE-E THE TRUE COPY OF THE APPEAL MEMORANDUM (WITHOUT ANNEXURES) DATED 13.06.2014 FILED BY THE REVENUE BEFORE THE APPELLATE TRIBUNAL.ANNEXURES) DATED 13.06.2014 FILED BY THE REVENUE BEFORE THE APPELLATE TRIBUNAL. ANNEXURE-F THE TRUE COPY OF THE COMMON ORDER DATED 14.08.2014 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH.PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH. ANNEXURE-G THE TRUE COPY OF THE ORDER DATED 11.12.2015 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, IN MISCELLANEOUS PETITION NO.5/COCH/2015 IN ITA NO.275/COCH/2015.THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, IN MISCELLANEOUS PETITION NO.5/COCH/2015 IN ITA NO.275/COCH/2015. ANNEXURE-H THE TRUE COPY OF THE ORDER DATED 19.07.2016 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, IN I.T.A.NO.275/COCH/2014, RELATING TO THE A.Y.2008-09.THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, IN I.T.A.NO.275/COCH/2014, RELATING TO THE A.Y.2008-09. RESPONDENT'S ANNEXURES:- ---------------------------------------------- NIL. vku/- ------------------------------------------------------- ------------------------------------------------------- Dated, this the 02[nd] day of July, 2018JUDGMENT Vinod Chandran, J: A Company, the appellant herein, who failed to pay the ANNEXURE-H THE TRUE COPY OF THE ORDER DATED 19.07.2016 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, IN I.T.A.NO.275/COCH/2014, RELATING TO THE A.Y.2008-09.THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, IN I.T.A.NO.275/COCH/2014, RELATING TO THE A.Y.2008-09. RESPONDENT'S ANNEXURES:- ---------------------------------------------- NIL. vku/- ------------------------------------------------------- ------------------------------------------------------- Dated, this the 02[nd] day of July, 2018JUDGMENT Vinod Chandran, J: A Company, the appellant herein, who failed to pay the employees' contribution under the Employees' Provident Funds andMiscellaneous Provisions Act, 1952 [for brevity, the EPF & MP Act]and the Employees State Insurance Act, 1948 [for brevity “ESI Act”]before the due date provided under the said enactments, is beforethis Court claiming deduction in the year 2008-09 for theemployees' contribution belatedly paid in the previous year to theassessment year. 2. The issue is covered by a decision of this Court in CIT v. Merchem Ltd. [(2015) 378 ITR 443 (Ker.). The learnedCounsel appearing for the appellant, however, urges that the saiddecision requires reconsideration. 3. The amounts to be remitted by the employer towards the employees' provident fund and employees' state insurance arethe employer's contribution and the employees' contribution. Thedecision of the Division Bench of this Court noticed CIT v. AlomExtrusions Ltd. [(2009) 318 ITR 306 (SC)]; but, however, misread the principle applied by the Hon'ble Supreme Court, is the argumentadvanced to compel reconsideration. We find that the DivisionBench which admitted the appeal also raised a question as towhether a reconsideration of Merchem Ltd. was required. Thequestions of law framed by a Division Bench, on admission, are asfollows: “(i)Whether the term 'amounts payable' as used in therelevant provision of law does take in employee'scontribution as well, or will it stand confined to employer'scontribution alone?relevant provision of law does take in employee'scontribution as well, or will it stand confined to employer'scontribution alone? (ii)Whether the separate course of action envisaged underSection 36(1)(v)/(va) of the Income Tax Act in respect ofthe employees' and employers' contribution will getvanished/eclipsed, by virtue of non-obstante clausecontained in Section 43B of the Act?Section 36(1)(v)/(va) of the Income Tax Act in respect ofthe employees' and employers' contribution will getvanished/eclipsed, by virtue of non-obstante clausecontained in Section 43B of the Act? (iii)Whether the effect of deletion of the second proviso toSection 43B in the year 2004 was considered by the Benchin Merchem Ltd.'s case (cited supra) in the context of thequestions raised as above and whether the dictum inMerchem Ltd.'s case requires reconsideration?”Section 43B in the year 2004 was considered by the Benchin Merchem Ltd.'s case (cited supra) in the context of thequestions raised as above and whether the dictum inMerchem Ltd.'s case requires reconsideration?” 4. The learned Counsel for the appellant took us through the provisions to argue that sub-clause (v) of Section 36(1) wasapplicable only with respect to an approved fund as distinguishedfrom a statutory fund created under the EPF&MP Act or the ESI Act. (iii)Whether the effect of deletion of the second proviso toSection 43B in the year 2004 was considered by the Benchin Merchem Ltd.'s case (cited supra) in the context of thequestions raised as above and whether the dictum inMerchem Ltd.'s case requires reconsideration?”Section 43B in the year 2004 was considered by the Benchin Merchem Ltd.'s case (cited supra) in the context of thequestions raised as above and whether the dictum inMerchem Ltd.'s case requires reconsideration?” 4. The learned Counsel for the appellant took us through the provisions to argue that sub-clause (v) of Section 36(1) wasapplicable only with respect to an approved fund as distinguishedfrom a statutory fund created under the EPF&MP Act or the ESI Act. What is applicable is sub-clause (va) of Section 36(1), whereinthere was an Explanation, enabling the deduction as available inSection 36 only if there was a payment made of the contributionbefore the “due date”. However, in considering the sustainability ofthe deduction claimed, one has to look at Section 43B, which has anominal heading “Certain deductions to be only on actual payment”.Sub-clause (b) of Section 43B specifically takes in the contributionpayable by the employer, which includes both the employer's andemployee's contribution. There was a proviso introduced by theAmendment Act of 1988, by which any sum referred to in clause (b)would be allowed as a deduction only if it has been actually paidduring the previous year on or before the due date as provided inthe Explanation below Section 36(1)(va). This was later amended totake in situations in which cash and cheque payments are made;which amendment is not relevant for our consideration. The provisoitself was deleted in 2004 and the question arose before the Hon'bleSupreme Court in Alom Extrusions Ltd. as to whether the deletionwas a curative amendment and hence, would apply to the earlieryears also. The Hon'ble Supreme Court has held that theamendment is curative and in such circumstances the deduction has to be permitted, even for the earlier years, dehors the provisowhich existed then; subsequently deleted as a curative measure. 5. The Division Bench of this Court in Merchem Ltd.though noticed the aforesaid decision, held the belated payment ofemployees' contributions, which was the subject matter of that case,as is the subject here too; will not qualify for deduction. It is, hence,there is a plea raised for reconsideration of the said decision. Thelearned Counsel would also specifically point to para 16 of AlomExtrusions Ltd., which speaks of an employer sitting on thecollected contributions and depriving the workmen of the rightfulbenefits under the social welfare legislation, which, according to theSupreme Court, had resulted in the introduction of the proviso; laterdeleted. This reference can only be to the employee's contribution,is the argument. On such deletion and the Supreme Court holdingthat the deletion is curative, necessarily the deduction had to beallowed in the year without reference to the “due date”. It isspecifically pointed out that Section 43B is a non-obstante clauseand would have overriding effect and applicationover the otherprovisions. Section 30 of EPF&MP Act is also pointed out to arguethat whether it be the contribution of the employer or the employee, - 5 - it is the liability of the employer and, hence, the employer's andemployee's contribution cannot be treated differently insofar as thedeductions permissible under Section 36. 6. The learned Senior Counsel for Government of India (Taxes), however, would seek to sustain the orders of the Tribunal inthe present case, which has relied on Merchem Ltd.. MerchemLtd., according to the learned Senior Counsel, has decided theissue of employee's contribution in the correct perspective while Alom Extrusions Ltd. considered the deduction permissible of theemployer's contribution. The appeal has to be rejected, argues thelearned Senior Counsel. 7. We will first notice the provisions. - 5 - it is the liability of the employer and, hence, the employer's andemployee's contribution cannot be treated differently insofar as thedeductions permissible under Section 36. 6. The learned Senior Counsel for Government of India (Taxes), however, would seek to sustain the orders of the Tribunal inthe present case, which has relied on Merchem Ltd.. MerchemLtd., according to the learned Senior Counsel, has decided theissue of employee's contribution in the correct perspective while Alom Extrusions Ltd. considered the deduction permissible of theemployer's contribution. The appeal has to be rejected, argues thelearned Senior Counsel. 7. We will first notice the provisions. “S.2(24)“income” includes - xxxxxxxxx (x) any sum received by the assessee from hisemployees as contributions to any provident fund orsuperannuation fund or any fund set up under the provisionsof the Employees' State Insurance Act, 1948 A(34 of 1948),or any other fund for the welfare of such employees”. “S.36. Other deductions (1) The deductions provided for in the followingclauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in thesection 28 - xxxxxxxxx (v) any sum paid by the assessee as an employer byway of contribution towards an approved gratuity fundcreated by him for the exclusive benefit of his employeesunder an irrevocable trust; (va) any sum received by the assessee from any ofhis employees to which the provisions of sub-clause (x) ofclause (24) of section 2 apply, if such sum is credited bythe assessee to the employee's account in the relevantfund or funds on or before the due date. Explanation.- for the purposes of this clause, “duedate” means the date by which the assessee is required asan employer to credit an employee's contribution to theemployee's account in the relevant fund under any Act,rule, order or notification issued thereunder or under anystanding order, award, contract of service or otherwise”. “S.43B. Certain deductions to be only on actualpayment Notwithstanding anything contained in any otherprovision of this Act, a deduction otherwise allowable underthis Act in respect of - xxxxxxxxx (b) any sum payable by the assessee as anemployer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fundfor the welfare of employees”. 8. Looking at the provisions we are definite that the Acttreats employer's and employee's contribution distinctly. Sub-clause(v) of Section 36(1) speaks of a gratuity fund, wherein the employeedoes not contribute at all. Section 36(1)(va) speaks of theemployee's contribution to a welfare fund for the benefit ofemployees alone, by virtue of the specific reference to Section 2(24). Section 2 (24) includes as income, any contribution receivedby the employer from the employee for the purpose of remittance toa fund created for the welfare of the employees; including inter aliaa provident fund and that under the ESI Act. When the same isremitted on the due date as prescribed in the statute or ordercreating such fund, then it is eligible for deduction under Section 36.Section 43B(b) refers to “a sum payable by the assessee as anemployer”, to an employees welfare fund which is the employer'scontribution. 9. We have carefully gone through the decisions of theHon'ble Supreme Court as also of the Division Bench. The primary question to be considered is whether there should be a 9. We have carefully gone through the decisions of theHon'ble Supreme Court as also of the Division Bench. The primary question to be considered is whether there should be a reconsideration of Merchem Ltd.. Alom Extrusions Ltd. andMerchem Ltd. applied in two different fields; the former withreference to Section 43B(b), being employer's contribution and thelatter dealing with employee's contribution as covered by Section36(1)(va). We would first deal with Alom Extrusions Ltd., whichhas dilated upon the history of the legislation and the reason for thevarious amendments brought in. We first notice that the questionwhich arose for consideration in Alom Extrusions Ltd. was as to“whether omission (deletion) of the second proviso to section 43Bof the Income-tax Act, 1961, by the Finance Act, 2003, operatedwith effect from April 1, 2004, or whether it operated retrospectivelywith effect from April 1, 1988” (sic para 4). The Hon'ble SupremeCourt noticed that prior to Finance Act, 2003, the second proviso toSection 43B restricted the deduction in respect of any sum payableby an employer by way of contribution to providentfund/superannuation fund or any other fund for the welfare ofemployees, unless it stood paid within the specified due date. 10. Here we have to notice that sub-clause (b) ofSection 43B speaks of sum payable by the employer which is the'employer's contribution', payable by the employer without deduction from the salary of the employee. Employees contribution thoughremitted to the fund by the employer, it is deducted from theemployees salary, which deduction is statutorily enabled. Deductionfrom the salary of the employee, of course, is the liability of theemployer and so is the remittance to the fund but it does notchange the essential nature of the contribution; which is of theemployee. A contribution deducted from the employee's salary andpaid by the employer cannot, for a moment, be termed as theemployer's contribution. There is a clear distinction insofar as thecontributions payable under the EPF&MP Act as also the ESI Act.The employer's contribution has to be paid by the employer himselfand there is possible no deduction from the salary of the employee,whereas with respect to the employee's contribution, it has to bededucted from the salary of the employee and paid to the relevantfund. 11. The Supreme Court in Alom Extrusions Ltd., aswas noticed, was specifically considering the issue with respect tothe employer's contribution. The Hon'ble Supreme Court noticedthat prior to 1983 even a book entry made with respect to anassessee following the mercantile system of accounting, making a provision for the payment of contributions towards EPF and ESIcould be claimed as a deduction. By introduction of Section 43B inthe Finance Act, 1983, the object was to “disallow deductionsclaimed merely by making a book entry based on the mercantilesystem of accounting” (sic - para 16). Section 43B made itmandatory for the department to grant deduction in computing theincome under Section 28 in the year in which the tax, duty, cess,etc. were paid. However, the due dates under the variousenactments, ie; the welfare and tax legislation would not have thedue date before the date of filing of return as provided in the IncomeTax Act. On account of this the first proviso was introduced to granta relief by way of deduction insofar as the tax, duties, cess or feepaid before the filing of the return under the IT Act though after theprevious year; the liabilities having accrued in that previous year.This relaxation, however, was restricted to tax, duties, cess and feeand not applied to contributions to labour welfare funds. The reasonalso stated by the Hon'ble Supreme Court “to be that theemployer(s) should not sit on the collected contributions anddeprive the workmen of the rightful benefits under social welfarelegislations by delaying payment of contributions to the welfare funds” (sic - para 16). It is this declaration by the Hon'ble SupremeCourt which is relied on by the learned Counsel for the appellant tocontend that the Hon'ble Supreme Court was considering thequestion of employee's contribution also. Otherwise, there wouldnot have been a reference to an 'employer sitting on the collectedcontribution', is the compelling argument. 12. We have to understand this statement with referenceto the question framed by the Hon'ble Supreme Court at the firstinstance in the opening paragraph of the judgment. We also have tonotice that even otherwise the Explanation to sub-clause (va) ofSection 36(1) took care of the employee's contributions; which wasintroduced by the Finance Act, 1987 with effect from 01.04.1988,from which date the statute recognised the distinction betweenemployee's and employer's contribution. In this context we have tonecessarily dwell upon the various amendments over the years andlook at the sequence in which they were brought in. Only onintroduction of Section 43B with effect from 01.04.1984, there wasan insistence that there should be actual payment of amountsclaimed as deductions, enumerated under the provision. Section43B (b) spoke of sum payable by the employer by way of contribution to a welfare fund. At that point it could be understoodthat the sub-clause took in both employee's and employer'scontribution. The legislature then took note of the circumstance thatmany claim the deduction on the ground of maintaining accounts onmercantile or accrual basis and fail to discharge the liability. Henceby Finance Act 1987, clause (x) under Section 2 (24) , sub-clause(va) of Section 36 (1) and the 2[nd] proviso to Section 43B werebrought in. From that date the statute treats the employee's andemployer's contribution differently. 13. Otherwise there was no requirement for bringing in a sub-clause under the definition clause of 'income' including theemployee's contribution received by the employer and providing adeduction by sub-clause (va) and permitting the deduction only ifthat contribution is paid in accordance with the statute, whichcreated the fund. The 2[nd] proviso to Section 43B then underwent acosmetic change and later was deleted. There was also a newproviso added under Section 43B for permitting deduction oncontributions paid before the returns are filed. This took in only theemployer's contribution especially since Section 2(24) andsub-clause (va) were retained. The employee's contributions, as Merchem Ltd. noticed, stands on a different footing, since it iscollected from the employee as a deduction in their salary itself.This would in effect be income of the assessee, as has beenspecifically indicated in the definition of “income” under Section2(24)(x), which provision was introduced w.e.f 01.04.1988 as perFinance Act, 1987. 14. We are of the opinion that the question with respectto employee's contribution is regulated by clause (x) of Section2(24) and sub-clause (va) of Section 36(1) and would not beaffected by Section 43B. Section 43B though a non-obstanteclause, makes deductions to be allowable only on actual payment;when such deductions are otherwise allowable. Primarily it is to benoticed that it is a restrictive clause, the amendments to which orthe deletion of a proviso in which cannot lead to it being convertedas an enabling provision permitting deduction even when there wasno deduction permissible by the other provisions of the Act. Thenon-obstante clause has no effect insofar as the employee'scontribution which is specifically covered by sub-clause (va) ofSection 36(1). By virtue of the Explanation below sub-clause (va),no deduction could be claimed if the contribution has not been paid, after collection from the employees by way of deduction from theirsalaries, within the due date under the EPF&MP Act. The deletion ofa proviso under Section 43B cannot render otiose the Explanationunder Section 36(1)(va). after collection from the employees by way of deduction from theirsalaries, within the due date under the EPF&MP Act. The deletion ofa proviso under Section 43B cannot render otiose the Explanationunder Section 36(1)(va). 15. Merchem Ltd., we notice, dealt with the specificquestion of disallowance of employee's contribution when the samewas not paid within the time provided under the statute under whichthe welfare fund was created and held so in paragraph 19: “19.Therefore, income of the assessee includesany sum received by the assessee from his employee ascontribution to any Provident Fund or superannuationfund or funds set up under the provisions of theEmployees' State Insurance Act, 1948 (34 of 1948) orany other fund for the welfare of such employees.According to us, on a reading of Sec. 36(1)(va) along withSec. 2(24)(x), it is categoric and clear that thecontribution received by the assessee from the employeealone was treated as income for the purpose of Sec.36(1)(va) of the Act and therefore we are of theconsidered opinion that the assessee was entitled to getdeduction for the sum received by the assessee from hisemployees towards contribution to the fund or funds somentioned only if, the said amount was credited by theassessee on or before the due date to the employees account in the relevant fund as provided underExplanation 1 to Sec.36(1)(va) of the Act. According tous, so far as Sec. 43B(b) is concerned, it takes care ofonly the contribution payable by the employer/assesseeto the respective fund. Therefore, in that circumstances,Sec. 36(1)(va) and Sec. 43B(b) operate in different fieldsi.e. the former takes care of employee's contribution andthe latter employer's contribution. The assessee wasentitled to get the benefit of deduction under Sec. 43B(b)as provided under the proviso thereto only with regard tothe portion of the amount paid by the employer to thecontributory fund. Such an understanding of Sec. 43B isfurther exemplified by the phraseology used in theproviso, which reads thus: "Provided that nothing contained in thissection shall apply in relation to any sum which isactually paid by the assessee on or before the duedate applicable in his case for furnishing the returnof income under Sub-section (1) of section 139 inrespect of the previous year in which the liability topay such sum was incurred as aforesaid and theevidence of such payment is furnished by theassessee along with such return." Further, in Explanation 1 to Sec. 43B also, thephraseology used persuade us to think that Sec. 43Bcan be applied to the contribution payable by theassessee as an employer, which reads thus: “For the removal of doubts, it is hereby declaredthat where a deduction in respect of any sum referredto in clause (a) or clause (b) of this section is allowed in computing the income referred to in section 28 of theprevious year (being a previous year relevant to theassessment year commencing on the 1st day of April,1983 or any earlier assessment year) in which theliability to pay such sum was incurred by the assessee,the assessee shall not be entitled to any deductionunder this section in respect of such sum in computingthe income of the previous year in which the sum isactually paid by him." Therefore, according to us, since the Respondent hasadmittedly not paid the deduction so made within the duedate as provided under Sec. 36(1)(va), the Respondentwas not entitled to get deduction of the amounts deductedthereunder for and on behalf of the employees”. 16. The learned Judges had elaborately considered the in computing the income referred to in section 28 of theprevious year (being a previous year relevant to theassessment year commencing on the 1st day of April,1983 or any earlier assessment year) in which theliability to pay such sum was incurred by the assessee,the assessee shall not be entitled to any deductionunder this section in respect of such sum in computingthe income of the previous year in which the sum isactually paid by him." Therefore, according to us, since the Respondent hasadmittedly not paid the deduction so made within the duedate as provided under Sec. 36(1)(va), the Respondentwas not entitled to get deduction of the amounts deductedthereunder for and on behalf of the employees”. 16. The learned Judges had elaborately considered the decision in Alom Extrusions Ltd. and has found the provisionshaving application in different fields. Section 43B(b) dealt with theemployer's contribution and sub-clause (va) of Section 36(1) wasconcerned with the employees contribution as rightly held. We donot find ourselves persuaded to take a different view with respect toemployee's contribution and we respectfully follow the decision ofthe Division Bench of this Court in Merchem Ltd.. We, hence,answer the substantial question of law raised with respect toreconsideration of Merchem Ltd. in the negative, against theassessee and in favour of the Revenue. 17. The other question of law framed refer to the'amounts payable', the reference obviously is to “any sum payableby the assessee as an employer by way of contribution to anyprovident fund or superannuation fund or gratuity fund or any otherfunds for the welfare of employees” as found in sub-clause (b) ofSection 43B, which refers only to the employer's contribution andnot the employee's contribution. Employee's contribution, as hasbeen already held by us, is covered by clause (va) of Section 36(1)and the deduction is restricted by the Explanation below it. Withrespect to employer's contribution, the deduction is allowable onlyon actual payment, as per Section 43B restricted only by theproviso as is now available in the Act, which requires paymentbefore the filing of return. Any sum paid as employer's contribution,which is actually paid by the assessee on or before the due dateapplicable in his case for furnishing the return of income, undersub-section (1) of Section 139, then the same would be enableddeduction. Hence, in the present case if the employer's contributionunder the EPF or ESI for the financial year 2007-08 is paid after thesaid year but before the date of filing of the return for that year, then necessarily it would be allowable as a deduction in the assessmentyear, de hors the fact that it was paid in the subsequent year. 18. Sub-clause (va) of Section 36(1) takes care of theemployee's contribution, which stands unaffected by Section 43B asthe restriction available in Section 43B is already available underthe Explanation to the said clause, with a qualification of thepayment being before the due date, as stipulated by the statute ororder creating the fund. We would also observe that, as the Hon'bleSupreme Court noticed, the legislature took a different approachwith respect to the contributions deducted from the salary of theemployees which had to be paid to the welfare fund within the duedate; as provided under the statute which created the welfare fund.The contributions which are deducted at the time of payment ofsalary is received by the employer-Company and is treated asincome under Section 2(24). On remittance of this contribution,within the due date, it is allowed as a deduction under Section 36. Ifit is not paid to the welfare fund within the due date provided underthe relevant statute, it remains as an income in the books ofaccounts of the assessee/employer Company. The said contributionhaving not been paid to the applicable welfare fund within the due date provided, the assessee for all time is deprived of claiming sucha remittance, made subsequently, as deduction from the income.This, as the Hon'ble Supreme Court noticed, is looking at the spiritbehind the labour welfare legislation and the need for the employerto satisfy the remittance within the time provided under the statutecreating the welfare fund. At least with respect to the employee'scontributions, which the employer deducts from the salary of theemployees, if it is not remitted into the fund within the due date, theemployer not only has defaulted the stipulation in the labourlegislation but has received an income; albeit an illegal enrichment.Sub-section (v) is with respect to and confined to a gratuity fund anddoes not have any relevance here. We, hence, answer the otherquestions of law framed, also against the assessee and in favour ofthe Revenue.We dismiss the appeal, leaving the parties to suffer theirrespective costs. Sd/- K.Vinod ChandranJudge vku/- [ true copy ] Sd/- Ashok MenonJudge