M/S.unifac Management Services (India) Private Ltd., Rep. By Its Managing Director, R.saravanan v. The Deputy Commissioner Of Income Tax, Corporation Circle 3(2), Office Of The Deputy Commissioner Of Income Tax, Room

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 23.10.2018 Reserved on 04.10.2018Delivered on 23.10.2018C O R A M THE HON'BLE Mr.JUSTICE K.RAVICHANDRABAABU W.P.No.5264 of 2018andWMP No.6461 of 2018 M/s.Unifac Management Services (India)Private Ltd.,Rep. by its Managing Director,R.Saravanan,No.148, Valluvar Kottam High Road,Nungambakkam, Chennai 600 034. ...Petitionervs The Deputy Commissioner of Income Tax,Corporation Circle 3(2),Office of the Deputy Commissioner of Income Tax,Room No.414, 4th Floor,Wanaparthy Block,Aayakar Bhavan, No.121 MG Road,Nungambakkam,Chennai 600 034. ...Respondent Prayer:Writ petition filed under Article 226 of the Constitutionof India for issuance of a writ of certiorari to call for therecords relating to respondent's order under Section 143(3) ofthe Income Tax Act dated 29.06.2017 in respect of the petitionerand consequential letter of the respondent dated 16.02.2018 andquash the same. For petitioner : Mr.K.SakthivelFor Respondents : Mr.Rajkumar Jhabakh Standing Counsel (I.T.) https://hcservices.ecourts.gov.in/hcservices/ O R D E R The petitioner is aggrieved against the assessment orderof the respondent passed under Section 143(3) of the Income TaxAct dated 29.06.2017 and consequential letter of the respondentdated 16.02.2018. 2.The case of the petitioner is as follows: The petitioner is a Company registered under theCompanies Act. It is an assessee under the respondent. For theassessment year 2015-2016, the petitioner filed its return ofincome on 31.10.2015, admitting an income of Rs.8,16,570/-. Asum of Rs.12,25,257/- paid by the petitioner towards EmployeesProvident Fund and ESI beyond the due date, but prior to filingof return, was treated by the petitioner company as deductiontowards EPF and ESI under Section 36(1)(va) and Section 43B ofthe Income Tax Act. The return filed by the petitioner wasprocessed under Section 143(3) of the said Act and the impugnedorder was passed by the respondent, disallowing the said sum ofRs.12,25,257/- paid by the petitioner towards employeesprovident fund and ESI on the reason that it was paid beyond thedue date mentioned in the relevant enactment. The petitionersent a letter dated 28.07.2017 to the respondent informing thatthough the said contribution was remitted beyond the due date,but the same has been done in accordance with the respectiveacts and that the remittance was before the due date for filingthe returns of income for the assessment year 2015-2016.Therefore, the petitioner requested the respondent to reconsiderthe disallowance. However, the respondent sent a notice dated16.02.2018 impugned in this writ petition demanding payment ofthe amount determined in the assessment order. Hence, thepresent writ petition. 3. The respondent filed a counter affidavit, wherein it isstated as follows: The writ petition is not maintainable, since anefficacious and statutory alternative remedy of appeal isavailable to the petitioner. A cumulative reading of Section 2(24)(x) with Section 36(1)(va) would show that it can beinterpreted that the employees' contribution towards the SocialSecurity Schemes shall be treated as income for the employer, ifsuch contributions are not deposited within the due datespecified under the relevant legislation. In Finance Act, 2003,with effect from the assessment year 2004-05, second proviso toSection 43B of the said Act was deleted also by amending thefirst proviso, which states that no disallowance will be calledfor if the payment is made before the due date of filing of The writ petition is not maintainable, since anefficacious and statutory alternative remedy of appeal isavailable to the petitioner. A cumulative reading of Section 2(24)(x) with Section 36(1)(va) would show that it can beinterpreted that the employees' contribution towards the SocialSecurity Schemes shall be treated as income for the employer, ifsuch contributions are not deposited within the due datespecified under the relevant legislation. In Finance Act, 2003,with effect from the assessment year 2004-05, second proviso toSection 43B of the said Act was deleted also by amending thefirst proviso, which states that no disallowance will be calledfor if the payment is made before the due date of filing of return of income under Section 139(1) of the said Act. A plainreading of Section 43B as amended would show that the deductionshall be allowable on the employers' contribution made beforethe due date for filing the return of income. The petitionercompany not having complied with Section 36(1)(va) read with theprovisions of Section 2 (24)(x) of the Act in accordance withthe Circular No.22 of 2015 dated 17.12.2015, the belated paymentmade towards the contribution was credited back to the totalincome of the petitioner company. In the present case, therecan be only one view that can be carved out taking intoconsideration the applicability of the said circular dated17.12.2015 and therefore, reliance placed on several other HighCourt Judgments is incorrect, since interpretation of thecircular is not taken into consideration at all in those cases. 4. Learned counsel for the petitioner Mr.K.Sakthivelsubmitted as follows: Even though the petitioner did not pay the contributionbefore the concerned authority within the due date stipulatedunder the relevant enactment, admittedly, the petitioner hadpaid the same before filing the return of income before therespondent/Assessing Officer. Therefore, as contained in theproviso to Section 43B(b) of the Income Tax Act, thepetitioner's interest is protected for getting deduction. Evenotherwise, the delayed payment of the contribution before theconcerned authority would only attract interest and penalty.Therefore, such payment cannot be termed not as a payment at allto deny the deduction under Section 36(1)(va) of the Income TaxAct. He further contended that availability of alternativeremedy is not a bar to entertain this writ petition, as theissue is covered by the decisions of the various High Courts asfollows. In support of his contention, the learned counselrelied on the following decisions: i) 2010(1) SCC 489, Commissioner of Income Tax vs AlomExtrusion Ltd.ii)(2008) 298 ITR 41 (KAR), Commissioner of Income Tax vsSabari Enterprises.iii)(2014) 366 ITR 167 (P&H), Commissioner of Income Tax vsHemlaEmbroidery Mills (P) Ltd.,iv)(2017) 291 CTR (ALL) 557, Sagun Foundry Private Ltd. VsCommissioner of Income Tax; 5.Per contra, Mr.Rajkumar Jhabak, the learned StandingCounsel appearing for the respondent submitted as follows: The due date referred under section 36(1)(va) is veryclear. It means the contribution should have been paid before https://hcservices.ecourts.gov.in/hcservices/ i) 2010(1) SCC 489, Commissioner of Income Tax vs AlomExtrusion Ltd.ii)(2008) 298 ITR 41 (KAR), Commissioner of Income Tax vsSabari Enterprises.iii)(2014) 366 ITR 167 (P&H), Commissioner of Income Tax vsHemlaEmbroidery Mills (P) Ltd.,iv)(2017) 291 CTR (ALL) 557, Sagun Foundry Private Ltd. VsCommissioner of Income Tax; 5.Per contra, Mr.Rajkumar Jhabak, the learned StandingCounsel appearing for the respondent submitted as follows: The due date referred under section 36(1)(va) is veryclear. It means the contribution should have been paid before https://hcservices.ecourts.gov.in/hcservices/ such due date contemplated under the relevant Act for thepurpose of getting deduction. Payment made after the due date,however, before filing the return, is not entitled to getdeduction under Section 36(1)(va). None of the decisionsreferred to by the learned counsel for the petitioner hasconsidered the scope of Section 36(1)(va) and on the other hand,the Apex Court's decision relied on by the petitioner in AlomExclusion Ltd.'s case is in respect of an issue relating toSection 43B only. Further, Circular No.22 of 2015 dated17.02.2015 issued by the Central Board of Direct Taxes makes itvery clear that the said circular does not apply to claim ofdeduction relating to employee's contribution to welfare funds,which are governed by Section 36(1)(va) of the Income Tax Act.In support of his contention, the learned counsel relied on(2014) 366 ITR 170 (Guj), Commissioner of Income Tax-II vsGujarat State Road Transport Corporation and 2015 280 CTR 381(KER), Commissioner of Income Tax vs Merchem Ltd. 6.Heard both sides and perused the materials placed beforethis Court. 7.The petitioner is aggrieved against the order ofassessment made under Section 143(3) of the Income Tax Act,1961. The only dispute is against disallowance of a sum ofRs.12,25,257/- paid by the assessee as employees contributiontowards EPF and ESI, on the reason that such payment was madebeyond the due date stipulated under the relevant enactment formaking such payment. The core contention of the petitioner isthat since the payment was made before filing the return, eventhough beyond the due date stipulated under the relevantenactment, the petitioner is entitled for deduction of suchpayment in view of amendment brought to Section 43B of theIncome Tax Act, 1961. On the other hand, it is contended by theRevenue that the petitioner is not entitled to take shelterunder Section 43B, which pertains to “employer's contribution”and on the other hand, the assessee's case would fall only underthe purview of Section 36(1)(va), which specifically deals with“employees contribution”. In other words, the contention of theRevenue is to the effect that the benefit of amendment broughtto Section 43B cannot be extended to unamended provision underSection 36(1)(va). 8.No doubt, on this issue, the petitioner heavily soughtto rely upon decision of the Apex Court reported in 2010(1)SCC489, Commissioner of Income Tax vs. Alom Extrusion Ltd., and thedecisions made by the High Court of Karnataka, Punjab andHaryana and Allahabad. On the other hand, the Gujarat andKerala High Court have taken contra view that goes against theassessee. Before going to those decisions, let me firstconsider the factual aspect of the matter and statutory positionpertains to the present issue. 9.Perusal of the impugned order of assessment would showthat the assessee has admittedly made the payment towards EPFand ESI beyond due date and such payment represents “employeescontribution” and not “employer's contribution”. It is truethat such payment was made by the assessee before filing thereturn. Therefore, the question is as to whether, based on suchadmitted position of the fact, the petitioner is entitled fordeduction. 9.Perusal of the impugned order of assessment would showthat the assessee has admittedly made the payment towards EPFand ESI beyond due date and such payment represents “employeescontribution” and not “employer's contribution”. It is truethat such payment was made by the assessee before filing thereturn. Therefore, the question is as to whether, based on suchadmitted position of the fact, the petitioner is entitled fordeduction. 10.In order to answer the said question, it is better toquote the relevant provisions under the Income Tax Act, 1961 asfollows: 11.Section 2(24)(x) defines the income as follows: “2.Definitions. (24) “income” includes - (x) any sum received by the assessee from hisemployees as contributions to any provident fund orsuperannuation fund or any fund set up under theprovisions of the Employees' State Insurance Act, 1948(34 of 1948), or any other fund for the welfare ofsuch employees;]” 12. Section 36 of the said Act deals with other deductionsout of which, section 36(1)(va) reads as follows:“36. Other deductions:(1) The deductions provided for in the followingclauses shall be allowed in respect of the mattersdealt with therein, in computing the income referred toin Section 28- ..[(va) any sum received by the assessee fromany of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply, if suchsum is credited by the assess to the employee's accountin the relevant fund or funds on or before the duedate. Explanation :- For the purpose of this clause,“due date” means the date by which the assessee isrequired as an employer to credit an employee'scontribution to the employee's account in the relevantfund under any Act, rule, order or notification issuedthereunder or under any standing order, award, contractof service or otherwise;]” 13.Section 43B(b) with first proviso reads as follows: 43B.Certain deductions to be only on actual payment:..(b) any sum payable by the assessee as an employer by way of contribution to any provident fundor superannuation fund or gratuity fund or any otherfund for the welfare of employees.Provided that nothing contained in this section shallapply in relation to any sum which is actually paid bythe assessee on or before the due date applicable inhis case for furnishing the return of income under sub-section (1) of Section 139 in respect of the previousyear in which the liability to pay such sum wasincurred as aforesaid and the evidence of such paymentis furnished by the assessee along with such return.” 14. A careful perusal of Section 2(24)(x) would show thatany sum received by the assessee from his employees ascontributions to any provident fund or superannuation fund orany fund set up under the provisions of the Employees' StateInsurance Act or any other fund for welfare of such employees,shall be treated as income at the hands of the assessee. It iscrucial to note at this juncture that the contribution towardsthe welfare funds scheme such as ESI or EPF is by two componentsviz., one by the employee and other by the employer. Therefore,the employee has to pay his part of contribution towards suchscheme to the employer, who in turn, has to pay the same to theconcerned authority along with his part of contribution. Tillthe assessee pays the sum so received from the employee to the concernedauthority along with his contribution, the said sum so receivedby the assessee will be treated as an income at the hands of theassessee. Moreover, it is mandatory on the part of the assesseeto make such payment within the due date stipulated under therelevant enactment. pays the sum so received from the employee to the concernedauthority along with his contribution, the said sum so receivedby the assessee will be treated as an income at the hands of theassessee. Moreover, it is mandatory on the part of the assesseeto make such payment within the due date stipulated under therelevant enactment. 15.Section 36(1) (va) deals with deduction in respect ofthe sum received by the assessee from any of his employees towhich the provisions of sub section 2(24)(x) applies, providedsuch sum is credited by the assessee to the employee's accountin relevant fund on or before the due date. The “due date” isdefined under the explanation to Section 36(1)(va) by statingthat the due date referred under the relevant Act and certainlynot the due date for filing the return. There is no dispute tothe fact that this provision has not been amended. 16.A combined reading of Section 2(24)(x) and Section 36(1)(va) would thus clearly indicate that both are in respect ofemployees contribution received by the assessee and not theemployer's contribution, which alone is dealt with under Section43B(b). A careful perusal of Section 43B(b) would undoubtedlyshow that it deals with the sum payable by the assessee as anemployer by way of his contribution to any provident fund or https://hcservices.ecourts.gov.in/hcservices/ superannuation fund or gratuity fund or any other fund forwelfare of employees. It is relevant to note at this juncturethat Section 43B, which deals with certain deductions to be onlyon account of actual payment, does not include the payment madeby the assessee of the sum, he received from his employeestowards such contribution fund. In other words, Section 43Bexcludes from its scope the sum so received by the assessee fromhis employees. The reason is obvious. I have already statedsupra that the sum received by the assessee as an employer fromthe employee is treated as an income at the hands of theassessee, as defined under Section 2(24(x) and would be entitledfor deduction only when it is paid to the concerned authoritywithin the due date. Certainly, the sum payable by the assesseeas an employer by way of his contribution towards the beneficialfund cannot be treated as an income at his hand but only as anexpenditure allowable for deduction. When such payment is madein accordance with Section 43B(b), then the same is entitled fordeduction. Therefore, there is a clear distinction between thescope of Section 43B(b) and Section 36(1)(va). 17.It is true that Section 43B was amended andconsequently the deduction is to be allowed based only onthe actual date of payment. But the facts of the present caseis otherwise. The belated payment made by the assessee in thiscase is not "employers contribution" and on the other hand, itis "employees contribution", which they received already.Therefore, the Assessing Officer is justified in disallowing thesaid payment on the reason that the same was made beyond the duedate and consequently, treating the same as an income at thehands of the assessee in view of Section 2(24)(x). WhileSection 36(1)(va) has to be read along with Section 2(24)(x), inmy considered view, Section 43B cannot be read into Section 36(1)(va), as both are operating on different obligatory field. 17.It is true that Section 43B was amended andconsequently the deduction is to be allowed based only onthe actual date of payment. But the facts of the present caseis otherwise. The belated payment made by the assessee in thiscase is not "employers contribution" and on the other hand, itis "employees contribution", which they received already.Therefore, the Assessing Officer is justified in disallowing thesaid payment on the reason that the same was made beyond the duedate and consequently, treating the same as an income at thehands of the assessee in view of Section 2(24)(x). WhileSection 36(1)(va) has to be read along with Section 2(24)(x), inmy considered view, Section 43B cannot be read into Section 36(1)(va), as both are operating on different obligatory field. 18. It is a known fact that the employees contributiontowards the welfare fund is being deducted by the employerperiodically from the salary of such employee. Therefore, suchaccumulated contribution of the employee for that year,available at the hands of the employer, has to be paid to theconcerned authority within the time stipulated under therelevant enactment. The employer is holding such amount intrust and not as beneficiary. Therefore, it is his boundenduty to pay the said amount towards such fund within time. Thenonly the onus on the part of the employer is said to have beendischarged. When the relevant enactment as well as the IncomeTax Act, 1961 in Section 36(1)(va) specifically contemplate andmandate that such payment should be made on or before the duedate fixed at the relevant enactment only, the employer is notentitled to claim benefit of deduction towards such payment,merely he made the same before filing return. Time limitstipulated for making such payment under both enactments is not directory and on the other hand, mandatory. If the payment wasnot done within the stipulated time prescribed under therelevant enactment, the benefit of deduction cannot be claimed,since such belated payment is not a valid payment to attractdeduction, under the purview of the Income Tax Act. However,insofar as the employer's contribution is concerned, no doubt,an amendment has been introduced to Section 43B, whereby theactual date of payment is enough for considering deduction, ifsuch date falls before the date for filing return. Theprovisions under the Income Tax itself viz., Section 43B givessuch scope and benefit to the employer/assessee in respect ofthe employers contribution alone, specifically by not extendingsuch benefit in respect of payment made towards employeescontribution. Therefore, in the absence of any amendment madeto Section 36(1)(va), I am of the firm view that bothcontributions viz., “employees” and “employers” cannot bebrought under the same scope and ambit of Section 43B to claimdeduction. 19. Further, the Revenue itself has made the aboveposition very clear in Circular No.22 of 2015 dated 17.12.2015,wherein it is stated that the said Circular does not apply toclaim of deduction relating to employees contribution to welfarefund which are governed by Section 36(1)(va) of the Income Tax.It is pertinent to note that the said circular was issued inconsequence of the amendment made to Section 43B to inform thesettled position that if the assessee deposits the contributionbefore the due date for furnishing the return, no disallowancecan be made under Section 43B of the said Act. Therefore, it isevident that the said Circular has specifically dealt with theemployers contribution and the scope of Section 43B afteramendment, specifically excluding the extension of such scope tothe employees contribution governed by Section 36(1)(va) of thesaid Act. Neither the said provision under Section 36(1)(va)nor the said Circular is challenged by the petitioner. In suchcircumstances, the petitioner is not entitled to contendotherwise. 20. Learned counsel for the petitioner strongly relied onAlom Extrusion Ltd.'s case of the Supreme Court. However, asrightly pointed out by the Gujarat High Court in (2014) 366 ITR170 (Guj), Commissioner of Income Tax-II vs Gujarat State RoadTransport Corporation, the Hon'ble Supreme Court in the AlomExtrusion Ltd.'s case, did not have an occasion to consider thescope of Section 36(1)(va) and the said decision was purely byconsidering the scope of amendment made to Section 43B only.Moreover, the issue before the Apex Court was whether theamendment made to Section 43B has any retrospective effect. 21. In 2010(1) SCC 489, Commissioner of Income Tax vs AlomExtrusion Ltd., the Hon'ble Supreme Court has held at paragraphs3 and 15 as follows: "..3.A short question which arises fordetermination in this batch of civil appeal is: whetheromission (deletion) of the second proviso to Section43-B of the Income Tax Act, 1961, by the Finance Act,2003, operated with effect from 1[st] April, 2004, orwhether it operated retrospectively with effect from1[st] April, 1988? ...15.We find no merit in these civil appealsfiled by the Department for the following reasons:firstly, as stated above, Section 43-B [main section],which stood inserted by Finance Act, 1983, with effectfrom 1st April, 1984, expressly commences with a non-obstante clause, the underlying object being todisallow deductions claimed merely by making a Bookentry based on Merchantile System of Accounting. At thesame time, Section 43-B [main section] made itmandatory for the Department togrant deduction in computing the income under Section28 in the year in which tax, duty, cess, etc., isactually paid. However, Parliament took cognizance ofthe fact that accounting year of a company did notalways tally with the due dates under the ProvidentFund Act, Municipal Corporation Act [octroi] and otherTax laws. Therefore, by way of first proviso, anincentive/relaxation was sought to be given in respectof tax, duty, cess or fee by explicitly stating that ifsuch tax, duty, cess or fee is paid before the date offiling of the Return under the Income Tax Act [duedate], the assessee(s) then would be entitled todeduction. However, this relaxation/incentive wasrestricted only to tax, duty, cess and fee. It did notapply to contributions to labour welfare funds. Thereason appears to be that the employer(s) should notsit on the collected contributions and deprive theworkmen of the rightful benefits under Social Welfarelegislations by delaying payment of contributions tothe welfare funds. However, as stated above, the secondproviso resulted in implementation problems, which havebeen mentioned herein above, and which resulted in theenactment of Finance Act, 2003, deleting the secondproviso and bringing about uniformity in the firstproviso by equating tax, duty, cess and fee withcontributions to welfare funds. Once this uniformity isbrought about in the first proviso, then, in our view,the Finance Act, 2003, which is made applicable by theParliament only with effect from 1st April, 2004, would become curative in nature, hence, it would applyretrospectively with effect from 1st April, 1988.” 22. In (2008) 298 ITR 141 (KAR), Commissioner of IncomeTax vs Sabari Enterprises, it is held at paragraphs 1 and 8 asfollows: “..1. Whether the Tribunal was correct inholding that the contributions made by the assessee toPF and ESI are allowable deduction even though it ismade beyond the stipulated period as contemplated underthe mandatory provisions of Section 36(1)(va) read withSection 2(24)(X) and Section 43B of the Act as the samewas paid by the assessee on or before the due date forfurnishing the return of income as per Section 139(1)of the Act?” become curative in nature, hence, it would applyretrospectively with effect from 1st April, 1988.” 22. In (2008) 298 ITR 141 (KAR), Commissioner of IncomeTax vs Sabari Enterprises, it is held at paragraphs 1 and 8 asfollows: “..1. Whether the Tribunal was correct inholding that the contributions made by the assessee toPF and ESI are allowable deduction even though it ismade beyond the stipulated period as contemplated underthe mandatory provisions of Section 36(1)(va) read withSection 2(24)(X) and Section 43B of the Act as the samewas paid by the assessee on or before the due date forfurnishing the return of income as per Section 139(1)of the Act?” ..8.The learned Counsel Sri Parthasarathy andDr.Krishna, appearing for respondents, also drew ourattention to the deletion of second proviso to Section43B of the Income Tax Act by Finance Act, 2003 whichprovision has come into force, with effect from 1-4-2004. The reliance placed upon the decision of theApex Court in Allied Motors (P) Ltd. v. CIT (supra) andalso on the decision in General Finance Co. v. CIT(supra) in respect of applicability of Section 43B(b)and also omission of Clause (a) or (c) or (d) or (f)referred to above occurred in the first proviso toSection 43B, supports the case of the assessees andalso relevant paras extracted from Allied Motor's case(supra) and para 59 referred to supra in this judgmentfrom the Finance Bill with all fours support the caseof the assessees/respondents. Therefore, we have toanswer the substantial question of law No.1 framed bythis Court in these appeals at the instance of therevenue against them, viz., in the negative (sic).Accordingly, we answer the substantial question No.1framed in these appeals in the negative (sic).” 23. In (2014) 366 ITR 167 (P&H), Commissioner of IncomeTax vs Hemla Embroidery Mills (P) Ltd., it is held at paragraphNo.4 as follows:“4. Learned counsel for the appellant could notdispute that the issue raised herein finally standssettled by the Apex Court judgment in Commissioner ofIncome Tax v. Alom Extrusions Ltd. [2009] 319 ITR 306(SC) and this Court in Income Tax Appeal No. 663 of2005 (The Commissioner of Income Tax, Patiala v. M/sRai Agro Industries Ltd. Sangrur), decided on30.11.2010 wherein it has been held that SecondProviso to Section 43B of the Act omitted by Finance Act, 2003 with effect from 1.4.2004 was clarificatoryin nature and was to operate retrospectively. Oncethat is so, in the present case, the respondent-assessee was entitled to deduction in respect ofemployer and employee's contribution to ESI andProvident Fund as the same had been deposited prior tothe filing of the return under Section 139(1) of theAct. In view of the above, the substantial questionsof law are answered against the revenue and in favourof the assessee. Consequently, the appeals aredismissed.” 24. In (2017) 291 CTR (ALL) 557, Sagun Foundry PrivateLtd. Vs Commissioner of Income Tax, it is held at paragraphs 22,25, 26, 28 and 29 as follows:“22. It also said that the word “contribution”used in clause (b) of Section 43B of Act 1961 meansthe contribution of employer and employee , both, andthat being so, if contribution is deposited on orbefore due date for furnishing Return of income undersub-section (1) of Section 139 of Act 1961, employeris entitled for deduction...25.Before following a particular view whenthere is divergence in views of different High Courts,we find it appropriate to examine Supreme Courtjudgment in Commissioner of Income-Tax Vs AlomExtrusions Ltd. (supra) to find out whether it can beconfined only in respect to employers' contribution oris applicable to both 'contributions', whether byemployer or employee. 26.The question, whether benefit under Section43B, as a result of amendment of Finance Act, 2003, isretrospective or not, came to be considered inCommissioner of Income-Tax Vs Alom Extrusions Ltd.(supra). Court considered the intent, purpose andobject in the historical back drop of insertion ofSection 43B and its progress by way of variousamendments. Referring Section 2(24)(X) it said,income is defined under Section 2(24) which includesprofits and gains. Further in clause (x) of Section 2(24) any sum received by Assessee from employees as'contributions' to any provident fund/superannuationfund or any fund set up under Act 1948, or any otherAssessee/Employer was entitled to deduction even priorto April, 1, 1984, keeping books on mercantile systemof accounting, as a business expenditure, by makingprovision in his books of account in that regard.Assessee was capable of keeping money with him andjust by mentioning in accounts, was able to claim deduction as business expenses. Section 43B wasinserted to check this practice and it resulted indiscontinuing mercantile system of accounting withregard to tax, contributions, etc. With induction ofSection 43B an Assessee could claim deduction onactual payment basis. By Finance Act, 1988 Parliamentinserted first proviso w.e.f. 01.04.1988 which interalia provides that any sum payable by Assessee by wayof tax, duty, cess or fee, if payment is made afterclosing of accounting year but before date of filingof Return under Section 139(1), Assessee would beentitled to deduction on actual payment basis. Thisproviso did not include within its ambit,contributions under labour welfare statutes. ByFinance Act, 1988, Second Proviso thus Second Provisowas further amended by Finance Act, 1989, w.e.f.01.04.1989. ..28. From the aforesaid judgment, we find thatirrespective of the fact that deduction in respect ofsum payable by employer contribution was involved, butCourt did not restrict observations, findings anddeclaration of law to that context but looking to theobjective and purpose of insertion of Section 43Bapplied it to both the contributions. It alsoobserved clearly that Section 43B is with a non-obstante clause and therefore over ride even if,anything otherwise is contained in Section 36 or anyprovision of Act 1961. 29. Therefore, we are clearly of the view thatlaw laid down by High Courts of Karnataka, Rajasthan,Punjab & Haryana, Delhi, Bomaby and Himachal Pradeshhave rightly applied Section 43B in respect to bothcontributions i.e. Employer and employee. Otherwiseview taken by Gujarat High Court and followed byKerala High Court, with great respect, we findexpedient to dissent therewith.” 25. In (2014) 366 ITR 170 (Guj), Commissioner of IncomeTax-II vs Gujarat State Road Transport Corporation, it is heldat paragraphs 6.01 and 6.11 as follows: “6.01. Short question which is posed forconsideration of this court is with respect to thedisallowance of the amount being employees'contribution to PF account/ESI Contribution whichadmittedly which the concerned assessee did notdeposit with the PF Department/DSI Department withindue date under the PF Act and/or ESI Act. ...6.11. Now, so far as the reliance placed upon the https://hcservices.ecourts.gov.in/hcservices/ 25. In (2014) 366 ITR 170 (Guj), Commissioner of IncomeTax-II vs Gujarat State Road Transport Corporation, it is heldat paragraphs 6.01 and 6.11 as follows: “6.01. Short question which is posed forconsideration of this court is with respect to thedisallowance of the amount being employees'contribution to PF account/ESI Contribution whichadmittedly which the concerned assessee did notdeposit with the PF Department/DSI Department withindue date under the PF Act and/or ESI Act. ...6.11. Now, so far as the reliance placed upon the https://hcservices.ecourts.gov.in/hcservices/ decision of the Himachal Pradesh High Court in thecase of Nipso Polyfabrics Ltd. (supra); decision ofthe Karnataka High Court in the case of SpectrumConsultants India (P) Ltd. (supra); decision of theRajasthan High Court in the case of Udaipur DugdhUtpadak Sahakari Sandh Ltd. (supra) and decision ofthe Punjab and Haryana High Court in the case ofHemla Embroidery Mills (P) Ltd. (supra) taking viewthat where the assessee deposited employees'contribution to ESI and Provident Fund before thedue date of filing the return under section 139(1)of the Act, the same would be allowable asdeduction, are concerned, With respect and for thereasons stated hereinabove, we are not in agreementwith the view taken by the aforementioned Highcourts. As discussed hereinabove, as there is noamendment in Section 36(1)(va) of the Income Tax Actand considering section 36(1)(va) of the Income TaxAct as it stands, with respect to any sum receivedby the assessee from any of his employees to whichthe provisions of clause (x) of sub-section (24) ofsection 2 applies, assessee shall not be entitled todeduction of such amount in computing the incomereferred to in section 28 if such sum is notcredited by the assessee to the employees' accountin the relevant fund or funds on or before the duedate as per explanation to section 36(1)(va) of theAct. Merely because Second Proviso to Section 43B ofthe Act in which there was a reference to due dateas defined in explanation below clause (va) of sub-section (1) of section 36, it cannot be held thateven section 36(1)(va) is amended and/or evenexplanation below clause (va) of sub-section (1) ofsection 36 is also deleted. It can be said thatthere was a reference to explanation below clause(va) of sub-section (1) of section 36 in secondproviso of section 43B (which has been deleted byFinance Act, 2003), only for the purpose of definingdue date as per explanation below clause (va) ofsub-section (1) of section 36. Therefore, bydeleting Second Proviso to section 43B by FinanceAct, 2003, it cannot be said that Section 36(1)(va)is amended and/or explanation below clause (va) ofsub-section (1) of section 36 is deleted, which iswith respect to employees' contribution. Under thecircumstances, we are not in agreement with the viewexpressed by the Himachal Pradesh High Court;Karnataka High Court; Rajasthan High Court andPunjab and Haryana High Court in the cases referredto hereinabove.” 26. In 2015 280 CTR 381 (KER), Commissioner of Income Taxvs Merchem Ltd. , it is held at paragraphs 24 and 26 as follows: “...24.So also, the learned counsel for theassessee contended that since s.43B commences with anon obstante clasue, Expln.1 to s.36(1)(va) wasexcluded. But in Alom Extrusions' case' (supra), theapex Court had held that the underlying object of thenon obstante clause was to disallow deductions claimedmerely by making the book entry under mercantilesystem of accounting. Therefore, the contention of thelearned counsel for the assessee that since s.43Bcommences with a non obstante clause, s.36(1)(va)stood excluded, cannot be sustained. According to us,the findings of the apex Court towards the latter partof para 15 makes the intention and purpose behind theamendment brought about to s.43B clear and it readsthus: “...24.So also, the learned counsel for theassessee contended that since s.43B commences with anon obstante clasue, Expln.1 to s.36(1)(va) wasexcluded. But in Alom Extrusions' case' (supra), theapex Court had held that the underlying object of thenon obstante clause was to disallow deductions claimedmerely by making the book entry under mercantilesystem of accounting. Therefore, the contention of thelearned counsel for the assessee that since s.43Bcommences with a non obstante clause, s.36(1)(va)stood excluded, cannot be sustained. According to us,the findings of the apex Court towards the latter partof para 15 makes the intention and purpose behind theamendment brought about to s.43B clear and it readsthus: “15........ Accordingly, we hold that FinanceAct, 2003, will operate retrospectively w.e.f. 1stApril, 1988 (when the first proviso stood inserted).Lastly, we may point out the hardship and theinvidious discrimination which would be caused to theassessee(s) if the contention of the Department is tobe accepted that Finance Act, 2003, to the aboveextent, operated prospectively. Take an example-in thepresent case, the respondents have deposited thecontributions with the R.P.F.C. after 31st March (endof accounting year) but before filing of the returnsunder the IT Act and the date of payment falls afterthe due date under the Employees' Provident Fund Act,they will be denied deduction for all times. In viewof the second proviso, which stood on the statute bookat the relevant time, each of such assessee(s) wouldnot be entitled to deduction under s.43B of the Actfor all times. They would lose the benefit ofdeduction even in the year of account in which theypay the contributions to the welfare funds, whereas adefaulter, who fails to pay the contribution to thewelfare fund right upto 1st April, 2004, and who paysthe contribution after 1st April, 2004, would get thebenefit of deduction under s.43B of the Act."According to us, it is thus clear that the decisionrendered by the apex Court in Alom Extrusions (supra)did not consider the question involved in this case....26. Therefore, in our view, when s.43B as itstood prior to the amendment and s.36(1)(va) Expln.1thereto r/w s.2(24)(x) are considered together, it is clear that they operate in different fields. So far asthe employee's contribution received is concerned, itshould have been paid on or before the due dateprescribed under the relevant statutes. Then again thelearned counsel contended that on a reading of s.43B(b), any sum "payable by the assessee as an employer"by way of contribution to any provident fund meantpayment of both employees contribution and employer'scontribution, by the employer and therefore theassessee was entitled to pay both contributionstogether on or before the filing of the return unders.139(1) of the Act. We are unable to accept the saidcontention advanced by the learned counsel. If such acontention is accepted, that would make s.36(1)(va)and the Explanation thereto otiose. According to us,there was no indication in s.43B as it stood prior tothe amendment and thereafter also to deface s.36(1)(va) and the Explanation thereto from the IT Act.Thus, it means that both provisions are operative andthe contributions have to be paid in accordance withthe mandate contained under s.36(1)(va) andExplanation thereto and under s.43B, respectively." 27.I have already pointed out that the scope of Section43B and Section 36(1)(va) are different and thus, there is noquestion of reading both provisions together to consider as towhether the assessee is entitled to deduction in respect of thesum belatedly paid towards such contribution, especially whensuch sum is, admittedly, a sum received by the assessee/employerfrom his employee. Therefore, for considering such question,application of Section 36(1)(va) read with Section 2(24)(x)alone is the proper course and any other interpretation wouldonly defeat the object and scope of both the provisions viz.,43B and 36(1)(va). 28.In view of the above stated facts and circumstances, Iam in full agreement with the decisions rendered by the Gujaratand Kerala High Court reported in (2014) 366 ITR 170 (Guj),Commissioner of Income Tax-II vs Gujarat State Road TransportCorporation and 2015 280 CTR 381 (KER), Commissioner of IncomeTax vs Merchem Ltd. Consequently, with great respect, I am notin agreement with the other decisions rendered by the HighCourts of Karnataka, Punjab and Haryana and Allahabad, which inmy view, did not consider the distinction of the scope and ambitof Section 36(1)(va) and Section 43B. Accordingly, I find noerror apparent on the face of the order passed by the AssessingAuthority, based on the admitted facts. Accordingly, the writ https://hcservices.ecourts.gov.in/hcservices/ petition fails and the same is dismissed. No costs. Theconnected miscellaneous petition is closed. Sd/- Assistant Registrar(CO) //True Copy// Sub Assistant Registrar vri To The Deputy Commissioner of Income Tax,Corporation Circle 3(2),Office of the Deputy Commissioner of Income Tax,Room No.414, 4th Floor,Wanaparthy Block,Aayakar Bhavan, No.121 MG Road,Nungambakkam,Chennai 600 034. +1cc to Mr.P.Rajkumar Jhabakh, Advocate, S.R.No.72357 +1cc to Mr.K.Sakthivel, Advocate, S.R.No.72576 W.P.5264 OF 2018VD(CO)GSP(01/11/2018) https://hcservices.ecourts.gov.in/hcservices/