“Whether, On The Facts And In Thecircumstances Of The Case And Also In Thelight Of The Clear Provisions Of Explanationto Clause (Va) Of Section 36(1) And Sectio v. Unionof India And Others), The Assessee Is Entitledto Claim Deduction Of The Belated Paymentto Provident Fund?”

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE THOTTATHIL B.RADHAKRISHNAN & THE HONOURABLE MR.JUSTICE K.HARILAL FRIDAY, THE 27TH DAY OF MARCH 2015/6TH CHAITHRA, 1937 ITR.No. 65 of 1999------------------ AGAINST THE ORDER IN I.T.A. NO. 705/1995 of INCOME TAXAPPELLATE TRIBUNAL,COCHIN BENCH, COCHIN. PETITIONER(S): -------------- THE COMMISSIONER OF INCOME TAX,COCHIN. BY ADV. SRI.P.K.R.MENON, SR.COUNSEL,GOI(TAXES) RESPONDENT(S): -------------- M/S SOUTH INDIA CORPORATION LTD.,BROADWAY, ERNAKULAM, COHCIN-31. BY ADV. SRI.B.S.KRISHNAN (SR.) ADV. SRI.K.ANAND (A.201) THIS INCOME TAX REFERENCE HAVING BEEN FINALLYHEARD ON 27-03-2015, ALONG WITH ITR. 66/1999, THECOURT ON THE SAME DAY PASSED THE FOLLOWING: THOTTATHIL B. RADHAKRISHNAN & K. HARILAL, JJ. --------------------------------------------------------- I.T.R. Nos.65 & 66 of 1999 ---------------------------------------------------------- Dated this the 27[th] day of March, 2015ORDER Thottathil B. Radhakrishnan, J. The only question referred by the Income TaxAppellate Tribunal, in these two matters, is as follows: “Whether, on the facts and in thecircumstances of the case and also in thelight of the clear provisions of Explanationto clause (va) of Section 36(1) and Section43B read with the decision reported in 227ITR 446 (Hitech (India) Pvt. Ltd., vs. Unionof India and others), the assessee is entitledto claim deduction of the belated paymentto Provident Fund?” 2. Heard the learned senior counsel appearing oneither side. 3. The question arose as a common issue in both the I.T.R. Nos.65 & 66 of 1999 -: 2 :- appeals that related to the deletion of dis-allowance ofbelated payment of Provident Fund amount. ProvidentFund amounting to `7,69,632/- relating to the assessmentyear 1992-93 and `7,60,047/- relating to the assessmentyear 1993-94. The Department took the stand that theassessee is not entitled to the deduction on the ground thatthe payment has not been made on the due date asdefined in the Explanation to clause (va) of sub-section (1)of Section 36 of the Income Tax Act. The CIT Appealsfollowed the Tribunal decision in I.T.A. Nos.194 (Coch)/92and 361 (Coch)/94. The Department's contention in thecase in hand was left unanswered leaving it open to theDepartment to make a reference application, though it issubmitted that another reference application under Section256(2) of the Income Tax Act was pending in relation to theissues in the afore-noted case. 4. Going by the material findings of facts, it cannot bedisputed that the payments were made by the assesseeafter the date by which the assessee was required as theemployer to credit an employee's contribution to theemployees' account in the Provident Fund. Therefore, interms of the Explanation to clause (va) of Section 36(1) of I.T.R. Nos.65 & 66 of 1999 -: 3 :- 4. Going by the material findings of facts, it cannot bedisputed that the payments were made by the assesseeafter the date by which the assessee was required as theemployer to credit an employee's contribution to theemployees' account in the Provident Fund. Therefore, interms of the Explanation to clause (va) of Section 36(1) of I.T.R. Nos.65 & 66 of 1999 -: 3 :- the Income Tax Act, such sums paid after the due datecannot be claimed as other deductions in terms of Section36 of the Income Tax Act. This is pointedly so because interms of Section 43B of the Income Tax Act, deductions areto be only on actual payment. These two provisions wereconsidered by the Hon'ble Supreme Court of India in Hitech(India) Pvt. Ltd., vs. Union of India and others (1997Volume 227 ITR 446) in which it was held that a combinedreading of clause (va) of Section 36(1) and Section 43B ofthe Income Tax Act makes it clear that if the assessee(employer) credited any sum received by him from any ofhis employees on or before the due date, that is, the dateby which the assessee (employer) is required to credit theemployees' contribution to the employees' account in therelevant fund (including the Provident Fund), he will beentitled to deduct the said amount in computing hisbusiness income. But, Section 43B controls the allowabilityof deduction of payment specified in clauses (a) to (d)thereof and provides certain conditions subject to whichalone the deductions may be permissible. Enunciating thepoint, it was held that deduction would be available only ifthe remittance to the fund is made within the due date I.T.R. Nos.65 & 66 of 1999 -: 4 :- fixed for making such remittance into the fund; in the casein hand, the Provident Fund. So much so, the questionreferred is to be answered in favour of the Revenue. Hencewe answer the reference by holding that on the facts and inthe circumstances of the case, the assessee is not entitledto claim deduction of the belated payment to the ProvidentFund in view of the provisions of the Explanation to clause(va) of Sections 36(1) and 43B of the Income Tax Act, in thelight of the law laid in Hitech (India) Pvt. Ltd., vs. Union ofIndia and others (1997 Volume 227 ITR 446). References are answered accordingly. Sd/- (THOTTATHIL B. RADHAKRISHNAN, JUDGE) Sd/- (K. HARILAL, JUDGE) Nan/ //true copy// P.S. to Judge