Document Fragment View

Matching Fragments

6. We have perused both the Judgments. This Court, after considering the relevant provisions not only of the IT Act but also of The Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (for short 'the PF Act') and The Employees' Provident Funds Scheme, 1952 (for short 'the PF Scheme'), in paragraph-8 thereof observed thus:

"A reading of the aforesaid provisions makes it clear that the contributions payable by the employer under the scheme shall be at the rate of 10% of the basic wages, Dearness Allowance. The contribution payable by the employee shall be equal to the contribution payable by the employer in respect of such employee. However, the employer shall, in the first instance, pay both the contribution payable by himself i.e., the employer's contribution as well as the employee's contribution and thereafter he is entitled to recover by means of deduction from the employee the contribution which he has paid as employee's contribution. Therefore, in law, the payment of contribution by the employer to the fund under the scheme means both employer's contribution and employee's contribution. Whether he deducts the employee's contribution from the salary or not, in law, he is liable to pay the said amount. Therefore, Section 2(24)(x) of the Act makes it clear that the employee's contribution which the employer deducts from his salary before it is paid into the fund, is treated as the income of the employer, and the employer by contributing can get the deduction. That payment must be made within the due date i.e., the due date prescribed under Section 139(1) of the Act. Because it was causing lot of problem as discussed in the judgment of the Apex Court, on a representation made by the industry, subsequent amendment was carried out to mitigate the difficulties caused to the employer under Section 43B of the Act. Though such contributions are not paid within the time prescribed under the relevant act, if those contributions are paid before the due dated prescribed under Section 139(1) of the Act, the employer shall be entitled to the deductions as provided under Section 36(1) of the Act. While extending such benefit, the Parliament has not made any distinction between the employee's contribution and the employer's contribution. It is for the simple reason, under the provident fund scheme, an employer has to pay both the contribution and then recover from the salary of the employee. Therefore, in view of the aforesaid judgment, we do not find any substance in this appeal. Therefore, the appeal is dismissed."

7. The Gujarat High Court in Gujarat State Road Transport Corporation (supra) considered the question with respect to the disallowance of the amount being employees' contribution to PF Account/ESI Contribution which admittedly the assessee did not deposit with the PF Department/DSI Department on or before the due date under the PF Act and/or ESI Act.

8. The Gujarat High Court also considered the relevant provisions of the Income Tax Act and so also the provisions of other relevant Acts and answered this question in favour of the revenue. The relevant observations made in paragraph - 7.6 read thus:

13. Thus, from bare perusal of Clause(va) of Section 36(1) of the IT Act, it is clear that any sum received by the assessee-employer from any of his employees towards the employees' contribution as contemplated by sub-para (1) of paragraph-29 of the PF Scheme and if it is deposited with relevant provident fund or fund under the provisions of ESI Act, the assessee is straightaway entitled for deduction as contemplated by Section 36(1)(va) of the IT Act, without any difficulty whatsoever, if he deposits employees' as well as his own contribution within the time stipulated under the provisions of PF Act and the PF Scheme/ESI Act.

13

16. In the present case, admittedly, though the employer did not deposit the contribution, within the stipulated time, as contemplated by paragraph-30 of the PF Scheme or before the due date under the provisions of the PF scheme/Act, he deposited the contribution to the PF/ESI fund before the due date contemplated under Section 139(1) of the Act.

17. Section 6 of the PF Act provides for contributions and matters which may be provided for in Schemes. Paragraph-29 of the PF Scheme states what is "Contribution". The expression "contribution" is also defined under the PF Act by Section 2(c) of the PF Act, which means a contribution payable in respect of a member under the Scheme or the contribution payable in respect of an employee to whom the Insurance Scheme applies. If this definition is read with sub-para(1) of paragraph-29 in Chapter-V of the PF Scheme, it would mean that the contributions payable by the employer under the Scheme shall be at a particular rate and the contribution payable by the assessee shall be equal to the contribution payable by the employer.