The Kerala High Court has recently dismissed the deduction claim made by Harrisons Malayalam wherein it was held that the deduction under Section 36(1)(va) of Income Tax Act cannot be granted if such payment was made after the due date.
The assessee company is engaged in the business of manufacture/production of tea and rubber. During the course of its assessment, the AO disallowed the delayed payments made to Employees’ Provident Fund, Labour Welfare Fund and Employees’ State Insurance was allowable as deduction under section 36(1)(va) of Income Tax Act.
On appeal, the Tribunal upheld the order of the Assessing Officer.
The assessee claimed that the contributions which are deducted at the time of payment of salary is received by the employer-company and is treated as income u/s 2(24). On remittance of this contribution, within the due date, it is allowed as a deduction under Section 36.
The High Court had earlier said that “If it is not paid to the welfare fund within the due date provided under the relevant statute, it remains as an income in the books of account of the assessee/employer-company. The said contribution having not been paid to the applicable welfare fund within the due date provided, the assessee for all time is deprived of claiming such a remittance, made subsequently, as a deduction from the income.”
The bench comprising Justices Abdul Raheem and R Narayana Pisharadi has held that the Tribunal has found that payments have to be made only before the due date prescribed u/s 139(1) for filing return of income to claim the benefit u/s 36(1)(va).
“The finding of the Tribunal in this regard is liable to be set aside. Moreover, the Tribunal has directed that the issue regarding deduction u/s 36(1)(va) has to be reconsidered by the AO. In the instant case, the assessee has got no plea that the remittance of employees’ contribution to Employees’ Provident Fund, Labour Welfare Fund, Employees’ State Insurance had been made before the due date prescribed in the respective enactments. Therefore, the direction given by the Tribunal remitting this issue for reconsideration by the AO is also liable to be set aside,” the bench said.
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