With respect to the sum received by the assessee from any of his employees to which provisions of sub-clause (x) of clause (24) of section (2) applies, the assessee shall be entitled to deduction in computing the income referred to in section 28 (of Income Tax Act, 1961) with respect to such sum credited by the assessee to the employees' account in the relevant fund or funds on or before the "due date" mentioned in explanation to section 36(1)(va) (of Income Tax Act, 1961).

By way of this appeal, the assessee has challenged correctness of the order dated 13.06.2016 passed by the learned CIT(A), in the matter of assessment under section 143(3) (of Income Tax Act, 1961), ( in short “the Act”) for the assessment year 2012-13.

2. The solitary grievance of the assessee in ground no.1 and 2 is that since the employees contribution to provident fund is covered by the provisions of section 43B (of Income Tax Act, 1961), therefore assessee is entitled to claim deduction. Ground no.3 raised by the assessee is not pressed.

3. When this appeal was called out for hearing, learned counsel for the assessee invited our attention to the order dated 26.12.2013 of the Jurisdictional Hon`ble Gujarat High Court in the case of CIT Vs. Gujarat State Road Transport Corporation [2014] 1 TMI 502/ [41 taxmann.com 100] whereby the issue of contribution of employees towards provident fund has been adjudicated against the assessee. The Hon`ble Court held that ‘Contribution of employees towards provident fund does not come under the purview of section 43B (of Income Tax Act, 1961)’.

4. Learned Departmental Representative has fairly agreed with submissions made by the ld. Counsel.

5. We see no reasons to take any other view of the matter than the view so taken by the Jurisdictional Hon`ble Gujarat High Court in the case of CIT Vs. Gujarat State Road Transport Corporation (supra). In this case the Hon`ble Court held as follows:

“7.1 Short question which is posed for consideration of this Court is with respect to the disallowance of the amount being employees' contribution to PF Account / ESI Contribution which admittedly which the concerned assessee did not deposit with the PF Department / ESI Department within due date under the PF Act and/or ESI Act.

7.2 To answer the above controversy, the relevant provisions of Income Tax Act, 1961 are required to be referred to.

7.3 "Income" has been defined under section 2(24) (of Income Tax Act, 1961). Under section 2(24)(x) (of Income Tax Act, 1961), any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the Employees' State Insurance Act, 1948, or any other fund for welfare of such employees, constitute income. Section 2(24)(x) (of Income Tax Act, 1961) reads as under:-

"Section 2(24)(x) (of Income Tax Act, 1961) :— Any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the Employees' State Insurance Act, 1948, or any other fund for welfare of such employees."

7.4 Section 36 (of Income Tax Act, 1961) provides for deduction in computing the income referred to in section 28 (of Income Tax Act, 1961). The relevant provisions applicable to the present cases would be Section 36(1)(va) (of Income Tax Act, 1961). As per sub-section 36(1)(va) (of Income Tax Act, 1961), assessee shall be entitled to the deduction in computing the income referred to in section 28 (of Income Tax Act, 1961) with respect to any sum received by the assessee from his employees to which the provisions of sub- clause (x) of clause (24) of section 2 (of Income Tax Act, 1961) apply, if such sum is credited by the assessee to the employees' accounts in the relevant fund or funds on or before the "Due Date". As per explanation to section 36(1)(va) (of Income Tax Act, 1961) for the purpose of the said clause, "Due Date" means the date by which the assessee is required as an employer to credit the employees' contribution to the employees account in the relevant fund under the Act, Rule, Order or Notification issued thereunder or under any Standing Order, Award, Contract or Service or otherwise. Section 36(1)(va) (of Income Tax Act, 1961) reads as under :

"Section 36(1) (of Income Tax Act, 1961) : The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28 (of Income Tax Act, 1961)—Section 36(1)(va) (of Income Tax Act, 1961) : any sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 (of Income Tax Act, 1961) apply, if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date.

Explanation :— for the purpose of this clause, "due date" means the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract or service or otherwise."

7.5 Another provision which is required to be considered while considering the above controversy would be Section 43B (of Income Tax Act, 1961), which stood prior to the amendment of section 43B (of Income Tax Act, 1961) vide Finance Act, 2003 and after the amendment to Section 43B (of Income Tax Act, 1961) by Finance Act, 2003. Section 43B (of Income Tax Act, 1961) prior to the amendment of Section 43B (of Income Tax Act, 1961) vide Finance Act, 2003 reads as under:

"Provided that nothing contained in this section shall apply in relation to any sum referred to in clause (a) or clause (c) or clause (d) or clause (e) or clause (f), which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 (of Income Tax Act, 1961) in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return:

Provided further that no deduction shall, in respect of any sum referred to in clause (b), be allowed unless such sum has actually been paid in cash or by issue of a cheque or draft or by any other mode on or before the due date as defined in the Explanation below clause (va) of sub-section (1) of section 36 (of Income Tax Act, 1961),and where such payment has been made otherwise than in cash, the sum has been realised within fifteen days from the due date."

By the Finance Act, 2003, Second Proviso to section 43B (of Income Tax Act, 1961) came to be deleted and even the first proviso to section 43B (of Income Tax Act, 1961) came to be amended. The first proviso to section 43B (of Income Tax Act, 1961), after its amendment by the Finance Act, 2003 reads as under:—

"Provided that nothing contained in this section apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 (of Income Tax Act, 1961) in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return."

7.6 Considering the aforesaid provisions of the Act, as per section 2(24)(x) (of Income Tax Act, 1961),any sum received by the assessee from his employees as contribution to any provident fund or superannuation fund or any fund set up under the provisions of ESI Act or any other fund for the welfare of such employees shall be treated as an 'Income'. Section 36 (of Income Tax Act, 1961) deals with the deductions in computing the income referred to in section 28 (of Income Tax Act, 1961) and as per section 36(1)(va) (of Income Tax Act, 1961) such sum received by the assessee from any of his employees to which provisions of sub-clause (x) of clause (24) of section 2 (of Income Tax Act, 1961) apply, the assessee shall be entitled to deduction of such amount in computing the income referred to in section 28 (of Income Tax Act, 1961) if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the "due date" i.e. date by which the assessee is required as an employer to credit the employee's contribution to the employee's account in the relevant fund, in the present case, the provident fund and ESI Fund under the Provident Fund Act and ESI Act. Section 43B (of Income Tax Act, 1961) is with respect to certain deductions only on actual payment. It provides that notwithstanding anything contained in any other provisions of the Act, a deduction otherwise liable under the Act in respect of (B) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of the employees in computing the income referred to in section 28 (of Income Tax Act, 1961) of that previous year in which such sum is actually paid by him. It appears that prior to the amendment of section 43B (of Income Tax Act, 1961) vide Finance Act, 2003, an assessee was entitled to deductions with respect to the sum paid by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of the employees (employer's contribution) provided such sum - employer's contribution is actually paid by the assessee on or before the due date applicable in his case for furnishing return of income under sub-section (1) of section 139 (of Income Tax Act, 1961) in respect of the previous year in which the liability to pay such sum was incurred and the evidence of such payment is furnished by the assessee along with such return. It also further provided that no deduction shall, in respect of any sum referred to in clause (B) i.e. with respect to the employer's contribution, be allowed unless such sum is actually been paid in cash or by issue of cheque or draft or by any other mode on or before the due date as defined in explanation below clause (va) of sub-section (1) of section 36 (of Income Tax Act, 1961) and where such sum has been made otherwise that in cash, the sum has been realised within 15 days from the due date. By the Finance Act 2003, Second Proviso of section 43B (of Income Tax Act, 1961) has been deleted and First Proviso to section 43B (of Income Tax Act, 1961) has also been amended which is reproduced hereinabove. Therefore, with respect to employer's contribution as mentioned in clause (b) of section 43(B) (of Income Tax Act, 1961), if any sum towards employer's contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of the employees is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of the income under sub-section (1) of section 139 (of Income Tax Act, 1961),assessee would be entitled to deduction under section 43B (of Income Tax Act, 1961) on actual payment and such deduction would be admissible for the accounting year. However, it is required to be noted that as such there is no corresponding amendment in section 36(1)(va) (of Income Tax Act, 1961). Deletion of Second Proviso to section 43B (of Income Tax Act, 1961) vide Finance Act 2003 would be with respect to section 43B (of Income Tax Act, 1961) and with respect to any sum mentioned in section 43(B) (of Income Tax Act, 1961) (a to f) and in the present case, employer's contribution as mentioned in section 43B(b) (of Income Tax Act, 1961). Therefore, deletion of Second Proviso to section 43B (of Income Tax Act, 1961) and amendment in first proviso to section 43B (of Income Tax Act, 1961) by Finance Act, 2003 is required to be confined to section 43B (of Income Tax Act, 1961) alone and deletion of second proviso to section 43B (of Income Tax Act, 1961) vide amendment pursuant to the Finance Act, 2003 cannot be made applicable with respect to section 36(1)(va) (of Income Tax Act, 1961). Therefore, any sum with respect to the employees' contribution as mentioned in section 36(1)(va) (of Income Tax Act, 1961), assessee shall be entitled to the deduction of such sum towards the employee's contribution if the same is deposited in the accounts of the concerned employees and in the concerned fund such as Provident Fund, ESI Contribution Fund, etc. provided the said sum is credited by the assessee to the employees' accounts in the relevant fund or funds on or before the 'due date' under the Provident Fund Act, ESI Act,Rule, Order or Notification issued thereunder or under any Standing Order, Award, Contract or Service or otherwise. It is required to be noted that as such there is no amendment in section 36(1)(va) (of Income Tax Act, 1961) and even explanation to section 36(1)(va) (of Income Tax Act, 1961) is not deleted and is still on the statute and is required to be complied with. Merely because with respect to employer's contribution Second Proviso to section 43B (of Income Tax Act, 1961) which provided that even with respect to employers' contribution [(section 43(B) (of Income Tax Act, 1961)b], assessee was required to credit amount in the relevant fund under the PF Act or any other fund for the welfare of the employees on or before the due date under the relevant Act, is deleted, it cannot be said that section 36(1)(va) (of Income Tax Act, 1961) is also amended and/or explanation to section 36(1)(va) (of Income Tax Act, 1961) has been deleted and/or amended.

It is also required to be noted at this stage that as per the definition of "income" as per section 2(24)(x) (of Income Tax Act, 1961), any sum received by the assessee from his employees as contribution to any Provident Fund or Superannuation Fund or any fund set up under the provisions of ESI Act or any other fund for the welfare of the such employees is to be treated as income and on fulfilling the condition as mentioned under section 36(1)(va) (of Income Tax Act, 1961), the assessee shall be entitled to deduction with respect to such employees' contribution. Section 2(24)(x) (of Income Tax Act, 1961) refers to any sum received by the assessee from his employees as contribution and does not refer to employer's contribution. Under the circumstances and so long as and with respect to any sum received by the assessee from any of his employees to which provisions of sub-clause (x) of sub-section 24 (of Income Tax Act, 1961) of section 2 (of Income Tax Act, 1961) applies, assessee shall not be entitled to deduction of such sum in computing the income referred to in section 28 (of Income Tax Act, 1961) unless and until such sum is credited by the assessee to the employees' account in the relevant fund or funds on or before the due date as mentioned in explanation to section 36(1)(va) (of Income Tax Act, 1961).

Therefore, with respect to the employees contribution received by the assessee if the assessee has not credited the said sum to the employees' account in the relevant fund or funds on or before the due date mentioned in explanation to section 36(1)(va) (of Income Tax Act, 1961), the assessee shall not be entitled to deductions of such amount in computing the income referred to in section 28 (of Income Tax Act, 1961).

7.7 Now so far as the reliance placed upon the decision of the Hon'ble Supreme Court in the case of Alom Extrusions Ltd. (supra), by the learned ITAT as well as learned advocates appearing on behalf of the assessee in support of their submission that in view of amendment in section 43B (of Income Tax Act, 1961) pursuant to Finance Act, 2003, by which the second proviso to section 43B (of Income Tax Act, 1961) has been deleted and therefore even with respect to employees contribution despite section 36(1)(va) (of Income Tax Act, 1961), and explanation to section 36(1)(va) (of Income Tax Act, 1961), if the employees' contribution is credited after the due date mentioned in the particular Act but credited on or before the due date by filing return under section 139 (of Income Tax Act, 1961), assessee shall be entitled to the deduction of such amount, is concerned,on considering the controversy before the Hon'ble Supreme Court in the case of Alom Extrusions Ltd. (supra), the said decision would not be applicable to the facts of the present case. In the said case before Alom Extrusions Ltd., the controversy was whether the amendment in section 43B (of Income Tax Act, 1961), vide Finance Act, 2003 would operate retrospectively w.e.f. 1/4/1988 or not. It is also required to be noted that in the case before the Hon'ble Supreme Court,the controversy was with respect to employers' contribution as per section 43(B)(b) (of Income Tax Act, 1961) and not with respect to employees' contribution under section 36(1)(va) (of Income Tax Act, 1961). Before the Hon'ble Supreme Court in the case of Alom Extrusions Ltd. (supra) the Hon'ble Supreme Court had no occasion to consider deduction under section 36(1)(va) (of Income Tax Act, 1961) and with respect to employees' contribution. As stated above, the only controversy before the Hon'ble Supreme Court was with respect to amendment (deletion) of the Second Proviso to section 43(B) (of Income Tax Act, 1961), 1961 by the Finance Act, 1963 operates w.e.f. 1/4/2004 or whether it operates retrospectively w.e.f. 1/4/1988. Under the circumstances, the learned tribunal has committed an error in relying upon the decision of the Hon'ble Supreme Court in the case of Alom Extrusions Ltd. (supra) while passing the impugned judgement and order and deleting disallowance of the respective sums being employees' contribution to PF Account / ESI Account, which were made by the AO while considering the proviso to section section 36(1)(va) (of Income Tax Act, 1961).

7.8 Now, so far as the reliance placed upon the decision of the Division Bench of this Court in the case of Alembic Glass Industries Ltd. (supra) is concerned, on facts and considering the provisions of section section 36(1)(va) (of Income Tax Act, 1961) as is stands, the said decision would not be applicable to the facts of the case on hand and the controversy in question.

7.9 Now, so far as the reliance placed upon the decision of the Karnataka High Court in the case of Sabari Enterprises (supra) is concerned, on facts and controversy raised in the present appeals, the said decision would not be any assistance to the assessee. In the case before the Karnataka High Court, the dispute was with respect to the employer's contribution and the controversy was whether the amendment to section 43B (of Income Tax Act, 1961) would be retrospective in nature or not. In the aforesaid case before the Karnataka High court, there was no dispute with respect to employees' contribution as is there in the present case.

7.10 Similarly, the decision of the Bombay High Court in the case of Pamwi Tissues Ltd. (supra) also would not be applicable to the facts of the case on hand. In the case before the Hon'ble Bombay High Court, the dispute was whether deletion of Second Proviso to section 43B (of Income Tax Act, 1961) would be applicable retrospectively or not and in that case the dispute was also with respect to employer's contribution.

7.11 Now, so far as the reliance placed upon the decision of the Himachal Pradesh High Court in the case of Nipso Polyfabriks Ltd. (supra); decision of the Karnataka High Court in the case of Spectrum Consultants India (P.) Ltd. (supra); decision of the Rajasthan High Court in the case of Udaipur Dugdh Utpadak Sahakari Sandg Ltd. (supra) and decision of the Punjab and Haryana High Court in the case of Hemla Embroidery Mills (P.) Ltd. (supra) taking view that where the assessee deposited employees' contribution to ESI and Provident Fund before the due date of filing the return under section 139(1) (of Income Tax Act, 1961), the same would be allowable as deduction, are concerned, With respect and for the reasons stated hereinabove, we are not in agreement with the view taken by the aforementioned High courts. As discussed hereinabove, as there is no amendment in Section section 36(1)(va) (of Income Tax Act, 1961) and considering section 36(1)(va) (of Income Tax Act, 1961) as it stands, with respect to any sum received by the assessee from any of his employees to which the provisions of clause (x) of sub-section (24) of section 2 (of Income Tax Act, 1961) applies, assessee shall not be entitled to deduction of such amount in computing the income referred to in section 28 (of Income Tax Act, 1961) if such sum is not credited by the assessee to the employees' account in the relevant fund or funds on or before the due date as per explanation to section 36(1)(va) (of Income Tax Act, 1961). Merely because Second Proviso to Section 43B (of Income Tax Act, 1961) in which there was a reference to due date as defined in explanation below clause (va) of sub- section (1) of section 36 (of Income Tax Act, 1961), it cannot be held that even section 36(1)(va) (of Income Tax Act, 1961) is amended and/or even explanation below clause (va) of sub-section (1) of section 36 (of Income Tax Act, 1961) is also deleted. It can be said that there was a reference to explanation below clause (va) of sub-section (1) of section 36 (of Income Tax Act, 1961) in second proviso of section 43B (of Income Tax Act, 1961) (which has been deleted by Finance Act, 2003), only for the purpose of defining due date as per explanation below clause (va) of sub-section (1) of section 36 (of Income Tax Act, 1961). Therefore, by deleting Second Proviso to section 43B (of Income Tax Act, 1961) by Finance Act, 2003, it cannot be said that Section 36(1)(va) (of Income Tax Act, 1961) is amended and/or explanation below clause (va) of sub-section (1) of section 36 (of Income Tax Act, 1961) is deleted, which is with respect to employees' contribution. Under the circumstances, we are not in agreement with the view expressed by the Himachal Pradesh High Court; Karnataka High Court; Rajasthan High Court and Punjab and Haryana High Court in the cases refereed to here in above.

7.12 Now, so far as the reliance placed upon the decision of the Hon'ble Supreme Court in the case of Sarabhai Sons Ltd. (supra), by the learned counsel appearing on behalf of the assessee and his submission that if two views are possible and different High Courts have taken a particular view, this Court may not take a different view, is concerned, we are of the opinion that in the present case, and as discussed hereinabove, only one view is possible as canvassed on behalf of the revenue and as observed by under section hereinabove and we are not in agreement with the view taken by the Himachal Pradesh High Court; Karnataka High Court; Rajasthan High Court and Punjab and Haryana High Court in the cases refereed to hereinabove, and therefore, the submission made on behalf of the assessee to follow the decisions of the different High Courts refereed to hereinabove and/or not to take a contrary view cannot be accepted.

8. In view of the above and for the reasons stated above, and considering section 36(1)(va) (of Income Tax Act, 1961) read with sub-clause (x) of clause 24 of section 2 (of Income Tax Act, 1961), it is held that with respect to the sum received by the assessee from any of his employees to which provisions of sub-clause (x) of clause (24) of section (2) applies, the assessee shall be entitled to deduction in computing the income referred to in section 28 (of Income Tax Act, 1961) with respect to such sum credited by the assessee to the employees' account in the relevant fund or funds on or before the "due date" mentioned in explanation to section 36(1)(va) (of Income Tax Act, 1961). Consequently, it is held that the learned tribunal has erred in deleting respective disallowances being employees' contribution to PF Account / ESI Account made by the AO as, as such, such sums were not credited by the respective assessee to the employees' accounts in the relevant fund or funds (in the present case Provident Fund and/or ESI Fund on or before the due date as per the explanation to section 36(1)(va) (of Income Tax Act, 1961) i.e. date by which the concerned assessee was required as an employer to credit employees' contribution to the employees' account in the Provident Fund under the Provident Fund Act and/or in the ESI Fund under the ESI Act.

9. Consequently, all these appeals are allowed and the impugned judgement and orders passed by the tribunal in deleting the disallowances made by the AO are hereby quashed and set aside and the disallowances of the respective sums with respect to the Provident Fund / ESI Fund made by the AO is hereby restored. The questions raised in present appeal are answered in favour of the revenue. With this, all these appeals are allowed.”

6. As the issue is squarely covered against the assessee by the Judgment of the Jurisdictional Hon`ble Gujarat High Court in the case of CIT Vs. Gujarat State Road Transport Corporation (supra).Respectfully following the above binding precedent, we uphold the contention of the assessee and therefore we confirm the order of the ld. CIT(A).

7. In the result, the appeal filed by the assessee is dismissed. Order is pronounced on 19/10/2020, as per Rule 34 (of Income Tax Rules, 1962) of Income Tax Appellate Tribunal, Rule 1963 (of Income Tax Rules, 1962).

Sd/- Sd/-

(PAWAN SINGH) (Dr. A.L. SAINI)

JUDICIAL MEMBER ACCOUNTANT MEMBER

Surat

Date: 19/10/2020