As per section 36(1)(iv) Deduction shall be allowed in respect of any sum paid by the employer by way of contribution towards a Recognized Provident Fund subject to limits prescribed in the recognition of the provident fund accorded by the Chief Commissioner or Commissioner of Income Tax.
Analysis
Employer's contribution towards provident fund is allowable as deduction subject to the following conditions:
- First condition is that, provident fund should be recognized. Thus, the employer will not get deduction in respect of contribution towards unrecognized provident fund.
- Further, the deduction is subject to the conditions laid down under Section 43B.
As per the provisions of Section 43B, any sum payable by assessee as an employer by way of contribution towards provident fund shall be allowed as deduction only in the previous year in which such sum is actually paid by him. However, if such sum is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under section 139(1) in respect of previous year in which liability to pay such sum was incurred by the assessee, then deduction shall be allowed in the previous year in which liability was incurred.
Below illustration will further clarify the above provisions:
Illustration: Employer's contribution towards PF for the month of October, 2014 is Rs. 10,000. The due date for depositing the same is 15th November, 2014 under the PF Act. Assuming due date for filing the return for the said assessee is 30th September, 2015.
Case 1: Employer deposits the PF on 12th November, 2014-
Deduction for the same will be allowed in A.Y. 2015-16.
Case 2: Employer deposits the PF on 20th November, 2014-
Deduction for the same will be allowed in A.Y. 2015-16.
Case 3: Employer deposits the PF on 25th September, 2015-
Deduction for the same will be allowed in A.Y. 2015-16.
Case 4: Employer deposits the PF on 18th October, 2015-
Deduction for the same will be allowed in A.Y. 2016-17.
Employee's Contribution
As per section 36(1)(va) Deduction shall be allowed for any sum received by the assessee from his employees as their contribution towards provident fund, if such sum is credited by the assessee to the employees account in the provident fund on or before the due date.
For the purpose of this section Due Date means the date of depositing PF as prescribed under PF Act.
Further as per section 2(24)(x) Income includes any sum received by the assessee from his employees as their contribution to provident fund.
Analysis
Employee's contribution towards provident fund is allowable as deduction, subject to the following conditions:
- Deduction shall be allowed if payment is made before the due date prescribed under PF Act i .e. 15th of the following month. However, as per the Guidance Note on Tax Audit issued by ICAI, the deduction under section 36(1)(va) shall be allowed even if the payment is made within the grace period falling after the due PF Act prescribes 5 grace days for depositing PF. Thus the deduction under section 36(1)(va) shall be allowed even if PF is deposited by 20th of the following month.
- Deduction shall not be allowed if PF is deposited after 20th of the following month.
- Provision of section 43B does not apply to employee's contribution towards provident fund. Below illustration will further clarify the above provisions:
Illustration: Employee's contribution towards PF for the month of October, 2014 is Rs 10,000. The due date for depositing the same is 15th November, 2014 under PF Act. Assuming due date for filing the return for the said assessee is 30th September, 2015.
Case 1: Employer deposits the PF on 12th November, 2014-
Deduction for the same shall be allowed in A.Y. 2015-16.
Case 2: Employer deposits the PF on 20th November, 2014-
Deduction for the same shall be allowed in A.Y. 2015-16 as per the Guidance Note on Tax Audit issued by ICAI.
Case 3: Employer deposits the PF on 25th September, 2015-
Deduction for the same shall not be allowed.
However, few High Courts have given identical judgments which are contrary to the above provisions of the act. I am quoting relevant extract of Delhi High Court Judgment in the case of CIT vs. AIMIL LIMITED for the reader's reference.
"If the employee's contribution is not deposited by the due date prescribed under the relevant acts and is deposited late, the employer not only pays interest on delayed payments but can incur penalties also, for which specific provisions are made in the provident fund act. Therefore, the act permits the employer to make the deposit with some delay, subject to aforesaid consequences. Insofar as the Income Tax Act is concerned, the assessee can get the benefit if the actual payment is made before due date of filing the return under section 139(1)."
Below illustration will further clarify the above provision:
Illustration: Employee's contribution to PF for the month of October, 2014 is Rs 10,000. The due date for depositing the same is 15th November, 2014 under PF Act. Assuming due date for filling the return for the said assessee is 30th September, 2015.
Case 1: Employer deposits the PF on 25th September, 2015-
Deduction for the same shall be allowed in A.Y. 2015-16 in the light of Delhi High Court Judgment in the case of CIT vs. AIM IL Limited.
Case 2: Employer deposits the PF on 18th October, 2015-
Deduction for the same shall not be allowed as the provision of section 43B does not apply to employee's contribution towards PF.
Thus, we can still claim deduction for employee's contribution to PF if the same is deposited before the due date of filing the return (CIT vs. AIMIL LIMITED). However, deduction cannot be claimed if the employee's contribution to PF is deposited after due date of filing the return as the provisions of section 43B does not apply to employee's contribution towards PF.
Remuneration payments to consultant-doctors would attract TDS under sec. 194J and not TDS under sec. 192
IT: Where appointment of doctors was contract for service classifiable as professional service, assessee had correctly deducted tax at source from payment to doctors under section 194J
Income from share transactions couldn't be held as business profits due to few instances ofsale in quick time
IT : Where assessee was not engaged in business of purchase and sale of shares, merely because in certain instances shares were sold before completion of a year was no reason to treat said income as business income when assessee had duly shown it as short-term capital gain
Loss on assignment of debt wasn't deductible as assessee was giving loan to affiliate when it was incurring losses
IT: Where assessee having assigned amount recoverable from sister concern to another company, claimed deduction of loss incurred on assignment of debt, in view of fact that assessee kept giving loan to sister concern even when it was continuously making loss, Tribunal rightly concluded that transaction of assignment of debt was not entered into normal course of business and, thus, assessee's claim was to be rejected
AO couldn't adopt DVO's report making valuation at CPWD if it exceeds market rate
IT: Where DVO valued construction at CPWD rates which were 30 per cent higher than market rate, no addition could be made over valuation of approved valuer as adopted by assessee
No addition due to non-inclusion of excise duty in closing stock as duty was payable on removal of goods
IT : Excise duty being payable at time of removal of goods and not at time of manufacture, an addition to income of assessee-company on account of non-inclusion of excise duty in closing stock of finished products was not justified
Mere grant of sec. 12A registration won't be sufficient to allow registration under sec. 80G as well
IT : Section 80G and section 12A are exclusive and, therefore, in order to get recognition under section 80G, mere registration under section 12A is not sufficient
With regard to the MODVAT credit etc., we may notice that Central Board of Direct Taxes (CBDT) has issued circular No. 772 dated 23.12.1998, the relevant portion of which reads as under:
"52. Method of accounting in certain cases.
52.1. The issue relating to whether the value of the closing stock of the inputs work-in-progress and finished goods must necessarily include the element for which MODVAT credit is available, has been a matter of considerable litigation over the years.
52.2 Consequent with the other provisions of the Act, with a view to put an end to this point litigation and in order to ensure that the value of opening and closing stock reflect the correct value, a new section 145A is inserted. This section provides that the valuation of purchase, sale and inventory shall be made in accordance with the method of accounting regularly employed by the assessee and such valuation shall be further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called), actually paid or incurred by the assessee to bring to goods to the place of its location and condition as on the date of valuation.
__._,_.___
No comments:
Post a Comment