By the Bench:
The appeal by the revenue and the cross-objection by the assessee are arising out of the order of the Commissioner (Appeals) for the assessment year 1991-92.
2. The first dispute raised in the appeal is against the deletion of disallowance of Rs. 2,782 being the amount paid to Assam Tribune Sports Club. It was disallowed by the assessing officer on the ground that the expenditure was of a non-trading nature. The Commissioner (Appeals) allowed the claim of the assessee by holding that the payments were made for the welfare of the employees who were the members of this sports club and, therefore, he held that the expenditure cannot be said to be for non-trading purposes. As the expenditure is for the welfare of the employees, the Commissioner (Appeals), in our opinion, was right in allowing the claim of the assessee. No interference is called for. His order on this issue is upheld.
3. The next issue is against the deletion of disallowance of Rs. 12,840 made under the head “Biswakarma Puja’, It was disallowed by the assessing officer as being not business expenditure. The expenditure was debited under the head “donation & charity and Biswakarma Puja” and the disallowance of Rs. 12,840 was part of the disallowance of Rs, 21,487. The Commissioner (Appeals) deleted the disallowance of Rs. 12,840 by observing that the assessee was engaged in the business of publishing newspapers with its own printing press and it was customary for the employees of a printing press to perform Biswakarma Puja. If they were prohibited from doing so, their morale will be adversely affected. Biswakarma Puja, according to him, was performed for the progress of the business as well for boosting the moral and sentiments of the employees, On these facts and circumstances of the case, in our opinion, no interference in the order of the Commissioner (Appeals) is called for. As stated by him, Biswakarma Puja is a necessary event which is to be performed by the employees working in the printing press and, therefore, the expenditure cannot be said to have been incurred for non-business purpose. We, accordingly, uphold the order of the Commissioner (Appeals) on this issue.
4. The next dispute is with regard to the deletion of disallowances made under the head provident fund of Rs. 19,85,860, Family Pension Fund of Rs. 96,812 and E.S.I. of Rs. 19,167. These payments were disallowed because they were not paid/deposited within the due date as required under the second proviso to section 43B and provisions of section 36(1)(va) of the Income Tax Act. The Commissioner (Appeals) deleted the additions by observing as under:
“I have gone through the facts of the case carefully and I am of the opinion that employers contribution towards the provident fund paid during the previous year should be allowed as deduction under section 43B. This view is supported by the fact that heading of section 43B speaks of “certain deductions to be only on actual payment”. From the heading, the intention of the legislature in introducing 43B is very much clear and apparent. Moreover, Circular No. 372, dt. 8-12-1983 also clarified the legislative intention and directs that contribution to Provident Fund should be allowed only in computing the income of that previous year to which such sum is actually paid by the assessee. The Hon’ble Members of Madras Tribunal also supports the view in Madras Radiators & Pressings Ltd. v. Dy. CIT (1996) 56 ITD 668 (Mad-Trib) (sic). When other kinds of payments as specified in clauses (a), (c) and (d) of section 43B are allowed in the year of payment or within the specified time under section 139(1), there cannot be different legislative intention for the payment of Provident Fund, Employees State Insurance etc. as included in clause (b) of the said section. The proviso or explanation cannot curtail or supersede the contents or meaning of main section. If the interpretation that if the payment is not made within the due date deduction will neither be allowed in the year of accrual nor be allowed in the year of payment is accepted, it will result into manifestly absured and unjust result. The Supreme Court in K.P. Varghese v. ITO (1981) 131 ITR 597 (SC) has held that “it is now a well-settled rule of interpretation of construction that where the plain literal interpretation of a statutory provision produces a manifestly absurd and unjust result which could never have been intended by the legislature, the court may modify the language used by the legislature or even ‘do some violence’ to it so as to achieve the obvious intention of the legislature and produce a rational constitution : vide Luke v. IRC (1964) 54 ITR 692 (HL).
‘It would indeed be strange if disobedience to the law should attract the levy of tax on income which has neither arisen to the assessee nor has been received by him.’
Moreover, Supreme Court in CIT v. Kullu Valley Transport Co. (P) Ltd. (1970) 77 ITR 518 (SC) has held even if two views are possible the view which is favourable to the assessee must be accepted. Rs. 991 was paid as employers and employees contribution during the year and as such the same should be allowed. Similarly deduction for a sum of Rs. 96,812 paid during the year in respect of contribution to Family Pension Fund is also to be allowed. The assessing officer is directed accordingly.
“Now, coming to employees contribution separately also, I find enough force in the contention of the authorised representative that the disallowance is not sustainable because the appellant had never claimed any allowance/deduction for the employees contribution. As such, employees contribution cannot be disallowed. Moreover, the claim is also fully covered under section 37. Even, on the facts of the case the terms and conditions of section 36(1)(va) is complied in the sense that the relevant fund account was credited in the accounts on or before the due dates and there is the only requirement of section 36(1)(va). Considering all these, the disallowance of employees contribution is not sustainable. The addition of balance of Rs. 3,41,911 (Rs. 9,92,907 – 50 per cent of Rs. 13,01,991) in respect of employee’s contribution is also, therefore, deleted.”
Similarly, he deleted the addition of disallowance of ESI by observing as under:
“I have gone through the facts of the case carefully and I find that section 43B(b) speaks of disallowance in respect of contribution to funds only. By making payment of annual premium no separate fund is created by the employers for the benefit of the employees and as such by payment of annual premium no separate fund is created by the employers for the benefit of the employees and as such payment of annual premium is not a contribution of fund. Provision of section 43B(b) is not applicable to Employees State Insurance payment. The addition made in respect of Employees State Insurance payments under section 43B(b) is, therefore, deleted. The appellant will get a relief of Rs. 19, 167. ”
5. As the payment of Rs. 13,01,911 has been made by the assessee during the previous year under consideration, we agree with the Commissioner (Appeals) that the same cannot be disallowed by invoking the proviso which apparently cannot curtail or supersede the contents or meaning of main section allowing the deduction and payments. We find support for this view from the Madras Bench of the Tribunal in the case of Madras Radiators & Pressings Ltd. referred to by the Commissioner (Appeals) in his order and also the decision of the Guwahati Bench of the Tribunal in the case of Him Containers Ltd. in ITA No. 574 Gau/1991 for assessment year 1989-90, order dated 27-5-1998, and the decision of Calcutta Bench “E” of the Tribunal in the case of National Homeo Laboratory in ITA Nos. 2443 & 2444 Cal/1996, order dated 26-2-1999. Similarly, we agree with the Commissioner (Appeals) in deleting the addition of Rs. 19,167 as it was the payment of premium for insurance under Employees State Insurance and the same was paid during the previous year under consideration. As regards deletion of Rs. 3,41,911 which represents the employees contribution, we do not find ourselves in agreement with the observation of the Commissioner (Appeals) that the same cannot be disallowed. Clause (b) of section 43B covers 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 employees. The employees’ contribution is deducted from their salary and is contributed to the provident fund by the assessee as an employer and, therefore, it would be covered within the meaning of section 43B, clause (b) of the Act. We may mention here that any sum received by the employee from his employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund is deemed to be the income of the assessee and consequently the corresponding liability of the assessee to contribute the same to the provident fund as an employer arises. Therefore, to say, that it was never claimed by the assessee as a deduction and, therefore, cannot be disallowed is not warranted. The contribution of the employee is treated as income of the assessee and the corresponding liability to pay the same would be an expenditure of the assessee. Therefore, clause (b) of section 43B, in our opinion, would be applicable in this case of the assessee. We, therefore, vacate the order of the Commissioner (Appeals) in allowing the claim of Rs. 3,41,911 on this account. We, however, direct that the same may be allowed on payment basis in the subsequent year when the amount is paid by the assessee.
6. The cross-objection filed by the assessee is only to support the order of the Commissioner (Appeals) on these points and, therefore, does not call for any specific discussion.
7. In the result, both the appeal and the cross-objection are dismissed.