ORDER
S. Bandyopadhyay, A.M.
1. In the assessment order in this case addition of an amount of Rs. 3,06,006 in respect of late payment to the provident fund account of the employees was made presumably by taking recourse to the provisions of Section 43B and Section 36(1)(va) of the Act. The amount under consideration seems to be consisting of two portions, viz., employees contribution portion and the employer’s contribution portion.
The addition was upheld in first appeal.
2. So far as employer’s contribution is concerned, an appellate ground taken up as ground No. 1 in this appeal filed by the assessee has not been pressed by the learned counsel for the assessee at the time of hearing of the appeal before us. Hence, this particular ground has been dismissed.
3. However, the assessee strongly objects to the addition of the portion representing employees’ contribution to the provident fund. It is contended that the payments of wages/salary pertaining to a particular month are being made in the next month. By referring to Clause 38 of Employees’ Provident Fund Scheme, 1952, relating to mode of payment of contribution it is contended that the assessee is entitled to make the payment in respect of the contribution within 15 days from the close of the month during which the disbursement of salary/wages is actually made. At the stage of hearing of the appeal before us the learned counsel for the assessees tried to make distinction between the “wage period” and the period of actual disbursement of the wages. It is strongly contended by the learned counsel for the assessee that the stipulation relating to make payment within 15 days from the close of the “month” means the month of actual disbursement of the wages and not the month to which the wage relates. It is, thus, strongly contended that inasmuch as all the disputed payments of contribution were made by the assessee within the aforesaid due date as per interpretation sought by the learned counsel for the assessee in the above way, no account should be considered to be disallowable under the provisions of Section 43B of the Act r/w Section 36(1)(va).
In support of this contention reliance has been tried to place on various decisions as follows :
(1) Fluid Air (India) Ltd. v. Dy. CIT (1997) 63 ITD 182 (Mumbai)
It has been decided in this case that the provisions of Section 43B and Section 36(l)(va) should be interpreted liberally, that ambiguity regarding interpretation of words “fifteen days from the close of the month” in Clause 38 of the Employees Provident Fund Scheme, 1952, ought to be decided in favour of the assessee and finally that for all payments made within the previous year, deduction ought to be allowed despite a few days delay in actual payment.
(2) Madras Radiators & Pressings Ltd. v. Dy. CIT (1996) 56 TTJ (Mad) 662 : (1996) 59 ITD 515 (Mad)
Similar view as above has been expressed in this case also.
(3) Travancore Titanium Products Ltd. v. Dy. CIT (1995) 52 TTJ (Coch) 601 : (1996) 57 FTD 16 (Coch)
It has been held in this judgment that the Employer’s contribution for the last month of the previous year if paid in the succeeding month but before the due date will be allowable in view of the provision that the words “during the previous year” have been omitted from the second proviso of Section 43B w.e.f. 1st April, 1989.
4. Hunsur Plywood Works Ltd. v. Dy. CIT (W96) 54 TTJ (Bang) 260 : (1995) 54 ITD 394 (Bang)
It has been held in this case that the concept of due date has to be considered in a rather flexible sense and that the grace period of 5 days has got to be added to the period of 15 days as provided in the relevant section.
4. Reliance has also been placed on the judgment of the Hon’ble Supreme Court in the case of CTT v. J.H. Gotla (1985) 156 ITR 323 (SC), K.P. Varghese v. ITO (1981) 131 TTR 597 (SC) and CIT v. Vegetable Products Ltd. (1973) 88 ITR 192 (SC) at p. 195 to argue that the Court may modify the language used by the legislature so as to scheme the intention of the legislature and to produce a rational result and furthermore that any case of ambiguity is required to be resolved in favour of the assessee.
5. On the other hand, the learned Departmental Representative has relied on the following judgments in support of his argument that even if the payments be made within the relevant previous year but beyond and due date, in accordance with the second proviso to s, 438 disallowance should follows :
(1) CIT v. K.L. Thirani & Co, Ltd. (1996) 218 ITR 149 (Cat);
(2) CIT v.South India Corporation Ltd. (2000) 242 ITR 114 (Ker);
(3) CIT v. Sree Kamakhya Tea Co. (P) Ltd. (1993) 199 ITR 714 (Cal); and
(4) Mitech India (P) Ltd. v. Union of India Ltd. (1997)
227 ITR 446 (AP).
6. Clause 38 of the Employees’ Provident Fund Scheme, 1952, fixes the time
limit for making payment in respect of contribution to the provident fund to
be 15 days from the close of the month concerned. However, the issue here is
whether the “month” should be considered to be the month to which the
wages relates or the month in which the actual disbursement of the wages is
made, we are of the considered opinion that the expression “month” should
mean here the month during which the wages/salary is actually disbursed
irrespective of month to which the same relates. Thus, the scheme of the
Government in this regard is that once a deduction is made in respect of the
employees’ contribution to the provident fund from the salary/wages of the
employee or the employer also makes his contribution, factually at the time of
disbursement of the salary the payment in respect of such contribution
should be made forthwith. If for some reason or other the payment of salary
for a particular month be held up for considerable period of time it cannot be
said that the employer would be liable to make payments in respect of the
“employer’s” as well as “employees” contribution in respect of wages for
such period within a period of 15 days from the close of the month to which
the wages relates. On the other hand, in our view, most appropriate
interpretation would be that the employer would be at liberty to make
payment of the contribution concerned within 15 days (subject however to
the further grace period) from the end of the month during which the
disbursement of the salary is actually made and the contribution of the provident fund are, thus, generated, inasmuch as, the provision relating to the disallowance of such contribution on account of delay is rather an artificial provision, In our view, a liberal approach has got to be made to this issue. Ultimately, therefore, we reverse the order of the lower authorities and direct the AO to examine whether the payments of contribution in the present case were made within 15 days (allowed with further grace period of 5 days) from the close of the respective months during which the disbursement of the salary/wages were actually made. The AO should recompute the amount disallowable, if any, on the above basis and take appropriate action accordingly.
7. In the result, the appeal filed by the assessee is partly allowed to the above-mentioned extent.