By TIOL News Service

ALLAHABAD, OCT 31, 2017: THE ISSUE BEFORE THE DIVISION BENCH IS - Whether Proviso to Section 43-B which allows deduction on actual payment before due date, would have curative and retrospective effect, even though it has been deleted by amendment of Finance Act. YES is the verdict.

Facts of the case:

The Assessee company is in the business of manufacturing and selling Indian Made Foreign Liquor and Country Liquor. It had filed the return for A.Y 1993-94 claiming deduction on account of payment of Provident Fund and Employee State Insurance u/s 43-B of Income Tax Act. The claim of Assessee was that, for the relevant A.Y, the deduction claimed by Assessee should have been allowed as the actual payment was made before filing of return. However, the Tribunal considering the proviso to Section 43-B, held that allowability of deduction depends on fulfilment of certain conditions as contemplated under the proviso which was that, actual payment should be made before the due date as per the requirement of scheme.

High Court held that,

++ it is not the case of Assessee that he had actually made the payment of provident fund as well as ESI on the due date as prescribed by the rules but claims that he had made the payment before filing of return, and therefore, entitled to such deduction. The tribunal while disallowing the appeal has categorically held that deduction under to proviso to Section 43-B is allowable on certain condition which condition has not been fulfilled by the appellant therefore no deduction can be claimed;

++ the counsel for Assessee has relied upon several decisions in the case of Commissioner of Income tax vs. Alom Extrusions Limited - 2009-TIOL-125-SC-IT, Commissioner of Income Tax vs. Nipso Polyfabriks Ltd - 2012-TIOL-930-HC-HP-IT and in the case of Commissioner of Income Tax vs. Aimil Ltd - 2010-TIOL-125-HC-DEL-IT. In all the three decisions, courts have held that the proviso which has been deleted will have a curative and retrospective effect. In the present case, no dispute with regard to the fact that the deletion of proviso of section 43- B has curative effect and would operate retrospectively. The fact remains that the claim of deduction must fall within the four corner of the proviso of Section 43-B which unfortunately the Assessee does not fulfil. Therefore, the Tribunal has arrived at right conclusion in rejecting the claim of Assessee for claim of the deduction in view of the proviso to Section 43-B.

(See 2017-TIOL-2266-HC-ALL-IT)