ESI and PF are statutory liability of an employer if it crosses a certain number of employees as mentioned in the respective act.
There are two parts of EPF contribution as per the law i.e. employees contribution and employers contribution. EPF can be said to be a social security scheme where the employer needs to contribute an amount equal to the amount of employees contribution.
Now, the due date for making such contribution has been mentioned as 15th of the next month. Under a normal scenario employer deposit contribution of both employer and employee in the government account.
As per the Income tax act deduction for depositing employee’s contribution is covered u/s 36(1)(va) and deduction for depositing employers contribution is covered under 43B.
Section 43B allows deduction of employer contribution on the basis of actual payment and if the payment is made after the end of financial year but before filing return of income u/s 139(1) of that financial year it shall be allowed as deduction in the relevant financial year.
Section 36(1)(va) on the other hand states that deduction of sum received by employer from employee shall be allowed as deduction if such sum is credited by employer to employee’s account of the relevant fund on or before due date.
Here due date means the date by which employer is required to credit contribution to employee’s account in the relevant fund under any Act.
In Commissioner of Income-tax v. Jaipur Vidyut Vitran Nigam Ltd. 49 taxmann.com 540, hon’ble Rajasthan High court held that assessee is eligible for benefit of deduction even if payment is made after due date but before filing return of income u/s 139.
Also, in CIT v. Aimil Ltd. [2010] 188 Taxman 265, hon’ble Delhi High court held that “if the employees’ 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 payment but can incur penalties also, for which specific provisions are made in the Provident Fund Act as well as the ESI Act. Therefore, the Act permits the employer to make the deposit with some delays, subject to the aforesaid consequences. In so far as the Income-tax Act is concerned, the assessee can get the benefit if the actual payment is made before the return is filed, as per the principle laid down by the Supreme Court in Vinay Cement (2009) 313 ITR (St.) 1”
Thus, based on above judgements it can be said that deduction u/s 36(1)(va) shall be available if payment is made after due date but before filing of return of income u/s 139.
However, there are various judgements by different High Court’s which are also against assessee such as: Gujarat High court in case of Principal Commissioner of Income – tax v. Suzlon Energy Ltd. [2020] 115 taxmann.com 340, Madras High Court, Kerala High Court etc.
Since, till date no specific judgement has been passed by Hon’ble Supreme court, therefore one need to check the judgement of it’s jurisdictional High court before taking a decision.
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