The main legal point established in the judgment is the interpretation of the provisions of Section 36(1)(va) and Section 43B of the Income Tax Act, emphasizing the due date for claiming exemption, the statutory liability of payment of PF or other contribution funds, and the retrospective application of the amendment introduced by the Finance Act, 2003.

V. Gopala Gowda, J.— These appeals are filed by the revenue questioning the impugned orders passed by the Tribunal in Appeal No ITA 1713/Bang/2005, dated 17-3-2006, framing the following substantial questions of law:

1. Whether the Tribunal was correct in holding that the contributions made by the assessee to PF and ESI are allowable deduction even though it is made beyond the stipulated period as contemplated under the mandatory provisions of Section 36(1)(va) read with Section 2(24)(x) and Section 43B of the Act as the same was paid by the assessee on or before the due date for furnishing the return of income as per Section 139(1) of the Act ?

2. Whether the Tribunal was correct in holding that the amendment to Section 43B of the Act which had been introduced by Finance Act, 2003, w.e.f 1-4-2004 should be read retrospectively and should be understood as if Section 43B would not be applicable to the assessee in the light of the judgment of the Apex Court in Allied Motors (P.) Ltd. Vs. Commissioner of Income Tax, Delhi, AIR 1997 SC 1361.

We have extracted the substantial questions of law only in one appeal, viz., IT Appeal No. 1088 of 2006 since other appeals are connected.

2. Learned Counsel Sri M.V. Seshachala appearing for appellants, has called in question the orders passed by the Tribunal, by placing reliance upon the mandatory provisions of Section 36(1)(va) read with Section 2(24)(x) and Section 43B(b) of the Income Tax Act; he has contended, that contributions should be paid to have been made within the specified date by the assessee to avail the relief of deduction from gross income. In support of his contention he has also placed reliance upon the decision of the Apex Court reported in Allied Motors (P.) Ltd. Vs. Commissioner of Income Tax, Delhi, AIR 1997 SC 1361. Para 60 of the said decision reads thus:

60. Several cases have come to notice where taxpayers do not discharge their statutory liability such as in respect of excise duty, employer's contribution to PF, ESI Scheme, etc., for long periods of time, extending sometimes to several years. For the purpose of their Income Tax assessments, they claim the liability as deduction on the ground that they maintain accounts on mercantile or accrual tests basis. On the other hand, they dispute the liability and do not discharge the same. For some reason or the other, undisputed liabilities also are not paid. To curb this practice, it is proposed to provide that deduction for any sum payable by the assessee by way of tax or duty under any law for the time being in force (Irrespective of whether such tax or duty is disputed or not) or any sum payable by the assessee as an employer by way of contribution to any PF, or superannuation fund or gratuity fund or any other fund for the welfare of employees shall be allowed only in computing the income of that previous year in which such sum is actually paid by him.

(Emphasis herein italicized in print supplied)

Regarding Section 43B, it is further held in the said decision as follows:

Section 43B was, therefore, clearly aimed at curbing the activities of those taxpayers, who did not discharge their statutory liability of payment of excise duty, employer's contribution to PF, etc., for long periods of time but claimed deductions in that regard from their income on the ground that the liability to pay these amounts had been incused by them in the relevant previous year. It was to stop this mischief that Section 43B was inserted. It was clearly not realised that the language in which Section 43B was worded, would cause hardship to those taxpayers who had paid sales-tax within the statutory period prescribed for this payment, although the payment so made by them did not fall in the relevant previous year. This was because the sales-tax collected pertained to the last quarter of the relevant accounting year. It could be paid only in the next quarter which fell in the next accounting year. Therefore, even when the sales-tax had in fac