Employees' contribution to provident fund and employees' State insurance is allowable as a deduction under section 36(1)(va) read with section 2(24)(x) of the Act, if paid before the due date of return.

1. The defect pointed out by the office is overruled. This appeal has been filed by the Revenue aggrieved by the order dated December 16, 2011, passed by the Income-tax Appellate Tribunal, Jodhpur Bench, Jodhpur ("the ITAT") in ITA No. 351/JU./2010 for the assessment year 2006-07, whereby the appeal filed by it against the order dated March 15, 2010, passed by the Commissioner of Income-tax (Appeals), Udaipur ("the CIT (A)") has been dismissed.

2. The facts in brief are that the assessee is engaged in the business of dairy product, processing and marketing of milk and milk products and cattle feed, etc. It filed its return of income for the assessment year 2006-07 on October 30, 2006, declaring total income of Rs. 9,80,723. While completing the assessment under section 143(3) of the Income-tax Act, 1961 ("the Act"), vide its order dated December 26, 2008, the Assessing Officer (AO) noticed that the assessee had deposited the payment of Rs. 14,60,412 in the provident fund and Rs. 973 in the employees' State insurance fund with delay that is the said payments were deposited after the due dates, i.e., after 15th next month and, therefore, added the said amount to the income of the assessee as per the provisions of section 36(1)(va) read with section 2(24)(x) of the Act.

3. Aggrieved by the assessment order dated December 26, 2008, the assessee filed an appeal before the Commissioner of Income-tax (Appeals), who, vide its appellate order dated March 15, 2010, after noticing certain judgments came to the conclusion that it is a settled position of law that where the payments on account of contribution to the provident fund, employees' State insurance, etc., are made within the due date of filing the return, such deductions are allowable. It was further noticed that it was not in dispute that the provident fund contribution and the employees' State insurance was deposited by the appellant before the due date of filing the return and, consequently, the Commissioner of Income-tax (Appeals) deleted the disallowance made by the Assessing Officer and granted a relief of Rs. 14,61,385.

4. The order dated March 15, 2010, passed by the Commissioner of Income-tax (Appeals) was questioned by the Revenue before the Income-tax Appellate Tribunal and the Income-tax Appellate Tribunal by its order dated December 16, 2011, upheld the order passed by the Commissioner of Income-tax (Appeals) on the said issue, inter alia, holding that the employees' contribution is allowable, if the same is paid before the due date of return.

5. It was contended by the learned counsel for the Revenue that the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal fell in error in deleting the addition made under section 36(1)(va) read with section 2(24)(x) of the Act without considering the facts and legal aspect involved therein. It was submitted with reference to section 43B of the Act that the deletion of the second proviso therein, after the amendment by the Finance Act, 2003 ; the contribution of the employer is governed by the provisions of section 43B, whereas the employees' contribution continues to be governed by the provisions of section 36(1)(va) read with section 2(24)(x) of the Act and, therefore, the Income-tax Appellate Tribunal fell in error in upholding the order passed by the Commissioner of Income-tax (Appeals).

6. The effect of the deletion of the second proviso to section 43B of the Act was considered by the hon'ble Supreme Court in CIT v. Alom Extrusions Ltd. (2009) 319 ITR 306 (SC) and it was observed at page 314 of the report as under :

". . . section 43B (main section), which stood inserted by the Finance Act, 1983, with effect from April 1, 1984, expressly commences with a non-obstante clause, the underlying object being to disallow deductions claimed merely by making a book entry based on the mercantile system of accounting. At the same time, section 43B (main section) made it mandatory for the Department to grant d