What is the amount disallowed in income tax

This query is : Resolved

Ramachandra (Querist)
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29 January 2013 I would like toknow the Delay in payment of PF/ESI what is the disallowance amount as per it act:
is the entire amount of Employer Contribution.
or
Only the amount of Emploee Contribution.
I would like to know the same.

Ramachandra.R

CA Suraj Lakhotia

CA Suraj Lakhotia (Expert)
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29 January 2013 Employer Contribution - Allowed as deduction if the same is remitted before the due date of filing return of the relevant previous year.

CA Suraj Lakhotia

CA Suraj Lakhotia (Expert)
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29 January 2013 Employee's Contribution is considered as income under section 2(24) and allowed as a deduction if the same is credited to employee's PF account before the due date as per the EPF Act (Income tax section 36 (1)(va).

However there are cases in which court have decided 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. Insofar 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 in Vinay Cement."

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CA Prashant Gupta

CA Prashant Gupta (Expert)
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29 January 2013 if PF is deposit after due date. then employer share will be allowed if paid before due date of return.

employees contribution will be added as income of employer.
sec 36(1)(va) says it will not be allowed if it is deposited after due date. So employee's share will be taxable as income

CA Suraj Lakhotia

CA Suraj Lakhotia (Expert)
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29 January 2013 Hon’ble Delhi High Court in the case of CIT v. P.M. Electronics Ltd., 220 CTR 635 (Delhi) while relying upon the decision of Hon’ble Apex Court in the case of CIT Vs. Vinay Cement Ltd.,213 CTR (SC) 268 , concurred with the view taken by the Hon’ble Madras High Court in Nexus Computer (P) Ltd.,219 CTR(Mad) 54 that employer/employees’ contribution towards provident fund payments made after the due date prescribed under the Employees’ Provident Fund Act and Rules made thereunder and before the due date for furnishing the return of income under sub sec. 1 of sec. 139 of the Act, are allowable under s.36(1)(va) read with sec. 2(24(x) and sec. 43B of the Act.