Allowability of Employer’s Contribution to funds for welfare of employees paid after the due date under the relevant Act but before the due date of filing of return of income under section 139(1) [Circular No.22/2015 dated 17-12-2015]

Under section 43B of the Income-tax Act, 1961, certain deductions are admissible only on payment basis. The CBDT has observed that some field officers disallow employer’s contributions to provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, by invoking the provisions of section 43B, if it has been paid after the ‘due dates’ as per the relevant Acts.

The CBDT has examined the matter in light of the judicial decisions on this issue. In the case of Commissioner vs. Alom Extrusions Ltd, [2009] 185 Taxman 416, the Apex Court held that the deduction is allowable to the employer assessee if he deposits the contributions to welfare funds on or before the ‘due date’ of filing of return of income.

Accordingly, the settled position is that if the assessee deposits any sum payable by it by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, on or before the ‘due date’ applicable in his case for furnishing the return of income under section 139(1), no disallowance can be made under section 43B.

It is further clarified that this Circular does not apply to claim of deduction relating to employee’s contribution to welfare funds which are governed by section 36(1)(va) of the Income-tax Act, 1961.