In the case law of cit v/s alom extrusions limited, section 43(b) provides that deduction must be allowed only in the assessment year. The CBDT (by Supreme Court) had to decide to extend the amendment in section 43(b) of first proviso by equating the tax, cess, duty and fee with contribution of welfare funds. The first proviso is favor to the assessee because non recoverable deductions are shown in the income tax (before the date of filling).
CBDT proceedings for CIT vs. Alom Extrusions Ltd
However the second proviso is made after the given date we allowed to deductions in income tax act. Because of the implementation problems overcome in the second proviso they decided to retrospect the first proviso. The changing of the proviso there will be demand of refund and Treating a class of persons unequally in a manner, because assessee who have compensated the contributions after the due date will be left without deduction for all times while a nonpayer who pays the contribution after 1st April, 2004 would get the benefit of deduction under section 43(b).
Act is applicable for:
- Payment made to income tax
- Contribution of employment benefits
- Commissions and bonus
- Interest on loans which are borrowed
According to sec 31(1) (VA), contribution of employee provident fund should be paid before the due date of filing by assessee. According to section 43(b) the deduction will be allowed only when the payment is made on cash basis.
The CBDT clarified that the appeal of disallowance of the contribution to any made for the welfare of employees that any sum outstanding by the assessed by way of tax, duty, cess or fee according to the income tax rules or any sum payable by the assesse as an employer of firm by way of contribution to recognized provident fund or gratuity fund or superannuation fund or any other fund for the purpose of welfare of employees and this contribution should be made on or before the ‘due date’ of furnishing the return of income under section 139(1) i.e. 30th September of assessment year. No disallowance should be allowed according to section 43B of the income tax act which is Deductions to be allowed only on certain payment.