G. SANTHANAM, A. M. :

The appellant is a company. In its return it admitted a total income of Rs. 50,30,350 for the asst. yr. 1991-92. The return was processed under s. 143(1). Subsequently, the case was taken up for scrutiny under s. 143(2) of the IT Act and a regular assessment under s. 143(3) was made on 21st Jan., 1994. In the assessment the learned Dy. CIT, Spl. Range-I, Coimbatore, proposed to disallow provident fund contribution of Rs. 2,92,094 and ESI contribution of Rs. 40,215, but actually disallowed only the PF contribution of Rs. 2,92,094. The first appellate authority dismissed the appeal of the assessee stating that the assessee has conceded the disallowance before him, but pointed out that the AO failed to disallow ESI contribution of Rs. 40,215.

2. Certain details are to be stated in order to appreciate the controversy. The assessee used to pay salary for the previous month on the 7th of succeeding month (See s. 5 of Payment of Wages Act). The employees contribution to the PF in the following sums were paid on the following dates :

Month Month Amount Amount Payment date of PF in Govt.

Payment date of PF in Govt.

April 55,703 24-5-90 May 54,343 25-6-90 July 54,804 23-8-90 October 59,857 30-11-90 December 67,337 67,337 31-1-91 2,92,044 2,92,044 Similarly, employees contribution to ESI in the following sums were paid on the following dates :

Month Month Amount Amount Payment date of ESI in Govt.

Payment date of ESI in Govt.

June 8,130 31-7-90 July 8,959 31-8-90 August 7,355 30-9-90 September 5,161 31-10-90 October 5,425 30-11-90 December 7,175 7,175 31-1-91 40,215 40,215 The AO took the view that these contributions were not effected within the due date for payment under the relevant provisions of the Provident Fund Act and ESI Act nor within the grace period allowed under that Act. Since the payments were beyond the due date including the grace period allowed for each month, the provisions of s. 36(1)(va) stood attracted and in this view of the matter the impugned amounts were disallowed.

3. The learned counsel for the assessee submitted that a concession on a point of law made by the Chartered Accountant is not binding on the assessee. We uphold this contention for the reason that there can be no estoppel against law. The learned Advocate next submitted that Employees Provident Fund Act is governed by a scheme known as Employees Provident Fund Scheme, 1952, and in accordance with r. 38 of the Scheme, which prescribes the mode of payment of contribution, it is the duty of the employer to pay the contributions to the fund within 15 days of the close of every month.Month has not been defined in the Act nor is there any indication whether the term month would refer to the month for which the salary is paid or the month in which salary is paid. Therefore, there is ambiguity in the provision. If the first interpretation is given, then there is a delay of only 4 or 5 days in respect of the last two payments, namely, the payments for the months of October and November in so far as PF contributions are concerned. However, in respect of ESI contributions, there is a delay of 4 to 5 days for all the months for which the salaries were paid. If, on the other hand, the term month referred to the month in which the salaries were paid, 15 days from the close of the month, which is the due date prescribed, will occur only in the succeeding month of each preceding month in which the salary is paid and in such a case it cannot be said that the payments were made beyond the due dates. The benefit of doubt must be given to the taxpayer. He then contended that the AO has invoked the provisions of s. 36(1)(va) but then it is subject to s. 43B. The substance of s. 43B is that if the payments were made in the previous year there can be no disallowance and in this case all the payments were within the previous year itself, though among themselves the payments were delayed by 4 to 5 days in some instances. Further, he submitted that contributions to Employees State Insurance Fund cannot be equated with the funds mentioned in cl. (b) of s. 43B and therefore there can be no disallowance of the same simply for the reason that the payments were a bit delayed.

4. Shri T. Vinay Mohan, the learned Departmental Representative, submitted that in terms of s. 2(24)(x) any sum received by the assessee from his employees as contribution to PF or any fund set up under the Employees State Insurance Act, 1948, should be treated as income chargeable to tax. Under s. 36(1)(va) a deduction is to be allowed if the amount thus received by the assessee is credited to the employees account in the relevant fund or funds on or before the due date, due date being the due date prescribed under the relevant Acts or Rules. In this case the payments were not made within the due date though it had been made within the month. The CIT(A) rightly disallowed the same. Further, the proviso to s. 43B only emphasised the payment within the due date. Hence, the disallowance was justified.

5. Having regard to the rival submissions, we delete the disallowance. Contributions received from the employees towards PF or the State Insurance Fund are first treated as income of the assessee in the previous year under s. 2(24)(x) of the IT Act. Such contributions are to be allowed as deduction under s. 36(1)(va) if the same is credited by the assessee to the employees account in the relevant Fund on or before the due date prescribed under the relevant Acts. One of the questions to be decided in this case is the determination of the due date for payment of such contributions. Sec. 38 of the Employees Provident Fund Scheme, 1952, is as follows :

"38. Mode of payment of contributions. - (1) The employer shall, before paying the member his wages in respect of any period or part of period for which contributions are payable, deduct the employees contribution from his wages which together with his own contribution as well as an administrative charge of such percentage of the pay (basic wages, dearness allowance, retaining allowance, if any, and cash value of food concessions admissible thereon) for the time being payable to the employees other than an excluded employee, and in respect of which provident fund contributions are payable as the Central Government may fix, he shall within fifteen days of the close of every month pay the same to the Fund by separate bank drafts or cheques on account of contributions and administrative charge."

The term month has not been defined in the Act. The learned Advocate contends that the condition that the payment should be made "within 15 days from the close of each month" should be reckoned from the month in which such contributions are received by the assessee from its employees and not to the month in respect of which such contributions are received by the assessee. Difficulty in the interpretation will not arise if the salary is paid for a particular month on the last day of the same month. But in cases where the salary is paid within 7 days from the end of the month to which it relates, there arises a certain amount of ambiguity with regard to the period of 15 days from the close of each month. There is support for this ambiguity from the provisions of s. 36(2) of the Employees Provident Fund Scheme, 1952, which dealt with the duties of the employer. Sub-s. (2) is as follows :

"(2) Every employer shall send to the Commissioner within 15 days of the close of each month a return -

(a) in Form 5, of the employees qualifying to become members of the Fund for the first time during the preceding month together with the declarations in Form 2 furnished by such qualifying employees, and

(b) in such form as the Commissioner may specify, of the employees leaving service of the employer during the preceding month :

Provided that if there is no employee qualifying to become a member of the Fund for the first time or there is no employee leaving service of the employer during the preceding month, the employer shall send a Nil return".

Reading together ss. 36 and 38, it could be said that there is certain amount of ambiguity over the expression "15 days from the close of the month". There is also force in the submission of the assessees counsel that in the case of ambiguity the benefit should be given to the taxpayer. Viewed in this context we hold that payments have been made within the due date and, therefore, no part of it can be disallowed.

6. If the due date is taken to refer to the period of 15 days from the end of the month for which salary is payable to the employees, there is no doubt that in the instant case a delay of 4 days in the case of salaries payable for the months of October and December in respect of contributions received from the employees as will be evident from the following table :

Month Month Amount Amount Date of payment of salary Date of payment of salary Due date of payment Due date of payment Date after grace period Date after grace period Payment date of PF in Govt.

Payment date of PF in Govt.

Remark Remark April 55,703 7-5-90 21-5-90 26-5-90 24-5-90 No delay May 54,343 7-6-90 21-6-90 26-6-90 25-6-90 No delay July 54,804 7-8-90 21-8-90 26-8-90 23-8-90 No delay October 59,857 7-11-90 21-11-90 26-11-90 30-11-90 4 days December 67,737 7-1-91 21-1-91 26-1-91 31-1-91 5 days 2,92,041 Similarly, there will be a delay of 5 days in the case of ESI contributions. Now the question is whether in such an event the amount is to be disallowed under s. 36(1)(va) of the IT Act. In our considered opinion, s. 36(1)(va) yields to s. 43B as the latter section starts with a non obstante clause. According to s. 43B the deduction is to be regulated only on the basis of actual payment in the previous year in which it is so paid. However, first proviso and second proviso were added to s. 43B by the Finance Act, 1987, w.e.f. 1st April, 1988. The first proviso reduces the rigour of the main section by enabling the assessee to get the benefit of deduction in respect of taxes, duties, etc. even if they were paid after the end of the previous year but before the due date for furnishing of return under s. 139(1) of the IT Act. The second proviso also introduced along with the first proviso w.e.f. 1st April, 1988, is to the effect that unless the payment in respect of contributions to PF, etc. have been actually made during the previous year on or before the due date as prescribed under the relevant Act or the Rules, no deduction should be allowed in respect of the same. Thus, the first proviso in a sense is an enabling provision. The second proviso would appear to be a disabling provision. It reads as follows :

"Provided further that no deduction shall, in respect of any sum referred to in cl. (b), be allowed unless such sum has actually been paid during the previous year on or before the due date as defined in the Explanation...."

Therefore, it could be argued that in respect of PF contributions, etc. covered by cl. (b) of s. 43B the payment must have been made not only during the previous year but also within due date prescribed under the relevant Acts. However, the legislature in its superior wisdom has redrafted the above second proviso as follows w.e.f. 1st April, 1989.

"Provided further that no deduction shall, in respect of any sum referred to in cl. (b), be allowed unless such sum has actually been paid in cash or by issue of a cheque or draft or by any other mode on or before the due date as defined in the Explanation below cl. (va) of sub-s. (1) of s. 36, and where such payment has been made otherwise than in cash, the sum has been realised within fifteen days from the due date."

The notable omission in the amended proviso is the expressions "during the previous year". Because of the omission of the expressions "during the previous year" in the second proviso to s. 43B, we hold that so long as the payments were made within the previous year, the payments are to be allowed as deduction under the main section. In respect of the contributions recovered on the last day of the previous year or any other subsequent date, under the second proviso deduction has to be allowed if the payment had been made within the due date prescribed under the Act. Thus, the second proviso to s. 43B has also been made an enabling provision just as the first proviso by the substitution of the second proviso w.e.f. 1st April, 1989. Further, provisos are meant to helpmate the main section rather than hinder its course. The tail cannot wag its head. In this view of the matter, even assuming that the due date for the payment of the contributions fell within a period of 15 days from the end of the month for which salaries were payable, since all the payments have been made in the year itself though with a marginal delay of a few days on certain occasions, we hold that no part of the contributions received by the assessee from its employees towards PF and ESI can be disallowed.

7. Shri Vinay Mohan vehemently contended that the contributions received by the assessee from the employees should not be put on a par with the contribution payable by the employer to the PF. The former is governed by the provisions of s. 36(1)(va) and the latter is governed by the provisions of s. 43B. In other words, his contention is that the employees contribution to PF will not come within the provisions of s. 43B. This is a very attractive argument. But we are unable to accept the same in view of the provisions of ss. 30 and 32 of the Employees Provident Funds Scheme, 1952. Section is as follows :

"30. Payment of contribution. - (1) The employer shall, in the first instance, pay both the contribution payable himself (in this Scheme referred to as the employers contribution) and also, on behalf of the member employee by him directly or by or through a contractor, the contribution payable by such member (in the Scheme referred as the members contribution)."

Sec. 32 is as follows :

"32. Recovery of a members share of contribution. - (1) The amount of a members contribution paid by the employer or a contractor shall, notwithstanding the provisions in this Scheme or any law for the time being in force or any contract to the contrary be recoverable by means of deduction from the wages of the member and not otherwise :

Provided that no such deduction may be made from any wage other than that which is paid in respect of the period or part of the period in respect of which the contribution is payable :"

Reading ss. 30 and 32 together, it would be clear that it is the liability of the employer to pay his own contribution and also the contribution of the members of the PF Scheme employed by him and the employer is also given the right to recover the amount of members contribution from the wages bill. Therefore, the provisions of s. 43B which has the overriding effect over other sections must prevail over s. 36(1)(va). Thus, we reject the argument of the learned Senior Departmental Representative.

8. In the result, the appeal is allowed.