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Section 2(24)(x) and section 36(1)(va)

Posted @ November 9, 2015, 10:20 pm under (TAX AUDIT)

During assessment proceedings assessee is generally asked to Justify claim made under Section 2(24)(x) and section 36(1)(va) in respect of payment pertaining to employees contribution towards ESI and EPF and the employee’s contribution to EPF/ESIC, if not paid by the due date, is not allowable.

The employee’s contribution is to be deducted from the salary/wages due to the employee so that no separate expenditure stands incurred in its respect and consequently, there is no question of the same being claimed or allowed as expenditure. However, Section 2(24)(x) of the Act, deems the sum so retained by the employer toward the employee’s contribution (for onward payment) as the employer’s income.

Deductibility of the employer’s contribution (to the relevant fund) is governed by Section 37(1) of the Act, that of the employee’s contribution, which is deemed as income under Section 2(24)(x) of the Act, is governed by Section 36(1)(va) of the Act.Only employer’s contribution is covered by Section 43B(b) of the Act Accordingly, the deduction of the employee’s contribution, which is deemed as the employer’s income under Section 2(24)(x) of the Act and which is subject to deduction under Section 36(1)(va) of the Act is not governed by Section 43B of the Act.


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