In the case of CIT v. South India Corpn. Ltd.(108TAX322) the payment of provident fund was made after the grace period of 5 days . The AO and the Commissioner (Appeals) declined the deduction. The Tribunal however allowed the claim on the basis that the underlying object of section 43B is to entitle an assessee to deductions for payments actually made. The object of the enactment of section 43B was to curb the tendency of the assessees to make claims for deductions and later on withheld the amount payable on the pretext of disputes. Admitted position being that payment were made before the expiry of the financial year relevant to the assessment year in question, the deduction was really admissible. The High Court held that the amount is deductible only if the assessee credits the amount to the employees’ account in the relevant fund on or before the date by which he is legally or contractually required to do so. The right to deduction would be lost even if the sum is credited after the due date. It cannot be an indefinite date left to the choice of the assessee. The Court further held that the Legislature in its wisdom had incorporated the proviso and it could not be said to be without a purpose. It is in the nature of an exception to what has been provided in the main provision.
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