1991 (2) TMI 98 - HC - Income Tax

High Court allows deduction of company's managing director's provident fund contribution as business expense, ruling in favor of assessee.

The High Court allowed the deduction of the company's contribution to the provident fund for its managing director, affirming that the payments were made ... Business Expenditure, Company, Directors Issues:The judgment addresses the question of whether the assessee-company was entitled to the deduction of its contribution to the provident fund in the case of its managing director for the assessment year 1972-73.Summary:The High Court considered the matter where the assessee, a company, had been deducting amounts from the salaries of managing directors for provident fund contributions and making its own contributions. The court referred to a previous judgment regarding the allowance of such deductions. The Tribunal had previously allowed the deduction under section 37, considering the contribution as a benefit to the managing directors. The court agreed with the Tribunal's reasoning that the payment was made out of commercial expediency and was allowable. While the deduction under section 36(1)(iv) was rejected, the court found that the payments were exclusively for the business purposes of the assessee, thus allowing the deduction under section 37 for the contribution towards provident fund. The court answered the question in the affirmative and in favor of the assessee.Separate Judgment:No separate judgment was delivered by the judges in this case.