Superannuation fund provision not taxable under Section 115WB: ITAT Chennai decision

The ITAT Chennai upheld the CIT(A)'s decision that the provision for the superannuation fund made by the assessee was not taxable under Section 115WB of the Income Tax Act as it did not constitute an actual contribution to an approved superannuation fund. The tribunal emphasized the need for actual contributions for taxability and cited precedents favoring the assessee. Consequently, the interest levied under Sections 115WJ(3) and 115WK was also not upheld. The Revenue's appeal was dismissed, and the CIT(A)'s order was affirmed on 20th February 2013.

---

---

Issues Involved:

1. Taxability of provision for superannuation fund u/s 115WB.
2. Applicability of interest u/s 115WJ(3) and 115WK.

Summary:

Issue 1: Taxability of provision for superannuation fund u/s 115WB

The Revenue's appeal challenges the order of the CIT(A) which held that the provision made by the assessee for Bharat Overseas Bank Ltd. Employees Pension Fund Trust does not amount to an actual contribution to an approved superannuation fund and hence, is not chargeable to tax u/s 115WB of the Income Tax Act, 1961. The CIT(A) reasoned that only actual contributions are taxable, not mere provisions in the accounts. The Revenue argued that the CIT(A) erred in this interpretation, citing the case of Federal Bank Ltd. vs. ACIT. However, the assessee supported the CIT(A)'s decision, referencing the ITAT Ahmedabad Bench's ruling in State Bank of Saurashtra vs. Addl. CIT, which held that fringe benefit tax applies only to actual contributions, not provisions.

The ITAT Chennai upheld the CIT(A)'s decision, agreeing that the mere provision does not attract tax u/s 115WB. The tribunal noted that the definition of fringe benefits in Section 115WB(1)(c) and the valuation in Section 115WC(1)(b) require actual contributions to an approved superannuation fund. The tribunal also emphasized that in cases of divergent judicial opinions, the one favoring the assessee should be adopted, citing the Supreme Court's decision in CIT vs. Vegetable Products Ltd.

Issue 2: Applicability of interest u/s 115WJ(3) and 115WK

The Assessing Officer had levied interest u/s 115WJ(3) and 115WK amounting to Rs. 23,52,302/- and Rs. 2,46,501/- respectively. However, since the primary issue of taxability of the provision was decided in favor of the assessee, the interest levied under these sections was also not upheld.

Conclusion:

The ITAT Chennai dismissed the Revenue's appeal and upheld the CIT(A)'s order, concluding that the provision for the superannuation fund does not attract fringe benefit tax as per the relevant sections of the Income Tax Act. The order was pronounced on 20th February 2013.

---