Recognised provident fund withdrawals fall under the Fourth Schedule, and estimated tax liability must be recomputed employee-wise.

A provident fund established under the Employees Provident Funds Act, 1952 was treated as a recognised provident fund for income-tax purposes, so premature withdrawals fell under the Fourth Schedule and related TDS provisions rather than section 10(11). The Tribunal rejected the view that Rule 1 of Part A excluded such withdrawals, noting that the scheme's withdrawal conditions did not disapply the Income-tax Act. On computation, a flat 50% estimate was found unsustainable without employee-wise details; the matter was remanded for fresh computation limited to pre-five-year withdrawals, with credit for tax already paid and guidance from section 192A.

---

---

Issues: (i) Whether withdrawals from the Employees Provident Fund were governed by section 10(11) or by the Fourth Schedule to the Income-tax Act, 1961 for the purpose of tax deduction at source; (ii) Whether the Assessing Officer was justified in estimating the liability on a 50% basis and whether the matter required fresh computation with credit for tax already paid by the employees.

Issue (i): Whether withdrawals from the Employees Provident Fund were governed by section 10(11) or by the Fourth Schedule to the Income-tax Act, 1961 for the purpose of tax deduction at source.

Analysis: The recognised provident fund definition in section 2(38) specifically includes a provident fund established under a scheme framed under the Employees Provident Funds Act, 1952. Section 10(12) expressly brings the accumulated balance due to an employee in a recognised provident fund within the scheme of Rule 8 of Part A of the Fourth Schedule. The exclusion in Rule 1 of Part A of the Fourth Schedule applies to provident funds governed by the Provident Funds Act, 1925 and not to the Employees Provident Fund scheme. Paragraph 69 of the Employees Provident Funds Scheme, 1952 regulates withdrawal conditions but does not exclude the operation of the income-tax provisions. The plea that section 10(11) governed the matter was therefore rejected.

Conclusion: The withdrawals were held to fall under the Fourth Schedule to the Income-tax Act, 1961 and not under section 10(11).

Issue (ii): Whether the Assessing Officer was justified in estimating the liability on a 50% basis and whether the matter required fresh computation with credit for tax already paid by the employees.

Analysis: The Tribunal held that the Assessing Officer could not estimate that 50% of the withdrawals were liable to tax without the required employee-wise details. The computation had to be made only in respect of withdrawals made before completion of five years of continuous service, and the effect of the Supreme Court ruling on tax payment by deductees had also to be considered. The Tribunal further directed that the benefit of section 192A should be used as guidance for computation, including the monetary threshold and the rate where PAN was furnished.

Conclusion: The estimation was set aside and the matter was remanded to the Assessing Officer for fresh computation.

Final Conclusion: The appeals succeeded only to the extent of remand for recomputation, while the substantive view that the Employees Provident Fund scheme is covered by the recognised provident fund provisions under the Income-tax Act was sustained.

Ratio Decidendi: A provident fund established under the Employees Provident Funds Act, 1952 is a recognised provident fund for income-tax purposes, so premature withdrawals are governed by the Fourth Schedule and related TDS provisions, not by section 10(11).

---