Provident fund deduction depends on statutory payment and tax-deduction conditions, not recognition alone.

Employer contributions to a provident fund are not deductible merely because the fund is recognised under the Employees' Provident Funds Act, 1952; section 9 of that Act may deem the fund recognised for income-tax purposes, but deductibility still depends on compliance with the allowance conditions under section 10(2)(xv) read with section 10(4)(c) of the Indian Income-tax Act, 1922. The decisive inquiry includes whether the employer made the required arrangements for deduction of tax at source from fund payments and whether the credit entries amount to payment in law. Recognition alone is therefore insufficient, and the statutory conditions governing payment and tax-deduction arrangements must be examined on the facts.

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Issues: Whether contributions made by the assessee to an employees' provident fund were allowable as a deduction, and whether the fund's recognition under the Employees' Provident Funds Act made the Commissioner's recognition order immaterial for that purpose.

Analysis: The fund was created under the Employees' Provident Funds Act, 1952, and by virtue of section 9 of that Act it was to be deemed a recognised provident fund for the purposes of the Indian Income-tax Act, 1922. On that footing, the Commissioner's later recognition order was treated as lacking practical significance. The question of deduction, however, could not be answered merely by reference to recognition, because the relevant allowance had to be examined under section 10(2)(xv) read with section 10(4)(c) of the Indian Income-tax Act, 1922. The record did not contain a finding whether the employer had made the required arrangements for deduction of tax at source from payments made from the fund, nor did it clearly establish the nature of the credit entries treated as payment.

Conclusion: Recognition of the fund was held to be immaterial to the decisive inquiry, but the claim to deduction could not be finally allowed or disallowed on the existing record and further findings were required.

Final Conclusion: The matter was sent back to the Tribunal to record the necessary findings on the statutory conditions governing deductibility of the employer's contributions.

Ratio Decidendi: Where deduction of employer contributions to a provident fund depends on compliance with the statutory conditions for allowance, the issue cannot be decided on recognition alone and must be determined on the basis of the requirements governing payment and tax-deduction arrangements.

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