Provident fund transfer outside section 58K can still qualify as deductible business expenditure when irretrievably paid for business purposes.

Section 58K of the Income-tax Act, 1922 applied only where an employer transferred a provident fund to trustees in trust for that employer's own participating employees; because the statutory provident fund covered employees of multiple employers, that requirement was not met and section 58K did not apply. The amount transferred had been actually paid out in the relevant accounting year, had gone irretrievably out of the assessee's hands, and was incurred exclusively for business purposes. It was therefore allowable as a deduction in computing business profits under section 10(1) and section 10(2)(xv), and section 10(4)(c) did not bar the claim on the facts found.

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Issues: (i) Whether the transfer of the assessee's accumulated contribution to the provident fund to the Regional Provident Fund Commissioner attracted section 58K of the Income-tax Act, 1922. (ii) Whether, if section 58K did not apply, the amount was allowable as a deduction in computing business profits under section 10(1) or section 10(2)(xv) of the Income-tax Act, 1922.

Issue (i): Whether the transfer of the assessee's accumulated contribution to the provident fund to the Regional Provident Fund Commissioner attracted section 58K of the Income-tax Act, 1922.

Analysis: Section 58K applies where an employer transfers a provident fund or part of it to trustees in trust for the employees participating in that fund, and the amount so transferred is then treated as capital expenditure. The statutory provident fund created under the Provident Funds Act was not confined to the employees of the assessee alone but covered employees of many employers. The essential requirement that the transfer be to trustees in trust for the employees participating in the assessee's own fund was therefore not satisfied.

Conclusion: Section 58K did not apply to the transfer in question.

Issue (ii): Whether, if section 58K did not apply, the amount was allowable as a deduction in computing business profits under section 10(1) or section 10(2)(xv) of the Income-tax Act, 1922.

Analysis: The amount was actually paid out in the relevant accounting year and had gone irretrievably out of the assessee's hands. It was incurred exclusively for the purposes of the business and satisfied the requirements of the deduction provisions. Section 10(4)(c) did not bar the claim on the facts found.

Conclusion: The amount was allowable as a deduction under section 10(2)(xv) and in computing business profits under section 10(1).

Final Conclusion: The transfer was outside section 58K, and the assessee was entitled to deduction of the amount as business expenditure, so the revenue's appeal failed.

Ratio Decidendi: Section 58K applies only when a provident fund maintained by an employer is transferred to trustees in trust for that employer's own participating employees; where the statutory fund is not so confined, the provision is inapplicable, and an amount irretrievably expended for business purposes may be deductible as business expenditure.

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