TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
of 
of 
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of of 
All Case Laws
of of All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of <h1>Assessee's Provident Fund contribution allowed in full under Section 36(1)(iv).</h1> The Tribunal held that the contribution made by the assessee-company towards the scheme under the Employees' Provident Funds and Miscellaneous Provisions ... Provident Fund Issues Involved:1. Applicability of Rule 75 of the Income-tax Rules, 1962.2. Distinction between individual and representative capacity in shareholding.3. Applicability of Rule 75 to contributions under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952.4. Limits on employer's contribution under Section 36(1)(iv) of the Income-tax Act, 1961.5. Previous Tribunal decisions supporting the conclusions.Detailed Analysis:1. Applicability of Rule 75 of the Income-tax Rules, 1962:The primary issue is whether Rule 75 applies to the provident fund contributions made under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. The Income-tax Officer (ITO) held that Rule 75 limits the permissible contribution to Rs. 3,000, disallowing Rs. 3,632 as excess. The Commissioner (Appeals) supported this view, stating that Rule 75 applies to contributions made to any provident fund, including those under the Employees' Provident Funds and Miscellaneous Provisions Act. However, the Tribunal disagreed, concluding that Rule 75 governs only the 'Scheduled Provident Funds' under Part A of the Fourth Schedule and not the funds under the Employees' Provident Funds and Miscellaneous Provisions Act. The Tribunal emphasized that different sets of rules apply to these two types of provident funds.2. Distinction between Individual and Representative Capacity in Shareholding:The Tribunal examined whether the managing director's shareholding in his individual capacity should be distinguished from his shareholding as the karta of his Hindu Undivided Family (HUF). The Tribunal reversed the Commissioner (Appeals)'s conclusion that no distinction is necessary. Citing Section 2(31) of the Income-tax Act, which separately defines 'individual' and 'HUF,' the Tribunal held that for Rule 75 to apply, the employee must hold more than 10% of the total shareholding in his individual capacity. In this case, the managing director held only 293 shares individually, which is less than 10% of the total shareholding, thus Rule 75 does not apply.3. Applicability of Rule 75 to Contributions under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952:The Tribunal clarified that the rules governing 'Scheduled Provident Funds' do not apply to provident funds under the Employees' Provident Funds and Miscellaneous Provisions Act. The Tribunal reasoned that if both types of funds were governed by the same rules, there would be no need for separate legislation. The Tribunal also noted that the definition of 'recognised provident fund' under Section 2(38) includes both types of funds but does not imply that the same rules apply to both. Furthermore, the Tribunal highlighted that the protections and privileges under the Employees' Provident Funds and Miscellaneous Provisions Act, such as those in Section 10, do not extend to 'Scheduled Provident Funds.'4. Limits on Employer's Contribution under Section 36(1)(iv) of the Income-tax Act, 1961:The Tribunal examined Section 36(1)(iv), which allows deductions for employer contributions to a recognised provident fund subject to prescribed limits. The Tribunal concluded that these limits are intended for the purpose of recognising the provident fund and do not apply once the fund is recognised. Thus, the limits in Rule 75 do not govern contributions to provident funds under the Employees' Provident Funds and Miscellaneous Provisions Act. The Tribunal also noted that Section 36(1)(iv) concerns only the employer's contribution, not the employee's.5. Previous Tribunal Decisions Supporting the Conclusions:The Tribunal referred to several previous decisions to support its conclusions:- IT Appeal Nos. 1473 to 1475 (Madras Bench 'A', Hyderabad) for assessment years 1973-74 to 1975-76.- IT Appeal Nos. 1563, 1564, and 1575 (Hyderabad Bench 'B') in the case of ITO v. J. & J. Dechane Lab. (P.) Ltd. for assessment years 1978-79 to 1980-81.- IT Appeal Nos. 145 and 146 (Hyderabad Bench 'B') in the case of Nath Laboratories (P.) Ltd. v. ITO for assessment years 1977-78 and 1978-79.- ITO v. Raab Pipe Works (P.) Ltd. [1982] 1 SOT 198 (Madras Bench 'B').Conclusion:The Tribunal ultimately held that no part of the contribution made by the assessee-company towards the scheme under the Employees' Provident Funds and Miscellaneous Provisions Act should be disallowed. Therefore, the amount of Rs. 3,632 paid by the assessee-company as contribution towards the provident fund of its managing director should be allowed in full under Section 36(1)(iv). The appeal was allowed, reversing the Commissioner (Appeals)'s decision to disallow Rs. 2,132.
TaxTMI 
TaxTMI 
