Provident Fund withdrawal adjustment held unsustainable for own contribution where no prior deduction was claimed.

ITAT Chandigarh examined whether a rectification adjustment on withdrawal from an Employees' Provident Fund could be sustained for the assessee's own contribution. The principle under Rule 9 of Part A of the Fourth Schedule applies only where deduction for that contribution had been claimed in earlier years and a corresponding disallowance was required then. As no deduction under section 80C had been claimed earlier against the assessee's own contribution, the adjustment to that extent was held unjustified and deleted. The taxable treatment of the employer's contribution and interest component remained unchanged.

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Issues: Whether the adjustment made in rectification proceedings in respect of withdrawal from the Employees' Provident Fund was sustainable to the extent of the assessee's own contribution, where no deduction under section 80C had been claimed in earlier years.

Analysis: The withdrawal comprised the assessee's contribution, employer's contribution, and interest components. The interest and employer's contribution were accepted as taxable. For the assessee's own contribution, the governing principle under Rule 9 of Part A of the Fourth Schedule applies only where deduction in respect of such contribution had been claimed in earlier years and would then require corresponding disallowance in those years. The record showed that no deduction under section 80C had in fact been claimed against those contributions in earlier years.

Conclusion: The adjustment to the extent of the assessee's own contribution was not justified and was deleted, while the remaining taxable components were left undisturbed.

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