Provident fund deduction fails where distributions follow amalgamation and court orders, not trustee payment under the fund rules.

Section 58K(2) of the Indian Income-tax Act, 1922, applies only where an employer-maintained provident fund is transferred to trustees and, on cessation of employment, the trustees pay the employee the accumulated balance in the ordinary course under the fund rules. On the stated facts, the provident funds were distributed after amalgamation pursuant to court orders, when the trust had already become extinct and the funds had been liquidated. That mode of payment did not satisfy the statutory requirement of payment of the accumulated balance due under the section. Section 10(2)(xv) also did not independently sustain the claim. The deduction was therefore unavailable.

---

---

Issues: Whether the assessee-bank was entitled to deduction under section 58K(2) of the Indian Income-tax Act, 1922, in respect of amounts distributed to employees from the amalgamating banks' provident funds, and whether section 10(2)(xv) could independently support the claim.

Analysis: Section 58K(2) applies where an employer maintains a provident fund, transfers it to trustees, and the trustees subsequently pay an employee the accumulated balance due on cessation of employment. The provision contemplates the continued existence of the fund, the trustees, the employer, and the employee relationship at the time of payment, together with payment in the ordinary course under the fund regulations. Here, the provident funds were not paid out by trustees on termination of employment, but were distributed pursuant to court orders after the trust had become extinct on amalgamation and the funds were liquidated under the provident fund rules. Such a distribution was not payment of the accumulated balance due within the meaning of the section. Since section 10(2)(xv) could not operate independently on the facts, and the requirements of section 58K(2) were not satisfied, the statutory deduction was unavailable.

Conclusion: The assessee was not entitled to deduction under section 58K(2) or section 10(2)(xv) of the Indian Income-tax Act, 1922.

---