TaxTMI 
TaxTMI 
2011 (3) TMI 604
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....he liability on account of pension on the basis of the provisions made should be allowed for the period till the death of the employees or all liabilities should be limited for the period of accounting year relevant to this assessment year?" The following facts are not in dispute: (a) The assessee claimed deduction of Rs.1,43,35,000/- on account of unfunded actuarial liability for pension in respect of certain categories of employees. There is no dispute that the assessee maintained its account on mercantile basis. It is also admitted that out of the aforesaid amount claimed as actuarial liability of pension under the aforesaid Head, the amount actually paid was to the extent of Rs.23,04,228/- only and the same was included under the Head as Staff Welfare Expenses. (b) The Assessing Authority disallowed the aforesaid claim of deduction by passing the following order: "The assessee has debited a sum of Rs.15,50,000 in respect of Death Pension which is included under the head "Staff Welfare Expenses". It has been held by the CIT, WB-II in his order under Section 263 of the Income Tax Act for Asstt. Years 1981-82 to 1983-84 that the amount of death pension is not admissible. On th....
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....issioner of Income tax reported in (1954) 26 ITR 27 (SC). 7. Metal Box Company of India Ltd vs. Their workmen reported in (1969) 73 ITR 53 (SC). 8. CIT vs. Turner Morrison & Co. Ltd. reported in (1978) 114 ITR 629 (CAL). 4. Mr. Agarwal, the learned advocate appearing on behalf of the Revenue, has, however, opposed the aforesaid contention of Dr. Pal and has contended that in view of the provisions contained in sub-section (9) of Section 40A of the Income-tax Act, 1961 inserted by the Finance Act, 1984 with retrospective effect from April1, 1980, only such deduction should be allowed which exists for the purpose and to the extent provided by or under Clause (iv) or Clause (v) of subsection (1) of Section 36 of the Act or as required by or under any other law for the time being in force. According to Mr. Agarwal, a perusal of the Clauses (iv) and (v) of Section 36(1) referred to in sub-section (9) of Section 40A of the Act would show that the deductions that are to be allowed to an employer are contributions towards a recognized provident fund or an approved superannuation fund or by way of contribution towards approved gratuity fund created by the employer for the exclusive benef....
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.... section shall have effect notwithstanding anything to the contrary contained in any other provision of this Act relating to the computation of income under the head "Profits and gains of business or profession". *********************************************************************************** (9) No deduction shall be allowed in respect of any sum paid by the assessee as an employer towards the setting up or formation of, or as contribution to, any fund, trust, company, association of persons, body of individuals, society registered under the Societies Registration Act, 1860 (21 of 1860), or other institution, for any purpose, except where such sum is so paid, for the purposes and to the extent provided by or under clause (iv) or clause (v) of sub-section (1) of Section 36 or, as required by or under any other law for the time being in force. (Emphasis supplied by us). 7. On a conjoint reading of those two sections of the Act, we find substance in the contention of Mr. Agarwal, the learned counsel appearing on behalf of the Revenue, that the amount of liability alleged to have accrued to the employer towards an unapproved scheme of superannuation fund for the payment to the ....
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....ny souvenir, brochure, tract, pamphlet or the like published by a political party." (Emphasis supplied by us). 10. In the case before us, first, the liability created by the resolution is although not covered by the instances indicated in Section 36, yet, is definitely of the nature of the liabilities mentioned therein and therefore, being of the same nature, it must conform to those provisions in order to get benefit of such deduction. The object of the legislature is to give benefit of deduction of expenditure to those items and to the extent prescribed in Sections 30 to 36 and not to give such deduction to any item, although of those natures but not coming within those sections. In other words, expenditures of the natures mentioned in Sections 30 to 36 of the Act must conform to those provisions in order to get benefit; otherwise, such benefit would be refused. Since it is impossible to conceive of all types of business expenditure, the legislature in its wisdom created a residuary provisions thereby providing the scope of deduction only to those other expenditure which are not of the nature provided in Sections 30 to 36 and at the same time, the same must not also be of the n....
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....by making payment. 14. We now propose to deal with the decisions cited by Dr. Pal. In the case of Bharat Earth Movers vs. Commissioner of Income-tax (supra), the question before the Supreme Court was whether for the relevant Assessment Year 1978-79, the provision for meeting the liability of leave encashment by the employees was liable to deduction. The Supreme Court answered the question in affirmative as the liability was not a contingent one. In the case before us we are concerned with the question whether a deduction not falling under the approved superannuation scheme as provided in Section 36 of the Act and at the same time is also reversible by a subsequent resolution is eligible for deduction on actuarial basis. The Supreme Court had in that decision no occasion to deal with the effect of Section 40A (9) of the Act or of Section 37 of the Act. Therefore, the said decision has no application to the facts of the present case. 15. In the case of Commissioner of Income-tax, West Bengal-II vs. National Insurance Co. of India (supra), the question was whether for the relevant Assessment Year 1971-72, the provisions of pension represented an accrued liability and was an ad....
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....ax vs. Bharat Petroleum Corporation Ltd (supra), the question was whether the department was right in disallowing the claim of the assessee for deduction of Rs.2,60,283/- being staff sports and welfare expenses under Section 40A (9) of the Act. The Division Bench of the Bombay High Court answered the question in the negative with the following observations: "Bharat Petroleum Corporation is a Central Government Undertaking. It has incorporated a club, essentially to carry on staff welfare activities. Under clause 28, Bharat Petroleum Corporation Ltd. had a right to issue directives to the Club which were binding on the Club. At times, the members of the Club who were the employees of Bharat Petroleum Corporation, took part in tournaments held outside the club premises like Times Shield in cricket. On such occasions, the assessee corporation used to reimburse expenses incurred by the Club. This is a finding of fact recorded by the Tribunal. In the circumstances, section 40 A (9) is not applicable. No substantial question of law arises. Hence, our answer to the aforesaid question no. 2 is in the negative, i.e. in favour of the assessee against the department." 18. In the said ....
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.... SCC 283 at page 296, the above principle would not apply after the insertion of Section 40-A(7) with effect from April 1, 1973. At paragraph 42 of the judgment, it has been pointed out that the principles of commercial accounting, mentioned above, which formed the basis of the judgment in Metal Box Co. of India (supra), were affirmed by the judgment of the Supreme Court in Shree Sajjan Mills vs. CIT reported in (1985) 4 SCC 590 up to April 1, 1973. We, therefore, find that the decision of Metal Box (supra), is of no assistance to the appellants before us and the aforesaid observations of the Supreme Court in the subsequent decision in the case of Rotork Control India Private Limited (supra), go against the contention of Dr. Pal. 21. In the case of CIT vs. Turner Morrison & Co. Ltd. reported in (1978) 114 ITR 629 (CAL), the contribution of assessee to a provident fund in Pakistan where it carried on its business and where such contribution was recognised but not in India was found to be deductable under Section 37(1) of the Act for computation of foreign income. It appears that the Division Bench did not give any detailed reason in arriving at such conclusion but simply relied upo....
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....nsfer the accumulated balances of the Provident Fund, if any, which had been maintained by them. Similarly, trustees of the private Provident Fund constituted by an employer were also required to transfer the accumulated balances to the statutory Provident Fund. Such employers were further required to make their own annual contributions according to the prescribed limit to that fund. The Board of trustees and the Officers administering the fund were required to open a Provident Fund account and in that account a separate account was maintained of each member showing the balance to his credit containing the contributions of the employer. The High Court was of the view that a trust in its true sense had not been constituted by the Provident Funds Act or the Scheme and that the transfer was not to the trustees but to the fund. The first question was answered in the negative and in favour of the assessee. The answer to the second question was given in the affirmative. It held that the deduction claimed was allowable under Section 10(2)(xv) and that the provisions of Section 10(4)(c) did not operate as a bar to the claim made by the assessee for deduction of the amount in question. On a....