TaxTMI 
TaxTMI 
2017 (6) TMI 1234
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.... 1,33,419/- which was made by the AO by not allowing deduction towards payment of PF and gratuity. 3. Brief facts of the case are that the assessee is a cooperative society, It has filed its return of income on 23.8.2010 declaring a total income at NIL. On scrutiny of the accounts, it revealed to the AO that the assessee has debited the following amounts: (a) Employees' contribution to PF : Rs. 52,752/- (b) Employer's contribution to PF : Rs.52,752/- (c) Contribution to gratuity fund : Rs.27,915/- 4. This claim of the assessee was disallowed by the AO by assigning the following reasons: "5.1. I have carefully gone through the facts of the case and the arguments put forth by the Id. authorized representative ....
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....t the Id. Revenue authorities have failed to take cognize sections 71 and 72 of the Gujarat Cooperative Societies Act, 1961 ("GCSA" for short). The GCSA authorizes assessee to establish a provident fund for its employees which will be governed by Employees' Provident Fund Act, 1952. This fund would be independent to assessee and the assessee could not use this fund for its business purposes. Safeguards have been made. Section 2(38) of the Income Tax Act also recognizes provident fund established under scheme framed under the Employees' Provident Fund Act. Thus, it was a valid fund constituted by the assessee and the contribution made to tins fund deserves to be allowed to the assessee. He drew our attention towards sections 71 and 7....
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....h provident fund shall not be used in the business of the society, nor shall it form part of the assets of the society; but shall be invested under the provisions of section 71 and shall be administered in the prescribed manner. 2. Notwithstanding anything contained in sub-section (1) a provident fund established by a society to which the Employees' Provident Fund Act, 1952 (XIX of 1952), is applicable, shall be governed by that Act." 8. Similarly, it is pertinent to take note of sections 36(1), 40A(9) and section 2(38) of the Income Tax Act. It read as under: "Section 36 (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein,- in computing the income referred to ....
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....and includes a provident fund established under a scheme framed under the Employees' Provident Funds Act, 1952 (19 of 1952);" A conjoint reading of these sections would show that section 2(38) provides definition of recognized fund. According to this definition, a recognized fund would be considered, if it has been recognized by the Pr. Commissioner, Chief Commissioner, Joint Commissioner and it continues to be recognized by these authorities in accordance with rule contained in part-A of the IVth Schedule. Definition further provides that if provident fund established under scheme formulated under the Employees' Provident Fund Act, 1952 then they would also be included in the provident funds which are stated to be recognized by t....