2011 (1) TMI 1530

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....as erred in law in deleting the disallowance of Rs. 4.76 crores made by the AO u/s.36(1)(vii) of the Income tax Act, being the amount paid to Approved Superannuation Fund exceeding 27% salary of an employee in violation of Rule 87 of Income tax Rules. 2. On the facts and in the circumstances of the case, ld CIT (A) has erred in law in holding that the amount disallowed u/s.36(1)(vii) is allowable u/s.37(1) of the Income tax Act even though section 37(1) specifically provides that section 37(1) is not applicable to an expenditure being expenditure of the nature described in section 30 to 36 of the income tax Act." 3. The relevant material facts are like this. During the course of scrutiny assessment proceedings, the Assessing officer noti....

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....he assessee had to make payment to the superannuation trust. It was contended that the payment so made is eligible for deduction. 5. None of these submissions, however, impressed the Assessing Officer. He was of the view that the payment, to the extent it is in excess of 27% of the salary of the employee, is not an allowable deduction. He, accordingly, disallowed Rs. 4,76,06,000. Aggrieved, assessee carried the matter in appeal before us. Learned CIT (A) allowed the appeal of the assessee on this issue, and observed as follows: "I have duly considered the submissions of the AR and I find that in the case of CIT vs. Premier Cotton Spg. Mills ltd., excess gratuity contribution was allowed u/s.37, whereas u/s.36(1)(v), the same was not allo....

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....e Board may think fit to specify in cases where the contributions are not in the nature of annual contributions of fixed amounts or annual contributions fixed on some definite basis by reference to the income chargeable under the head 'Salaries' or to the contributions or to the number of members of the fund ;" 9. We may now refer to the Fourth Schedule. Part B of the Schedule deals with the approved superannuation funds. Conditions relating to the grant of approval and the procedure therefor are set out in these, two Parts. Rule 11 of Part B provides, that in addition to any power conferred by Part B, the CBDT may make rules, inter alia, limiting the ordinary annual contribution and any other contributions to an approved superannu....

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....nd. As a corollary to these limits having been prescribed, amounts paid in excess of such limits, towards initial contribution and for ordinary annual contribution, are not allowed as deduction. That is the only limitation for quantum of deduction under section 36(1)(iv). However, it is not in dispute that the amounts paid in excess of the 27% of salaries of the employees, are neither towards the ordinary annual contribution nor towards the initial contribution. This payment has been necessitated due to shortfall discovered in the course of actuarial valuation of the fund, and is in the nature of a one time exceptional payment to ensure that the superannuation fund is able to discharge its obligation. Its neither an annual contribution, nor....