TaxTMI 
TaxTMI 
2026 (8) TMI 1485
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....), is an Artificial Juridical Person with a history of providing essential port services since its establishment in the year 1870. For the assessment year 2018-19, the assessee filed its original return of income on September 27, 2018 and a revised return on March 28, 2019. This return was initially processed under the provisions of section 143(1) of the Income Tax Act, 1961. Subsequently, the case was scrutinised under the Computer Assisted Scrutiny Selection (CASS) system, leading to the issuance of a notice under section 143(2) on September 22, 2019. The assessment was eventually completed by the Assessing Officer (A.O.) under section 143(3) read with section 144B of the Act through an order dated September 24, 2021. In the said assessment order, the A.O. determined the total income to be Rs. 876,16,93,450, having incorporated substantial additions and disallowances. These included a disallowance of Rs. 710,68,55,297/- regarding contributions to the Superannuation Fund under section 37 read with section 43B. A disallowance of Rs.33,11,01,366/- for contributions to the approved Gratuity Fund under section 37(1) read with Rule 87 and a disallowance of Rs. 8,38,35,219/- for belated....
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.... facts and in the circumstances of the case, the Hon'ble ITAT erred in upholding the order of the Ld. CIT(Appeals), NFAC, Delhi deleting the disallowance of Rs. 33,11,01,366/ made by the A.O. on account of contributions towards Gratuity Fund in excess of limit fixed under Rule 103 by considering it as an exceptional onetime payment and failing to consider that such excess contribution to meet shortfall in fund balance was a regular practice over past several years and as such was rightly considered by the Α.Ο. as regular contribution? iii. Whether on the facts and in the circumstances of the case, the Hon'ble ITAT erred in upholding the order of the Ld. CIT(Appeals), NFAC, Delhi by placing reliance on the decision of the Hon'ble Calcutta High Court in the case of Exide Industries reported in [2023] 146 taxmann.com 21 (Cal) and failing to appreciate that the facts of the instant case are different from that of Exide Industries as in the case of the assessee, the excess contribution to meet shortfall in fund balance was a regular practice over past several years and not a onetime exception? iv. Whether on the facts and in the circumstances ....
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.... (supra), which established that the statutory ceiling of Rule 87 does not apply to extraordinary contributions made to address actuarial deficits. 8. The revenue argued before this Court that the case of Exide Industries Ltd. (supra) is distinguishable because the assessee's practice of funding shortfalls was a regular, recurring method of operation over past years, rather than an exceptional one-time payment. This Court is unable to accept the revenue's contention. The legal nature of a contribution is defined by its purpose i.e., remedying an actuarial deficit and not by how many years the deficit takes to be fully addressed. A persistent deficit caused by past funding constraints cannot convert ad hoc gap-filling payments into ordinary annual contributions. To superimpose the Rule 87 ceiling on necessary, actuarially-backed funding of an approved fund would compromise the solvency of the fund and is contrary to the scheme of Section 36(1)(iv) of the Act. The ITAT committed no error in upholding the deletion of the disallowance. We answer substantial questions of law (1) and (3) in negative, i.e., against the appellant revenue and in favour of the respondent assessee.....
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....roceedings to disregard the approved status of the fund and to superimpose Rule 103 as a deduction-disallowance mechanism contrary to as held in Eastern Equipment (supra). Restricting the deduction to 8.33% when the statutory provision does not envisage such a cap especially for payments intended to maintain the solvency of the fund based on actuarial requirements would be contrary to the intent of the Act. Therefore, the ITAT correctly appreciated that the ceiling fixed under the rules does not apply to this specific type of contribution. We answer substantial question (2) in the negative, i.e., against the revenue and in favour of the assessee. 11. Third, the ITAT's decision to delete the Rs. 8,38,35,219/- disallowance regarding belated employee contributions to PF and ESI is legally sound. The A.O. had initially made this addition under Section 36(1)(va), relying on the Tax Audit Report which flagged the deposits as "delayed" based on an artificial deadline being 15th of the month. However, Section 36(1)(va), read with its Explanation, makes it clear that a disallowance can only arise where the employees' contribution is not credited by the 'due date' that is defi....