1982 (7) TMI 126

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....mmitted default in payment of the contributions to the provident fund under the employee Provident Fund, Family Pension Fund Act, 1952, hereinafter referred to as the Provident Fund Act. Sec 14B of the Provident Fund Act provides that where an employer makes default in payment of the contribution, the appropriate authority authorised under the Act, may recover from the employer such damages, not exceeding the amount of arrears, as it may think fit to impose. In exercise of the powers under s. 14B the Regional Provident Fund Commissioner, Maharashtra and Goa, imposed on the assessee damages to the tune of Rs. 28,489. The assessee claimed deduction of this amount as a business expenditure. The claim was negatived by the ITO who held that the ....

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.... payable only on account of late payment, that it cannot be treated as a penalty and that the interest amount is, therefore, allowable as a deduction. 5. The Full Bench ruling of the Allahabad High Court in the case of Saraya Sugar Mills P. Ltd vs. CIT 1978 CTR (All) 329 : (1979) 116 ITR 387 (All) (FB) fully supports the contention of the Department. The nature of the damages ordered to be paid under s. 14B of the Provident Fund Act was one of the questions that arose for consideration before the Full Bench. It was held that the damages is a civil sanction, that the damages as well as the penalty payable are intrinsically of the same nature and that the interest paid to the Provident Fund Commissioner is not an admissible deduction. In t....

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.... Court thought that it will not be proper to sit on judgement over the ruling of the Allahabad High Court as the same was not in appeal before the Supreme Court. But it true that in the light of the ruling of the Supreme Court, the ruling of the Allahabad High Court with regard to the interest payable under s. 3(3) of the Sugarcane Purchase Act may no longer be good law. But the same cannot be said of the ruling of the Allahabad High Court with regard to the interest ordered to be recovered under the Provident Fund Act, because the ratio of the ruling of the Supreme Court will not apply to the interest ordered to be recovered under this Act. Sec. 3(3) of the U.P. Sugarcane Cess Act provided that if the cess was not paid by the specified dat....