Madras High Court
The Commissioner Of Income Tax vs M/S.Tamilnadu Maritime Board on 8 October, 2020
Author: T.S.Sivagnanam
Bench: T.S.Sivagnanam, V.Bhavani Subbaroyan
T.C.A.No.287, 288, 296 & 298 of 2020
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 08.10.2020
CORAM
THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM
and
THE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN
T.C.A.Nos.287, 288, 296 & 298 of 2020
The Commissioner of Income Tax,
Chennai .. Appellant in all T.C.As
Versus
M/s.Tamilnadu Maritime Board
No.171, South Kesavaperumal Puram
Off Greenways Road, Raja Annamalaipuram
Chennai – 600 028
PAN:AAATT9514E .. Respondent in all T.C.As
Prayer in T.C.A.No.287 of 2020:- Tax Case Appeal filed under Section 260-A
of the Income Tax Act, 1961, against the order of the Income Tax Appellate
Tribunal, Madras 'B' Bench, Chennai dated 22.09.2017 made in
I.T.A.No.1657/Mds/2017 relating to the Asst Year 2007-08.
Prayer in T.C.A.No.288 of 2020:- Tax Case Appeal filed under Section 260-A
of the Income Tax Act, 1961, against the order of the Income Tax Appellate
Tribunal, Madras 'B' Bench, Chennai dated 22.09.2017 made in
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T.C.A.No.287, 288, 296 & 298 of 2020
I.T.A.No.1555/Mds/2017 relating to the Asst Year 2009-10.
Prayer in T.C.A.No.296 of 2020:- Tax Case Appeal filed under Section 260-A
of the Income Tax Act, 1961, against the order of the Income Tax Appellate
Tribunal, Madras 'B' Bench, Chennai dated 22.09.2017 made in
I.T.A.No.1658/Mds/2017 relating to the Asst Year 2009-10.
Prayer in T.C.A.No.298 of 2020:- Tax Case Appeal filed under Section 260-A
of the Income Tax Act, 1961, against the order of the Income Tax Appellate
Tribunal, Madras 'B' Bench, Chennai dated 22.09.2017 made in
I.T.A.No.1659/Mds/2017 relating to the Asst Year 2011-12.
For Appellant :M/s.R.Hemalatha
[In all appeals]
For Respondent : M/s.S.Sriniranjani
[In all appeals]
JUDGMENT
Common Judgment was delivered by T.S.Sivagnanam,J.
These appeals have been filed by the Revenue under Section 260 A of the Income Tax Act, 1961 ('the Act' for brevity), challenging the common order dated 22.09.2017 passed by the Income Tax Appellate Tribunal ('the Tribunal' for brevity), Madras 'B' Bench, Chennai, made in I.T.A.No.1657/Mds/2017, 2/12 http://www.judis.nic.in T.C.A.No.287, 288, 296 & 298 of 2020 I.T.A.No.1555/Mds/2017, I.T.A.No.1658/Mds/2017, I.T.A.No.1659/Mds/2017 for the Assessment Years 2007-08, 2009-10, 2009-10, 2011-12 respectively. The Revenue has raised the following Substantial Questions of Law for consideration:
I.T.A.No.1657/Mds/2017:
1. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the contribution made towards superannuation fund was to be treated as business expenditure and is to be allowed u/s.37 of the Incometax Act even though it was an unapproved Fund during the year and hit by the provisions of Section 36(1)(iv) r.w.s.40A(9)?
2. Whether the reasoning and finding of the Tribunal is proper especially when as per Section 36(1)(iv) the employer's contribution towards recognized provident fund or approved superannuation alone is to be allowed as a deduction subject to the conditions prescribed thereunder which is not the case on hand?
I.T.A.No.1555/Mds/2017:
1.Whether the Tribunal was correct in holding that the CIT(A) cannot enhance the assessment on a reference made by the AO especially when the provision of Section 251(1)(a) confers the power to enhance on the CIT(A) and there is no bar in the AO from 3/12 http://www.judis.nic.in T.C.A.No.287, 288, 296 & 298 of 2020 reporting the short coming in the order passed for the purpose of enhancement?
2. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the contribution made towards superannuation fund was to be treated as business expenditure and is to be allowed u/s.37 of the Incometax Act eventhough it was an unapproved Fund during the year hit by Section 36(1)(iv) r.w.s.40A(9)?
3. Whether the reasoning and finding of the Tribunal is proper especially when as per Section 36(1)(iv) the employer's contribution towards recognized provident fund or approved superannuation alone is to be allowed as a deduction subject to the conditions prescribed thereunder which is not the case on hand?
I.T.A.No.1658/Mds/2017:
1.Whether the Tribunal was correct in holding that the CIT(A) cannot enhance the assessment on a reference made by the AO especially when the provision of Section 251(1)(a) confers the power to enhance on the CIT(A) and there is no bar in the AO from reporting the short coming in the order passed for the purpose of enhancement?
2. Whether on the facts and in the circumstances of the 4/12 http://www.judis.nic.in T.C.A.No.287, 288, 296 & 298 of 2020 case, the Income Tax Appellate Tribunal was right in holding that the contribution made towards superannuation fund was to be treated as business expenditure and is to be allowed u/s.37 of the Incometax Act eventhough it was an unapproved Fund during the year hit by Section 36(1)(iv) r.w.s.40A(9)?
3. Whether the reasoning and finding of the Tribunal is proper especially when as per Section 36(1)(iv) the employer's contribution towards recognized provident fund or approved superannuation alone is to be allowed as a deduction subject to the conditions prescribed thereunder which is not the case on hand?
I.T.A.No.1659/Mds/2017:
1.Whether the Tribunal was correct in holding that the CIT(A) cannot enhance the assessment on a reference made by the AO especially when the provision of Section 251(1)(a) confers the power to enhance on the CIT(A) and there is no bar in the AO from reporting the short coming in the order passed for the purpose of enhancement?
2. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the contribution made towards superannuation fund was to be treated as business expenditure and is to be allowed u/s.37 of the 5/12 http://www.judis.nic.in T.C.A.No.287, 288, 296 & 298 of 2020 Incometax Act eventhough it was an unapproved Fund during the year hit by Section 36(1)(iv) r.w.s.40A(9)?
3. Whether the reasoning and finding of the Tribunal is proper especially when as per Section 36(1)(iv) the employer's contribution towards recognized provident fund or approved superannuation alone is to be allowed as a deduction subject to the conditions prescribed thereunder which is not the case on hand?
2. We have elaborately heard M/s.R.Hemalatha, learned Senior Standing counsel for the Revenue and M/s.S.Sriniranjani, learned counsel appearing for the respondent/assessee.
3. We need not labour much to go into the facts of the case as similar question has been decided by the Division Bench of this Court on identical facts in the case of Commissioner of Income Tax v. Kattabomman Transport Corporation Limited [(268 ITR 507 Mad)].
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4. In fact, the Tribunal had decided the above issue in favour of the assessee by referring to the assessee's own case in I.T.A.No.862/Mds/2015 for the Assessment Year 2010-11, which was decided in favour of the assessee by the Tribunal, following the decision in the case of Kattabomman Transport Corporation Limited (cited supra). The operative portion of the said judgment reads as follows:
“There are two references before us one by the Revenue and the other at the instance of the assessee. Both the references relate to the assessments made for the year 1976-77 under the provisions of the Income-tax Act, 1961.
2. Two questions referred at the instance of the revenue are :
"1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the sum of Rs. 9,75,485 was allowable as a deduction with reference to the Employees' Provident Funds Act, 1952, read with section 2(38) of the Income-tax Act, 1961 ?
2. Whether, on the facts and in the circumstances of the case, the provision made for contribution of Rs. 1,03,251 towards the provident fund maintained by the Government of Tamil Nadu on account of Government employees sent on deputation to the asses see-corporation is an allowable deduction in computing its income ?"
3. We shall consider the questions referred to us at the instance of the revenue before we proceed to consider the questions referred to us at the instance of the assessee.
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4. The first question relates to the deductibility of the amount paid as contribution to the provident fund maintained by the assessee which admittedly has not been recognised by the Commissioner of Income-tax, as the recognition of the fund either under the Act or under the Employees' Provident Funds Act is a pre-condition for allowing any contribution to the provident fund as a deduction in view of section 2(38) of the Act and section 36 of the Act.
5. Section 2(38) of the Act defines 'recognised provident fund' as meaning a provident fund which has been and continues to be recognised by the Chief Commissioner or Commissioner in accordance with the rules contained in Part A of the Fourth Schedule, and includes a provident fund established under a scheme framed under the Employees' Provident Funds Act, 1952 (Act 19 of 1952). Section 36(1)(iv) permits the deduction or contribution made only to a recognised provident fund or an approved superannuation fund.
Under section 2(38) of the Act, it is only a scheme framed under the Employees' Provident Funds Act which is deemed to be an approved provident fund for the purpose of the Income-tax Act even though such a fund has not received the express approval of the Commissioner of Income-tax.
6. The assessee herein did not claim that fund to which contribution has been made was one set up under the scheme of the Employees' Provident Funds Act. On the other hand, it sought exemption from the provisions of that Act for the scheme framed by it on the ground that the benefits available to the employees under that scheme were not less than those available under the provisions of the Employees' Provident Funds Act. The order granting exemption from the provisions of the Act, cannot be treated as an order recognising the scheme as one framed under the Act. The very object of exemption granted under section 17 of the Employees' Provident Funds Act is to render the scheme immune from the application of the provisions of the Employees' 8/12 http://www.judis.nic.in T.C.A.No.287, 288, 296 & 298 of 2020 Provident Funds Act, subject to such conditions as may be prescribed while granting such exemption.
7. The scheme referred to in section 2(38) of the Income-tax Act is a scheme either framed under the Employees' Provident Funds Act, or a scheme approved by the Commissioner of Income-tax. The assessee's claim does not answer either of these requirements for this assessment year. A scheme which has been exempted from the provisions of the Provident Funds Act does not become a scheme framed under that Act. The words under the Act clearly imply and require that the scheme is one which is subject to the Act. The scheme to which an Act is rendered inapplicable by virtue of exemption is not a scheme framed under the Act.
8. Our answer to the first question therefore is in favour of the revenue and against the assessee.
9. So far as the second question is concerned, that question has to be answered in favour of the assessee. The amount paid by the assessee to the Government in order to enable the Government to credit the amount so paid to the provident fund account of the Government employees who were at that point of time working in the Corporation, is part of the amount payable by the Corporation to the Government for availing of the services of Government employees. The fact that the Government after receipt of the amounts from the Corporation, chooses to credit that amount to the provident fund account of the concerned employee of the Government, does not render the payment paid by the corporation a contribution by the Corporation to the provident fund maintained by the Government for the benefit of its employees. The amount so paid to the Government is not in any way affected by section 36 of the Act. The payment so made is deductible under section 37 of the Act, being part of the business expenditure of the assessee. This question is therefore answered in favour of the assessee and against the revenue.
10. The questions referred to us at the instance of the 9/12 http://www.judis.nic.in T.C.A.No.287, 288, 296 & 298 of 2020 assessee are :
"1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that a sum of Rs. 82,500 paid towards unexpired portion of the route permit was not a revenue expenditure ?
2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the payment of Rs. 3,50,000 to the Chief Minister's Drought Relief Fund was not an allowable deduction ?"
The first of these questions is covered against the assessee by a judgment of this Court in the case of Anna Transport Corpn. Ltd. v. CIT[1995] 215 ITR 800 wherein, it was held that the amount paid towards unexpired portion of the route permit is not a revenue expenditure. Following that judgment and for the reasons stated therein, we answer this question against the assessee and in favour of the revenue.
The second question referred to us at the instance of the assessee is required to be answered in favour of the assessee in the light of the decision rendered by this Court in the case of CIT v. Cheran Transport Corpn. Ltd.[1996] 219 ITR 203,1 , wherein a similar donation was held to be an allowable deduction. Following that judgment and for the reasons stated therein, we answer the second question in favour of the assessee and against the revenue.”
5. Thus, by applying the above decision, the Substantial Questions of Law framed for consideration are answered against the Revenue and in favour of the assessee.
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6. In the result, the Tax Case Appeals are dismissed. No costs.
(T.S.S.,J) (V.B.S.,J) 08.10.2020 Kak Index: Yes / No Internet: Yes / No To The Income Tax Appellate Tribunal, 'B' Bench, Chennai.
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AND V.BHAVANI SUBBAROYAN, J.
Kak T.C.A.No.287, 288, 296 & 298 of 2020 08.10.2020 12/12 http://www.judis.nic.in