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