Law: Income Tax Act, 1961

Section: 36(1)(iv),2(38)

Section 36(1)(iv) of the Income-tax Act, 1961 - Provident Fund - Contribution to recognised provident funds - Assessment year 1977-78 - In assessment year 1977-78, provident fund setup by assessee had not been recognized and recognition was granted, during pendency of reference, in 1998 with effect from date of establishment of fund - Whether for assessment year 1977-78 deduction on account of contribution to fund would have to be allowed - Held, yes FACTS The ITO disallowed the contribution made by the assessee to the Provident Fund on the ground that it was made towards an unrecognised Provident Fund. On second appeal, the Tribunal, however, held that though there was no recognition granted by the Commissioner to the said fund, the assessee would be entitled to deduction since it was a provident fund constituted under the provisions of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952. On reference : HELD During pendency of the reference, in 1998 the Commissioner had granted recognition to the provident fund established by the assessee with effect from 1-4-1977, i.e., from the date of establishment of the Fund. The assessment year concerned was 1977-78 and the recognition granted would govern the assessment proceedings for that year as well. In view of the recognition granted by the Commissioner, the Tribunal's view that the assessee was entitled to deduction of the contribution made to the provident fund, was sustainable in law, though on different reasons. EDITOR'S NOTE In view of the Supreme Court's decision in the case of Sri Venkata Satyanarayana Rice Mill Contractors Co. v. CIT [1996] 89 Taxman 92/[1997] 223 ITR 101, it was held that the payment made by the assessee towards the Flag Day Fund was rightly held by the Tribunal as an allowable deduction. CASES REFERRED TO CIT v. Cheran Transport Corpn. Ltd. [1996] 219 ITR 203/ 88 Taxman 228 (Mad.) and Sri Venkata Satyanarayana Rice Mill Contractors Co. v. CIT [1996] 89 Taxman 92/[1997]223 ITR 101 (SC). R. Meenakshisundaram and T.K. Jayaraman for the Applicant. C.V. Rajan for the Respondent. JUDGMENT Balasubramanian, J. - There are two tax cases; one at the instance of the assessee and…

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