Law: Income Tax Act, 1961

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

Income-tax---Business expenditure---Contributions to recognised provident funds--¬Restriction of deduction to Rs.250---Applies to contributions to fund maintained by company---Contributions to fund under scheme formulated under Employees Provident Funds Act, 1952---Deductible in full---Indian Income Tax Act, 1961, Ss.2(38) & 36(1)(iv)---Indian Income Tax Rules, 1962, R.75. The expression "recognised provident fund" as defined in section 2(38) of the Income Tax Act, 1961, contemplates two categories of provident funds ---(i) a provident fund which has been recognised by the Chief Commissioner or Commissioner by applying the rules contained in Part A of the Fourth Schedule to the Act; and (ii) provident fund established under the scheme framed under the Employees Provident Funds Act, 1952. The restriction to Rs.250 specified in rule 75(1) of the Income Tax Rules, 1962, applies to the first category and not to the second category, for the reason that the second category contributions are not in respect of -a provident fund maintained by the company". Held accordingly, that since the contributions made by the assessee were not in respect of any provident fund maintained by the company, but were remittances directly to the scheme under the Employees Provident Funds Act, 1952, and maintained by the Provident Fund Commissioner, rule 75 of the Income Tax Rules was not applicable and the assessee was entitled to claim deduction of the entire remittance of Rs.12,000 under section 36(1)(iv) of the Act. JUDGMENT M. N. RAO, J.---In all the three referred cases, the following question was referred for the opinion of this Court under section 256(1) of the Income Tax Act, 1961, by the Income-tax Appellate Tribunal: "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in holding that the entire contribution of Rs.12,000 made by the assessee-company was allowable and rule 75 of the Income Tax Rules was not applicable in the case of the assessee-company?" R.C. No.31 of 1990 pertains to the assessment year 1982-83, R.C. No. 38 of 1988 pertains to the assessment year 1983-84 and R. C. No. 102 of 1989 relates to the assessment year…

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