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Issues involved: Appeal against the order directing deduction of contribution made towards Provident Fund not recognized u/s 2 (38) of IT Act.
Issue 1: Recognition of Provident Fund Trust The department appealed against the order allowing deduction of contribution made by the assessee towards Provident Fund, which was not recognized u/s 2 (38) of the IT Act. The assessee, a Co-operative Society engaged in banking, debited an amount towards Provident Fund of its employees. The Assessing Officer disallowed the contribution u/s 40A(9) as the Provident Fund Trust was not recognized. The CIT (A) allowed the appeal, stating that the Provident Fund was established under a scheme framed under the EPF Act, 1952, making it eligible for deduction irrespective of approval by the authorities. The Tribunal upheld the CIT (A)'s decision, emphasizing that a Provident Fund established under the EPF Act, 1952 is considered a recognized Provident Fund u/s 2 (38) of the Act. Issue 2: Interpretation of Section 2 (38) of the IT Act The Tribunal analyzed Section 2 (38) of the IT Act, which defines a "recognized provident fund" to include a fund established under a scheme framed under the EPF Act, 1952. It noted that the Assessing Officer failed to acknowledge that the assessee's Provident Fund Trust was established under the EPF Act, 1952. As per the Act, a Provident Fund established under the EPF Act, 1952 is considered recognized, regardless of approval by the authorities. The Tribunal concluded that the CIT (A) correctly rectified the Assessing Officer's error in disallowing the deduction, as the Provident Fund met the criteria of a recognized fund as per Section 2 (38) of the Act. Final Decision The Tribunal dismissed the department's appeal, finding no merit in the grievance raised. It upheld the CIT (A)'s decision to allow the deduction of contribution made towards the Provident Fund, emphasizing that the fund being established under the EPF Act, 1952 qualified as a recognized Provident Fund u/s 2 (38) of the IT Act.
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