2014 (11) TMI 634 - HC - Income Tax

Eligibility for deduction on contribution to the Bata Workers Sickness Benefit Society Effect of provisions of section 40A(9) Allowability of deduction u/s 37(1) Held that - The Tribunal was rightly of the view that the assessee debited a sum as payment to Bata Workers Sickness Benefit Society (BWSBS) in Bata India Ltd. Versus Deputy Commissioner Of Income-Tax 2002 (9) TMI 254 - ITAT CALCUTTA-A the same issue has been decided - the contributions made by the assessee in performing the terms of the agreement was also compliance with the statutory requirements - The agreement does come within the meaning of settlement giving it binding force, levy of penalty for breach and recovery of non-payment in terms thereof as statutorily enforceable under the Industrial Disputes Act, 1947 - the contributions were made complying with the statutory requirement for providing medical benefits to the workers of the assessee under Standing Orders and Rules duly certified under the provisions of the Industrial Employment (Standing Orders) Act, 1946 is undisputed - by reason of the facilities provided by the assessee, the provisions of the Employees State Insurance Act does not apply to its Batanagar factory premises the order of the Tribunal is upheld Decided against revenue.

Summary

Issues:
- Interpretation of deduction eligibility for contribution to Bata Workers' Sickness Benefit Society under Income Tax Act, 1961.
- Allowability of contribution under Section 37(1) of the Income Tax Act, 1961.

Analysis:
The High Court of Calcutta addressed the issues raised in three appeals concerning the assessment years 1983-84, 1984-85, 1994-95, 1995-96, and 1996-97. The primary appeal under section 260A of the Income Tax Act, 1961 was against the Tribunal's order related to the assessment year 1996-97. The key questions revolved around the eligibility of the assessee for deduction of contributions made to the Bata Workers' Sickness Benefit Society and whether such contributions were allowable under Section 37(1) of the Income Tax Act, 1961. The Tribunal had previously considered similar issues in the assessee's case for earlier assessment years, leading to the rejection of the Department's grounds and allowance of the assessee's appeal.

In its decision, the Court referred to the Tribunal's findings from previous cases, emphasizing that the contributions made by the assessee to the society were in compliance with statutory requirements. The Court highlighted the certified standing orders and rules under the Industrial Employment (Standing Orders) Act, 1946, which mandated the provision of medical benefits to workers. The Court noted that the agreement between the assessee and the Bata Mazdoor Union, along with the constitution of the society, outlined specific objectives related to sickness relief, medical facilities, and health promotion among members. These objectives aligned with the statutory framework, making the contributions necessary and enforceable under relevant labor laws.

Furthermore, the Court cited a previous judgment concerning Bata India Ltd., where deductions for similar contributions were lawfully allowed based on established practices and compliance with certified standing orders. The Court upheld the submissions made on behalf of the assessee, concluding that the contributions were made in accordance with statutory requirements and the terms of the agreement, thereby justifying their eligibility for deduction. It was established that the contributions fulfilled the obligations set forth in the Industrial Disputes Act, 1947, and the Industrial Employment (Standing Orders) Act, 1946, making them permissible under the Income Tax Act, 1961.

In light of the above analysis, the Court answered the questions in favor of the assessee and against the revenue, ultimately dismissing all appeals. The judgment reaffirmed the legality and validity of the contributions made to the Bata Workers' Sickness Benefit Society, emphasizing their compliance with relevant laws and agreements.