2017 (5) TMI 1220 - HC - Income Tax

Disallowance of contribution to Retired Employees Medical Benefit scheme invoking Section 40A (9) - Held that - Section 40A which starts with the non obstante clause. Prior to its amendment by the Finance Act, 2011, as per sub-section (9) introduced by the Finance Act, 1984, with effect from April 1, 1980, deduction of only payments for the purposes and the extent provided was permitted. The assessee does not have a case that the contribution made by it to the pension fund is payment which is permitted under section 36. If that be so, in view of section 40A(9), the payment made by the assessee could not have been allowed to be deducted and its disallowance by the Assessing Officer is perfectly in line with the statutory provisions. See CIT v. State Bank of Travancore 2015 (8) TMI 369 - KERLA HIGH COURT - Decided in favour of revenue

Summary

Issues: Disallowance of contribution to Retired Employees Medical Benefit scheme under Section 40A(9) of the Income Tax Act.

Analysis:
The High Court of Kerala heard an appeal filed by the revenue against the order of the Income Tax Appellate Tribunal concerning the disallowance of contribution to a Retired Employees Medical Benefit scheme under Section 40A(9) of the Income Tax Act for the assessment year 2007-08. The Commissioner of Income Tax (Appeals) had set aside the assessment order disallowing the contribution. The primary question before the court was whether the assessee's contribution towards the Retired Employees Benefit Scheme could be considered an allowable deduction under Section 40A(9) of the Income Tax Act. The Tribunal had relied on its own order from a previous assessment year, and the revenue challenged this decision. The court referred to a previous judgment involving the State Bank of Travancore, where it was held that if the contribution made by the assessee was not a permitted payment under Section 36, it could not be allowed as a deduction under Section 40A(9). Despite arguments citing other judgments in favor of the assessee, the court upheld the binding precedent set by the State Bank of Travancore case, ruling in favor of the revenue and disposing of the appeal accordingly.