2024 (3) TMI 1386 - HC - Income Tax

Deduction of an amount credited to PNB Employees Pension Fund u/s 43B - when the amount was not payable as per terms and conditions of the pension fund - HELD THAT - Irrespective of whether the contribution was in excess of the statutory prescription, in our considered opinion as long as the deposit was made to the pension fund, the provision of Section 43B of the Act would stand satisfied. We find no ground to interfere with the view as expressed by the ITAT. Two questions of law on ITA 540/2023 stands admitted are reproduced hereinbelow A. Whether in the facts and circumstances of the case and in law, the ITAT as well as the CIT(A) erred in deleting addition of INR 17,70,89,577 made by the AO in respect of losses in Market to Market MTM derivatives? B. Whether in the facts and circumstances of the case and in law, the ITAT as well as the CIT (A) erred in deleting addition of INR 809,52,69,679/- on account of depreciation/loss on investments? In order to enable learned counsels for parties to address submissions on the rest of the issues, let the appeal be called again on 15.07.2024.

Summary

Issues:
- Whether ITAT is legally justified in allowing deduction of an amount credited to PNB Employees' Pension Fund under Section 43B of the Income Tax Act, 1961 even when the amount was not payable as per terms and conditions of the pension fund.
- Whether the ITAT and CIT(A) erred in deleting additions made by the AO in respect of losses in Market to Market derivatives and on account of depreciation/loss on investments.

Analysis:

Issue 1: Deduction of Amount to Pension Fund under Section 43B
The High Court addressed the common question in two appeals by the Revenue regarding the deduction of an amount credited to the PNB Employees' Pension Fund under Section 43B of the Income Tax Act, 1961. The Court noted that the ITAT had allowed the deduction based on the contributions made to the pension fund, despite the amount not being payable as per the fund's terms and conditions. The Court referenced the findings of the CIT(A) which confirmed the contributions made to the approved fund, satisfying the provisions of Section 43B. The Court held that as long as the deposit was made to the pension fund, Section 43B would be satisfied, regardless of any excess contribution beyond statutory limits. Consequently, the Court found no grounds to interfere with the ITAT's view and dismissed the appeals.

Issue 2: Deletion of Additions on Market to Market Derivatives and Investments
In the second appeal, the Court considered the additions made by the AO in respect of losses in Market to Market derivatives and on account of depreciation/loss on investments. The Court admitted the appeal for consideration on two substantial questions of law. The questions raised whether the ITAT and CIT(A) erred in deleting the additions related to losses in Market to Market derivatives and depreciation/loss on investments. The Court scheduled a further hearing to address submissions on these issues, indicating that the appeal would be called again on a specified date for parties to present arguments.

In conclusion, the High Court upheld the ITAT's decision regarding the deduction of contributions to the pension fund under Section 43B of the Income Tax Act, emphasizing the importance of depositing the amount to the fund. Additionally, the Court admitted the second appeal for consideration on the issues of deletions related to losses in Market to Market derivatives and depreciation/loss on investments, setting a future date for further arguments.