9911796707
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Issues:
1. Deduction of contribution to provident fund in computing total income for the assessment year 1977-78. 2. Applicability of Rule 14 of the Fourth Schedule regarding the transfer of provident fund to Trustees in Trust. 3. Determining the point of time when the deduction of contribution to the fund should be allowed. Analysis: 1. The appeal challenged the order of the CIT (Appeals) allowing a deduction of Rs. 6,730 as a contribution to provident fund for the assessment year 1977-78. The CIT (Appeals) recognized the creation of a Fund by the assessee company in 1956, even though the Employees Provident Fund and Family Pension Fund Act, 1952 was not directly applicable. The retrospective recognition was granted from 1st Jan., 1976, and the CIT (Appeals) allowed the deduction based on the Supreme Court decision in the case of Mysore Spinning and Manufacturing Co. Ltd. (1970) 78 ITR 4 (SC). 2. The Revenue contended that the recognition in this case was given retrospectively after the end of the previous year, unlike the case considered by the Supreme Court. The argument revolved around the formal transfer of funds to a Trust as per Rule 14(1) of the Fourth Schedule. The assessee maintained that the separate bank account with the Post Office constituted a Trust, and the retrospective recognition should be considered for assessment purposes. 3. The Tribunal upheld the order of the CIT (Appeals) by considering Rule 14 of the Fourth Schedule, which postpones the deduction of contributions to the Fund until the payment is made to the employee. The Tribunal determined that the Rule, similar to the one considered by the Supreme Court, applied only to private provident funds exclusive to the workmen of the assessee. The Tribunal also addressed the timing of the deduction, concluding that the liability accrued from 1st Jan., 1976, as per the retrospective recognition, and should be allowed for the assessment year 1977-78. The Tribunal dismissed the appeal, affirming the decision of the CIT (Appeals).
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