2006 (6) TMI 76 - HC - Income Tax

Tribunal has disallowed a deduction towards contribution of a sum of Rs. 4,31,342 made by the assessee to the gratuity fund and a sum of Rs. 35,31,223 contributed towards the superannuation fund on the ground that the said funds were not approved during the relevant period - It is well settled that the provisions of a taxing statute have to be interpreted strictly applying the rule of literal interpretation. Nothing can be added or substituted by implication or intendment. If Parliament has made deductions towards provident fund, superannuation fund or gratuity fund admissible only in cases where such funds are approved, granting deductions of amounts paid into unapproved funds under the cover of section 37 of the Act may defeat the legislative intent and frustrate the very purpose underlying the specific provisions made thereunder. We, therefore, see no merit even in the alternative contention urged by appellant that what does not fall under section 36 may nevertheless fall under section 37 and be granted by way of a deduction. - no merit in this appeal which fails and is hereby dismissed

Summary

Issues:
- Disallowance of deduction towards contribution to gratuity and superannuation funds.
- Interpretation of provisions under section 36, 37, and 40A(7) of the Income-tax Act, 1961.

Analysis:
The judgment pertains to an appeal challenging the disallowance of deductions for contributions made by the assessee to gratuity and superannuation funds. The appellant contended that the contributions were admissible under section 36(1)(iv) and (v) of the Act, or alternatively, under section 37 regulating business expenditures. However, the court found no merit in these arguments. Section 36 allows deductions for contributions to recognized provident, superannuation, and gratuity funds, provided they are approved. As the funds in question were not approved during the relevant period, the deductions were deemed inadmissible under section 36. The court emphasized that the provisions of section 43B, dealing with deductions for payments actually made, do not negate the requirement for contributions to be made to approved funds for admissibility. Therefore, the appellant's reliance on section 43B was deemed unavailing.

The court also rejected the argument that deductions could be granted under section 37 as a general provision for business expenditures. Section 37 permits deductions for expenditures exclusively incurred for business purposes, excluding those covered under sections 30 to 36. Since the deductions sought by the appellant fell within the ambit of section 36(1)(iv) and (v), they were not eligible for deduction under section 37. Granting deductions for unapproved fund contributions under section 37 would contravene the legislative intent and undermine the specific provisions of sections 30 to 36. The court emphasized the need for strict interpretation of taxing statutes, precluding deductions for contributions to unapproved funds under the guise of section 37.

In conclusion, the court found no merit in the appellant's arguments and dismissed the appeal, upholding the disallowance of deductions for contributions made to unapproved gratuity and superannuation funds.