2021 (9) TMI 966 - AT - Income Tax

Disallowing employer s contribution to superannuation fund u/s 36(1)(iv) - inaction on the part of PCIT to decide the application - superannuation fund under the head employee s benefit and charged to Profit and Loss Account - Whether assessee in getting approval of superannuation fund for which the assessee has framed a scheme for superannuation fund? - HELD THAT - Application filed by the assessee is as long as in 2011 and till date there is no approval by the PCIT despite the assessee filing of necessary evidences and clarifications. It is also a fact that assessee has complied with all the other conditions for claim of deduction except approval which is to be granted by the Department. We see no reason that the assessee cannot claim deduction for the in action of the PCIT. Hence, we reverse the orders of the lower authorities and respectfully following the legal proposition laid down by High Courts in the above case laws, we allow the claim of the assessee.

Summary

Issues:
- Disallowance of employer's contribution to superannuation fund under section 36(1)(iv) of the Income Tax Act, 1961.

Analysis:
1. The appeal pertains to the disallowance of the employer's contribution to the superannuation fund by the Assessing Officer, upheld by the CIT(A). The Assessing Officer disallowed the contribution amounting to ?55,35,549 due to lack of approval for the superannuation fund scheme. The CIT(A) confirmed this disallowance citing provisions of section 36(1)(iv) and (v) of the Income-tax Act, 1961, which allow deductions only for contributions towards approved funds. The CIT(A) emphasized that deductions under sections 30 to 36 cannot be claimed under section 37, and therefore, the claim was denied.

2. The assessee contended that despite applying for approval in 2011 and providing necessary documents and clarifications, the approval from the PCIT was still pending. The assessee had diligently followed up with the PCIT, demonstrating cooperation. The counsel relied on case laws from the Rajasthan High Court and Calcutta High Court, emphasizing that the assessee should not be penalized for delays in approval by the authorities. The case laws highlighted that fulfilling conditions for approval suffices, and disallowances based solely on pending approvals are unjust.

3. The Tribunal noted the efforts made by the assessee in seeking approval since 2011 and the total contributions made towards the superannuation fund. Despite the lack of approval, the Tribunal found that the assessee had fulfilled all other conditions for claiming the deduction. The Tribunal referenced the legal precedents from the High Courts to support its decision to allow the claim, emphasizing that the delay in approval should not prejudice the assessee's right to the deduction.

4. Ultimately, the Tribunal reversed the decisions of the lower authorities and allowed the claim of the assessee, citing the legal propositions established by the High Courts in similar cases. The judgment highlighted that the assessee's compliance with all requirements except approval justified the allowance of the deduction. Consequently, the appeal of the assessee was allowed on 13.08.2021.