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TMI Blog2006 (10) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 1980-81 based on the accounting year ended December 31, 1979, amongst other, it claimed deduction of Rs. 78,896 on account of contribution made by it towards daughter's marriage benefit scheme. Such a deduction was claimed as an admissible expense being in the nature of staff welfare expenses. The Assessing Officer observed that the payment cannot be treated as obligatory and also cannot be treated expenses towards staff welfare necessary for business. Further, he held that the contribution was not under any irrevocable trust divesting the company of control and authority over such funds. Further the expenditure is neither obligatory under the Factories Act nor customary to the trade in which company is engaged. As such the expenditure was not treated as business expenditure and the same was disallowed. Against the order passed by the Assessing Officer the matter was taken in first appeal and it was, inter alia, submitted before the appellate authority that the assessee-company made a matching contribution and such amount was utilized for marriage of employees' daughters. It was also pointed out that since the entire funds remained with the company and were used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that the Tribunal had recalled its earlier order in respect of the applicability of the provisions of sub-section (9) of section 40A of the Act and once it is found that the same was not attracted it was not open to the Tribunal to proceed to redecide the controversy on the merits. The submission is misconceived. The Tribunal in paragraph 13 of its order has dealt with this plea in the following words: "13. The preliminary objection of the assessee in these proceedings, viz. that we would not travel beyond the provisions of subsection (9) of section 40A is not acceptable to us. The occasion for recalling the order was certainly the omission on the part of the Tribunal to take note of the provisions of sub-section (9) of section 40A to begin with. But once the order on the aforesaid subject, passed earlier, is recalled by the Tribunal, the entire issue becomes open for consideration de novo, and it is open for both the sides to urge before the Tribunal the relevant arguments which they may consider appropriate. There is nothing in the language of the recall order putting any fetters in this regard." As we have already mentioned hereinbefore that the order dated March 22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contribution of the employee excluding interest at the time of marriage of each daughter irrespective of period of membership of the scheme, provided the marriage takes place during his employment with the company.' It will be apparent from the above that the obligation to pay the amount as its own contribution to an employee arises on the assessee-company at the time of marriage of each daughter; it does not arise at the end of each accounting period. Clause 7(a) is also relevant and may be quoted here as below: '7(a) A clerk, who resigns or is discharged or removed or retired from service, will cease to be a member of the scheme with' effect from the date of ceasing of his employment. In the case of a clerk, who resigns or is discharged or removed from services, only his contribution together with to date interest thereon will be refunded to him. However, in the case of a clerk who is retired on reaching the age of superannuation, the clerk's own contribution together with to date interest thereon shall be paid to him with the management's contribution at the following rates: (i) Up to 5 years'; membership of the scheme Nil (ii) Above 5 year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above scheme. It arises on the happening of certain contingencies as noted above. The mode of treatment in accounts cannot change the nature of the liability of the assessee. The liability arises on the happening of certain contingent events, as visualised in rules 4 and 7. In fact, there may be certain situations, where such liabilities may never arise, e.g., when the daughter may die before marriage or the employee resigns or his services are terminated, or if he retires in the normal course, and his membership of the scheme is of less than 5 years' duration. In other contingencies, the employees may be eligible at the time of superannuation, for 50 per cent. or 75 per cent. of the employer's matching contribution. To say in the face of the above rules, that the liability to make the payments to the scheme by the employer accrues and arises annually would be against the facts. The learned Commissioner of Income-tax (Appeals) was, therefore, in our opinion, correct in holding that no liability, in fact, accrued and arose against the company to contribute to the employee's account under the scheme except where actual marriage took place and payments were made to the extent of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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