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TMI Blog1983 (5) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... ircular issued by the CBDT--Circular No. 153, dated 30-11-1974 held that the fund could not be considered to be one established under the EPF Act and, consequently, the ITO was wrong in allowing deduction in respect of the contributions made by the assessee towards the West Bengal State Electricity Board Employees' Provident Fund under section 36(1)(iv). According to the Commissioner, in order to claim deduction under section 36(1)(iv) the assessee must get the fund approved under the Fourth Schedule of the Act. The Commissioner observed that the assessee's application for approval of the fund under the Fourth Schedule was pending with the Commissioner's office and in completing the fresh assessment the ITO should enquire the outcome of the assessee's application for approval of its provident fund. 3. Before us the assessee's learned senior counsel, Dr. Pal, contended that the Employees' Provident Fund of the assessee was established under the West Bengal State Electricity Board Employees' Contributory Provident Fund Regulations, 1965, by a resolution No. 14 of the Board dated 28-9-1965. Our attention was drawn to the said resolution which reads as under : "As the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgment to be influenced by certain instructions contained in a circular of the Board. In this connection reliance has been placed on a Calcutta High Court decision in the case of CIT v. Swedish East Asia Co. Ltd. [1981] 127 ITR 148. According to the learned senior counsel, the Commissioner should have held that on a true and correct interpretation of section 2(38) the fund established by the assessee satisfied the test of a recognised provident fund. One alternative argument advanced by the learned senior counsel was that even if the fund was considered to be a non-recognised one, the contributions made by the assessee towards that fund were eligible for deduction in terms of section 37 of the Act on grounds of commercial expediency. For this proposition he relied on the two High Courts' decisions in the cases of Addl. CIT v. Karnataka State Warehousing Corpn. [1980] 125 ITR 136 (Kar.) and CIT v. Chhotabhai Jethabhai Patel Tobacco Products Co. Ltd. [1981] 128 ITR 702 (Guj.). The departmental representative, on the other hand, strongly supported the Commissioner's order by making pointed reference to the Commissioner's observations that the fund has not been transferred to any trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. The assessee established a provident fund of its employees by drawing up a scheme in accordance with section 5. The scheme known as the West Bengal State Electricity Board Employees' Contributory Provident Fund Regulations, 1965, which was approved and adopted in terms of resolution No. 14 of the Board dated 28-9-1965 and was duly approved by the Regional Commissioner of Provident Funds in terms of the Regional Commissioner's letter dated 24-10-1965. The manner in which the trust funds were to be invested may be found from Regulation 15 of the Employees' Contributory Provident Fund Regulations, 1965. Regulation 17 provides that in cases of any dispute arising between the trustees and the subscribers, the same shall be referred to the Regional Provident Fund Commissioner, whose decision shall be final binding on both the parties. Regulation 6 dealt with the functions and responsibilities of the trustees and their terms of appointment. Now section 2(38) provides that a provident fund established under a scheme framed under the EPF Act would be a recognised provident fund. There can be no dispute, therefore, that the employees' contributory provident fund of the assessee was the sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to as the said scheme), in relation to the employees in any other establishment of similar character. NOW, THEREFORE, in exercise of the power conferred by clause (a) of sub-section (1) of section 17 of the Employees' Provident Funds Act, 1952 (XIX of 1952), read with the Government of India, Ministry of Labour and Employment Notification No. SO 1236 dated the 20th June 1958 published in Part 11, section 3(ii) of the Gazette of India dated the 28th June, 1958 the Governor is pleased hereby to exempt, with effect from the date of publication of this notification in the Calcutta Gazette of said establishment from the operation of all the provisions of the said scheme, subject to the specific Schedule II below, namely :-- SCHEDULE I West Bengal State Electricity Board as a whole including : (1) Gouripur Electric Supply (2) Burdwan Electric Supply (3) Kurseong Hydro Electric Supply (4) Renaghat Electric Supply (5) Santipur Electric Supply 1. That the said establishment shall continue to have a provident fund in force the rules of which with respect of the rates of contribution shall not be less favourable than those specified in section 6 of the Employees' Provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustees of the Employees' Provident Fund inasmuch as it has been mentioned that the funds established under the West Bengal State Electricity Board Employees' Contributory Provident Fund Regulations, 1965 shall vest in and be administered by a Board of Trustees. It follows from the discussions made above that exemption granted by the State Government under section 17(1) does not in any way take away the benefits that the employees were enjoying when the provident fund scheme was drawn in 1965. 5. We have now to examine the contents of the Board's Circular on which the Commissioner has placed reliance. The Board's Circular, dated 30-11-1974, reads as follows : "Circular No. 153, dated November 30, 1974 Subject : Provident funds recognition under section 3(1) of Part A of the Fourth Schedule to Income-tax Act, 1961--Provident fund exempt under section 17(1) of the Employees' Provident Funds Act/Para 79 of EPF Scheme, 1952, or Para 27A of Employees' Provident Funds Scheme, 1952. Reference is invited to Board's Circular F. No. 44/14/1964-ITJ dated the 22nd March, 1965, on the above subject. 2. I am directed to say that the Board has re-examined the contents of its circular r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nised provident fund' as and when it was granted exemption under section 17. It has been also found that in terms of the State Government's notification dated 8-7-1971 the regulations of the provident funds drawn up in 1965 continued with certain modifications and the fund continued to remain under the administrative control of the Regional Provident Fund Commissioner. We are, accordingly, satisfied that the Board's Circular dated 30-11-1974 is not applicable in the assessee's case and even if it was applicable the provident fund of the assessee-company established in 1965 cannot be held to be a fund that did not come within the definition of section 2(38). In our opinion, the Commissioner was wrong in holding that the assessee's provident fund was not a recognised provident fund within the meaning of section 2(38). We, accordingly, set aside the Commissioner's order under section 263 and restore the order of the ITO for the assessment year 1976-77. 6. Since we have set aside the Commissioner's order, it is not necessary to deal with the alternative arguments advanced by the assessee's learned counsel, viz., that the contributions made by the assessee towards the employees' provi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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