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ITA-419/2012 Page 1
$~13 * IN THE HIGH COURT OF DELHI AT NEW DELHI
DECIDED ON: 27.08.2012
ITA 419/2012
CIT
..... Appellant Through: Mr. Sanjeev Sabharwal, Sr. Standing Counsel with Mr. Puneet Gupta, Jr. Standing Counsel and Ms. Gayatri Verma, Advocate.
versus
INDIAN SUGAR EXIM CORPN. LTD ..... Respondent
Through: Mr. Ashwani Taneja with Ms. Rani Kiyala, Advocates.
CORAM: MR. JUSTICE S. RAVINDRA BHAT MR. JUSTICE R.V. EASWAR
MR. JUSTICE S.RAVINDRA BHAT (OPEN COURT) % The Revenue through this Appeal claims to be aggrieved by the order of the ITAT dated 15.11.2011 on the following questions of law: - (i) Whether in the facts and circumstances of the case, the assessee is entitled to depreciation of building and car parking at Ansal Plaza for the assessment year 2005-06 in the absence of registered title in its favour. (ii) Whether the ITAT was justified in deleting/cancelling the
ITA-419/2012 Page 2
addition of ` 9,08,359/- on the ground that it constituted payment towards an unrecognized Provident Fund Trust under Section 2 (38) of the Income Tax Act. 2. The brief facts of the case are that the assessee is a public limited company and used to derive income from business of trading and sugar and its products. It filed returns disclosing a total income of ` 10,39,39,955/- which was assessed under provisions of Sections 143 (3). The AO by his order dated 3.11.2007 disallowed certain amounts which included a claim for depreciation for car parking primarily on the ground that the asset was not owned by it since the assessee did not have a registered sale deed in that regard. Likewise, the AO disallowed the sum of ` 9,08,359/-, i.e., the contribution made towards provident fund. It was held that the fund though administered by the Trust was unrecognized. The assessee carried the matter in appeal to CIT (A) which was partly allowed. 3. Both the assessee and the Revenue, therefore, filed the appeals before the ITAT. The ITAT allowed the assessee’s appeal and dismissed the Revenue’s appeal. The Revenue claims to be aggrieved against the said two questions. 4. As far as the first question, i.e., claim for depreciation on account of car parking space is concerned, the question stands covered by the decision of Supreme Court in Mysore Minerals case reported 239 ITR 775 (SC). That question is, therefore, answered against the Revenue and in favour of the assessee.
The Court notices that as far as the second question
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i.e. provident fund contribution amounting to ` 9,08,359/- is concerned, the assessee had relied upon the letter dated 25.08.1976. The very same material had been taken into account in all the previous years including the assessment year in question. The material part of the letter is extracted below: - “Section 2 (38) of the Income Tax Act, 1961 provides that “recognized provident fund” means a provident fund which has been and continues to be recognized by the Commissioner in accordance with the rules contained in Part A of the Fourth Schedule, and includes a provident fund established under a scheme framed under the Employees Provident Fund Act, 1952; The fourth Schedule Part „A‟ to Income Tax Act, 1961 lays down (under rule-1) that this part shall not apply to any provident fund to which Provident Fund Act, 1925, applies. Since the Provident Fund of Indian Sugar Industry Export Corp. Ltd., appear to be one of the Provident Fund to which Provident Fund Act of 1925/1952 applies, no further recognition is required under Income Tax Act, 1961.”
The Income Tax authorities in the present case as well as in the previous assessments appear to have proceeded on the assumption - which was endorsed by the Tribunal in the impugned order - that the above letter amounted to recognition of assessee’s Provident Fund. On a plain reading of Section 2 (38) of the Income Tax Act, it is apparent that to claim a benefit of deduction on account of such contributions, the Provident Fund Trust or scheme must conform to at either of the three specifications i.e. it must be either a scheme framed by virtue of the Employees Provident Fund Act, 1952; or a scheme framed by the employer but
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with the approval of the Provident Fund Commissioner or lastly a scheme approved by the income tax authorities in terms of the Fourth Schedule to the Act. Facially, a reading of the letter dated 25.08.1976 would indicate that apparently no express approval by the Provident Fund Commissioner to the scheme formulated by the assessee had been actually taken into account by the income tax authorities at the relevant time. The assessee is undoubtedly correct in contending that in 12 successive assessments, the authorities accepted its position that the scheme was a recognized one. The Commissioner - in this Court’s opinion - rather uncritically did not go into the matter in detail and went on the assumption that 1976 letter itself amounted to recognition. Even while clarifying this position, this Court is conscious of the fact that the tax implication in the present case is far below the prescribed limit of ` 10 Lakh. The demand or disallowance itself was ` 9,08,359/-; and the tax payable on that would be roughly around 1/3rd of the said amount.
In the circumstances, apart from noticing this aspect, which may be appropriately looked into for subsequent years wherever pending, the Court is of the opinion that no interference is called for; the appeal is consequently dismissed.
S. RAVINDRA BHAT, J
AUGUST 27, 2012/vks/
R.V. EASWAR, J