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Income Tax Appellate Tribunal, “ C ” BENCH, AHMEDABAD
Before: SHRI S.S. GODARA & SHRI PRADIP KUMAR KEDIA
आदेश / O R D E R PER PRADIP KUMAR KEDIA - AM: The captioned appeal has been filed at the instance of the Revenue against the order of the Commissioner of Income Tax(Appeals)-4, Vadodara [CIT(A) in short] dated 13/05/2015 arising in the matter of assessment order passed under s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") dated 21/03/2014 relevant to Assessment Year (AY) 2011-12.
ITA No.2495/Ahd/2015 DCIT vs. Institute of Rural Management Asst.Year – 2011-12 - 2 - 2. The effective ground of appeal raised by the Revenue reads as under:-
The Ld. CIT(A) has erred in law and on facts in deleting addition made of Rs.65,06,688/- on account of disallowance made by the A.O. due to contribution made by the A.O. due to contribution made by the assessee towards unrecognized provident fund. 3. When the matter was called for hearing in the Revenue appeal, the Ld.AR for the assessee Mr. Sanjay Shah submitted, at the outset, that the Assessing Officer (AO) at the assessment stage committed error in disallowing contribution of Rs.65,06,688/- made by the assessee as employer to IRMA EPF trust set up and controlled and managed by trustees appointed by the Assessee on the basis that said Provident Fund Trust is not a ‘recognized Provident Fund’ under s.2(38) r.w.s. 36(1)(iv) of the Act. It was thus alleged that contributions made by the employer is not eligible for deduction. The Ld.AR submitted that the AO committed the aforesaid error owing to misappreciation of facts. The Ld.AR pointed out that the fund was accorded recognition by the CIT Gujarat-III, Ahmedabad vide its order dated 26/02/1981. The Ld.AR vehemently submitted that the aforesaid approval was not withdrawn by the CIT at any point of time thereafter and thus the Provident Fund Trust is continuing to be a recognized Provident Fund. The Ld.AR relied upon the order of the CIT(A) whereas the CIT(A) granted relief passed on the earlier decision in assessee’s own case in AY 2010-11.
ITA No.2495/Ahd/2015 DCIT vs. Institute of Rural Management Asst.Year – 2011-12 - 3 - 4. The Ld.DR, on the other hand, relied upon the order of the AO and submitted that Institute of Rural Management EPF Trust is rightly held as unrecognized PF since it was mandatory on the part of the assessee to obtain approval of the specified authority namely the Commissioner of Income tax having regard to provisions of section 2(38) of the Act. The last approval was taken way back in November-2004.
We have considered the rival submissions and perused the orders of the authorities below. The CIT(A) has dealt with the issue as under:- “These grounds of appeal deal with the disallowance of Rs.65,06,688/- u/s.36(iv) of the Act, The Assessing Officer has dealt with the issue in para 6 and 7 of his assessment order. Relevant portions are extracted below for ready reference-
"6. On verification of the income and expenditure account, it is found that the assessee during the year under consideration has made contribution towards PF of employees of IRMA. The assessee was therefore asked to furnish the details of contribution to PF and other funds Rs.7,07,09.799/-. The assessed vide their submission dated 21.03.2014, has submitted their details of contribution towards the PF and other fund. On going through the same, is observed that the IRMA as employer has contributed Rs.65,06,088/- to their IRMA EPF Trust, and which is controlled and managed by the trustees of IRMA EPF Trust. It is pertinent to note that the IRMA EFF Trust has not obtained the approval from the Commissioner of Income tax from November, 2004, section u/s.2(3) clearly indicates that "recognized provident fund means a provident fund which has been and continues to be recognized by the (CHIEF COMMISSIONER OR COMMISSIONER) in accordance with the rules contained in PART-A of the Fourth schedule and includes a
ITA No.2495/Ahd/2015 DCIT vs. Institute of Rural Management Asst.Year – 2011-12 - 4 - provident fund established under a scheme framed under the Employee's provident fund Act, 1952, the assessee is required mandatorily to obtain the approval from the Commissioner of Income tax having jurisdiction over the assessee. The assessee also did not care of obtaining the approval of the authority, and Approval by specified authority is main condition for graining approval as per Section 2 (38).
6.1 Section 36(1)(iv) preservers as under: "Any sum paid by the assessee as an employer by way of contribution towards a recognized provident fund subject to such limit as may be proscribe [or the purpose of recognizing the provident fund as the case may be, and subject to such conditions as the Board may think fit to specify in cases where the contributions are not in the nature of annual contributions of fix amounts or annual contributions fixed on some definite basis by reference to the income chargeable under the head salaries 01 to the contribution or to the numbers of members of the fund."
From the above, it is crystal clear that the payment should be made to the recognized provident fund, in this case, the provident fund payments are made to the unrecognized provident fund. Therefore, the payments of Rs.65,06,688/- is disallowed u/s.36(iv) and added to the total income of the assesses Trust."
6.2 During the course of the appellate proceedings, the assessee submitted as under on the issue-
Gr. Grounds before Asstt. Appellant’s submission Nos. CIT(A) Order Para No. • For recognition of PF two 2. Disallowance of Para the contribution 6, 6.1 conditions are required to be of & 7 fulfilled- Section 2(38) of the Rs.65,06,688/-
ITA No.2495/Ahd/2015 DCIT vs. Institute of Rural Management Asst.Year – 2011-12 - 5 - made as - PF shall be recognized by employer CIT/CCT in accordance with u/s.36(1)(iv) on the rules contained in partn the basis that A of the fourth schedule and PF Trust is on -PF shall be established unrecognized under a scheme framed provident fund. under the EPF Act, 1952 • Copy of the recognition by Non- Para appreciation of 6, 6.1 Commissioner of income Tax the fact that & 7 - Gujarat - Charge-III, Trust is Ahmedabad under Rule 3(1) Recognized by of Part A of Fourth Schedule CIT and same vide his order dated has not been 26.02.1981 is enclosed withdrawn. herewith at Annexure-1. • Funds have been framed 4 Mandatory Para approval form 6, 6.1 under the EPF and MP Act, CIT(A) is tom be & 7 1952. Copy of letter dated taken whenever 27.04.1989 from Regional charges are Provident Fund made Commissioner for confirming 5 The changes the application of PF Act is made were for enclosed herewith at administrative Annexure-2. • AO treated the fund as perspective and do not affect the unrecognized only on the conditions basis that pF Trust has not mentioned in obtained approval from CIT rule 4 of part A from November, 2004 which of Fourth h according to his is Schedule of mandatory. • As per Rule 3(1) of Part A of income tax Fourth Schedule, the power is given to CIT/CCIT to accord recognition and to withdraw the recognition if in his opinion the Provident
ITA No.2495/Ahd/2015 DCIT vs. Institute of Rural Management Asst.Year – 2011-12 - 6 - Fund contravenes any conditions mentioned in Rule-4. • Since no such withdrawal has taken place for the year under consideration, the trust continues to be a recognized Provident Fund as any contribution made to Recognized PF is allowable u/s. 36(1)(iv) of the Act. • The AO could have referred the withdrawal of recognition to the Commissioner if he found any contraventions in conditions of provident fund. The AO has exceeded the jurisdiction by denying the exemption u/s.36(1)(iv) treating the some as unrecognized provident fund. • Relied on judgment of Apex Court in case of Geslender Duplicators Pvt. ltd. v. Commissioner of Income Tax 1 taxman 1 - Copy is attached herewith at Annexure-3. • Also relied on CIT(A)'s order in the appellant's own case for A.Y. 2010-11 where the disallowance made u/s.36(10(iv) has been deleted. Copy of order is attached herewith at Annexure-4. Please note that
ITA No.2495/Ahd/2015 DCIT vs. Institute of Rural Management Asst.Year – 2011-12 - 7 - against the order of CIT(A), department has not preferred any appeal which proves that it has reached its finality. • Also CIT(A)'s order in the case of IRMA-EPF for A.Y. 2010-13 and AO's, order for A.Y.2012-13, it has been accepted that IRMA-EPF Trust is a recognized provident fund and no additions u/s.10(25) has been made.
6.3 I have considered the facts and circumstances of the case, observations of the Assessing Officer, submissions of the assessee, the material available on the record and the relevant judicial pronouncements on the subject. The issue is covered in favour of the assessee in its own case in A.Y.2010-11 by the order of CIT(A) in CAB/IV-A-114/2013-14, whereby, CIT(A) has held as under on the issue- "6.2 Second ground of appeal pertains to the disallowances of Rs.39,80,993/- made with regard to the contribution made towards PF of the employees of the appellant trust. The Assessing Officer had disallowed the said contribution by holding that the appellant (rust has not obtained the approval from the CIT u/s.10(2b) of the Act which is mandatory on the part of EPF trust. Thus, the IRMA EPF Trust is so far not a recognized EPF Trust and payments made to the EPF Trust is not eligible for deduction u/s.36(1)(iv) of the Act. I have gone through the contentions of the AO and the submissions of the appellant. During the course of hearing the AR brought to my notice that the in case of IRMA EPF Trust learned AO had disallowed deduction claimed u/s.10(25) of the Act for the A.Y. 2010-11 on the same ground that appellant has not obtained prior permission of Commissioner of Income tax for making the
ITA No.2495/Ahd/2015 DCIT vs. Institute of Rural Management Asst.Year – 2011-12 - 8 - amendments in PP rules, therefore, same was considered as unrecognized provident fund. Against the said order the EPF TRUST went in to the appeal and the CIT(A) vide its order dated 20-05-2014 accepted the contention of the appellant and considered IRMA EPF trust as a recognized provident Fund and allowed the deduction u/s.10(25). The relevant para of the said CIT(A) order is reproduced hereunder:
"in the present case, the AO has clearly extended his jurisdiction by denying exemption to the employee provident fund u/s.10(25) of the Act without referring the contraventions made by the appellant fund to the Jurisdictional Commissioner of Income-tax for his relevant order. The CIT, on the basis of such contraventions, could have passed an order withdrawing the exemption granted to the appellant as per the provisions of Rule 79 of the Income-tax Rules, 1962. Only, thereafter AO could have taxed the income of the appellant as per Rule 80 of the Act. Since the recognition granted by the Commissioner of Income- tax continued during the financial year 2009-10, hence, the appellant is eligible for deduction u/s.10(25) of the Act, 1961. Accordingly, exemption withdrawn by AO is not correct.
As a result, AO is directed to grant exemption to the appellant u/s.10(25) of the Act." In view of the aforesaid order of CIT(A) where IRMA EPF trust is considered as a Recognized provident Fund, following the same the addition of Rs.39,80,993/- is deleted. This ground of appeal is allowed.''
6.4 Since the facts of the present case are exactly similar to the case decided by CIT(A) in CAB/IV A-114/2013-14, following the decision of CIT(A) in assessee's own case in A.Y. 2010-11, it is held that IRMA EPF Trust is considered a Recognized Provident Fund. Consequently, addition of Rs.65,06,688/- on account of disallowance of contribution by the assessee towards employees’ PF to IRMA PF trust, as discussed supra, is deleted. The assessee succeeds on these grounds of appeal.”
ITA No.2495/Ahd/2015 DCIT vs. Institute of Rural Management Asst.Year – 2011-12 - 9 - 6. We do not find any infirmity in the order of the CIT(A) where relief was granted to the assessee on the ground that approval granted by the competent authority conscious to subsist and remain in force and has not been withdrawn. We take note of the plea raised on behalf of the assessee that the order of the CIT(A) in the earlier years were not challenged before the Tribunal and has attained the finality which fact has been confirmed by the Revenue at the time of hearing. In such a circumstances, we do not see any reason to interfere with the order of the CIT(A).
In the result, appeal of the Revenue is dismissed. This Order pronounced in Open Court on 13 / 12 /2017
Sd/- Sd/- (एस.एस.गोदारा) (�द�प कुमार के�डया) �या�यक सद�य लेखा सद�य ( S.S. GODARA ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated 13/ 12 /2017 ट�.सी.नायर, व.�न.स./T.C. NAIR, Sr. PS
ITA No.2495/Ahd/2015 DCIT vs. Institute of Rural Management Asst.Year – 2011-12 - 10 -
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-4, Vadodara �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy//
उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation .. 12.12.2017(dictation-pad 6- pages attached at the end of this appeal-file) 2. Date on which the typed draft is placed before the Dictating Member …12.12.2017 3. Other Member… 4. Date on which the approved draft comes to the Sr.P.S./P.S…………….. 5. Date on which the fair order is placed before the Dictating Member for pronouncement…… 6. Date on which the fair order comes back to the Sr.P.S./P.S…….13.12.17 7. Date on which the file goes to the Bench Clerk…………………13.12.17 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order………………