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Income Tax Appellate Tribunal, KOLKATA BENCH ‘B’, KOLKATA
Before: Shri P. M. Jagtap, A.M. & Shri S.S.Viswanethra Ravi, J.M.)
ORDER Per Shri S.S.Viswanethra Ravi, J.M. This appeal is filed by the Revenue having aggrieved by the order dated 22.02.2013 passed by the CIT(Appeals)-XXIV, Kolkata in Appeal No.1165/CIT(A)-XXIV/C-1/12-13 for the assessment year 2006-07 framed under section 115WE(3)/115WG(c) of the I.T.Act.
2. Challenging the above impugned order, the appellant Revenue has raised the following grounds before the Tribunal. “1. That on the facts and in the circumstances of the case the Ld. CIT(A) has erred and is not justified in deleting the addition of Rs.1,13,42,857/- as fringe benefits u/s 115WB(1)(c) on account of contribution to the Employees Provident Fund Organisation towards employees Pension Scheme, 1995.
2. That the appellant craves leave to add, alter/or amend any of the grounds of appeal during the course of hearing.”
Brief facts of the case are that the fringe benefit tax for short FBT assessment was completed u/s. 115WE(3) of the Act on 28.10.2008 North Brook Jute Company Assessment Year: 2006-07 determining the value of taxable fringe benefits at Rs.4,92,016/-. The said order passed under section 115WE(3) was rectified under section 154 of the Act on 29.10.2009. The total value of fringe benefits were revised to Rs.5,16,476/-. Subsequently the case was reopened as per provision of section 115WG(c) of the Act by issuing notice under section 115WH of the Act on 22.10.2010 on the ground that an amount of Rs.1,13,42,857/- relating to payments made for pension fund which is a superannuation fund is not considered as the value of fringe benefits in the assessment under section 115WE(3) which is chargeable to fringe benefit tax and has escaped assessment.
In response to the notice issued under section 115WH the assessee filed a letter on 09.11.2010 to treat the return filed by the assessee under section 139(1) for the assessment year 2006-07 on 30.11.2006 as return filed in compliance of notice under section 115WH of the Act. Thereafter, a notice under section 142(1) was issued to the assessee on 16.12.2011. The assessee submitted written explanation in response to the said notices. On scrutiny, the AO found that the assessee had debited an amount of Rs.1,43,33,150/- to the P&L account for the year ended 31.03.2006 towards contribution to provident fund and other funds which includes a sum of Rs.1,13,42,857/- related to the payments made to the Pension Fund which is a superannuation fund and as per provisions of section 115WB(1)(c) of the Act.
5. During the course of re-assessment proceedings the assessee submitted that the amount was actually paid by the assessee to the employees provident fund organisation established under a scheme framed under the Employees Provident Fund Act, 1952. As such, the same represents contributions made by the assessee to a recognized North Brook Jute Company Assessment Year: 2006-07 provident fund, as defined under section 2(38) of the Income-tax Act, which does not attract levy of FBT as has been clarified by the question no.38 of the CBDT’s Circular No.8/2005 dated 29.08.2005. The AO was of the view that the employer’s contribution to the pension fund was fringe benefit and Rs.1,13,42,857/- was added to the total value of fringe benefits.
In first appeal, The assessee contended that the employer’s contribution to the “Employees Provident Fund” is not that of a contribution to any approved superannuation fund as defined under section 2(6) of the Act. Accepting the same, Ld. CIT(A) deleted the said addition made by the AO of Rs.1,13,42,857/- on account of fringe benefits under section 115WB(1)(c) if the Act.
7. Now the question to be decided as formulated by the assessee is as to whether the employer’s contribution to the employees provident fund is a contribution defined under section 2(6) of the Act which attracts fringe benefit tax U/s 115WB(1)(c) of the Act or not?
The assessee’s contention was that the employer’s contribution to the employees provident fund is a statutory contribution to the employee’s pension scheme framed by the Government of India under the provisions contained in the Employees Provident Fund & Miscellaneous Provision Act 1952, but does not come under section 2(6) of the Act and such contributions made to Employees Provident Fund Organization under the Employees Pension Scheme, 1995 are not a Fringe Benefit.
North Brook Jute Company Assessment Year: 2006-07 9. In this connection, we may refer to the Section 2(6) of the Income tax Act which defines approved superannuation fund for better under standing
"approved superannuation fund" means a superannuation fund or any part of a superannuation fund which has been and continues to be approved by the Chief Commissioner or Commissioner] in accordance with the rules contained in part B of the Fourth Schedule."
A close reading of the above provision goes to speak that any contribution to approved superannuation fund requires approval of the Chief Commissioner or Commissioner invariably in pursuance of the Rules contemplated in part B of the Fourth Schedule. Let us examine the fourth schedule provided in the Act.
THE FOURTH SCHEDULE PART A RECOGNISED PROVIDENT FUNDS36 [See sections 2(38), 10(12), 10(25), 36(1)(iv), 87(1)(d), 111, 192(4)] Application of Part.
1. This Part shall not apply to any provident fund to which the Provident Funds Act, 1925 (19 of 1925), applies. Definitions.
In this Part, unless the context otherwise requires,— (a) "employer" means any person who maintains a provident fund for the benefit of his or its employees, being— (i) a Hindu undivided family, company, firm or other association of persons, or (ii) an individual engaged in a business or profession the profits and gains whereof are assessable to income-tax under the head "Profits and gains of business or profession"; (b) "employee" means an employee participating in a provident fund, but does not include a personal or domestic servant; (c) "contribution" means any sum credited by or on behalf of any employee out of his salary, or by an employer out of his own moneys, to the individual account of an employee, but does not include any sum credited as interest; (d) "-----; (e) "---; North Brook Jute Company Assessment Year: 2006-07 (f) "---; (g) "regulations of a fund" means the special body of regulations governing the constitution and administration of a particular provident fund; and (h) "salary" includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites. According and withdrawal of recognition. 3. (1) ---: Provided that in a case where recognition has been accorded to any provident fund on or before the 31st day of March, 2006 and such provident fund does not satisfy the conditions set out in clause (ea) of rule 4, the recognition to such fund shall be withdrawn, if such fund does not satisfy, on or before the 31st day of March, 38[2014], the conditions set out in the said clause and any other condition which the Board may, by rules specify, in this behalf : Provided further that nothing contained in the first proviso shall apply to the provident fund of an establishment in respect of which a notification has been issued by the Central Government under sub-section (2) of section 16 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952).
PART B APPROVED SUPERANNUATION FUNDS44 [See sections 2(6), 10(13), 10(25)(iii), 36(1)(iv), 45 87(1)(e), 192(5), 206] Definitions.
In this Part, unless the context otherwise requires, "employer", "employee", "contribution" and "salary" have, in relation to superannuation funds, the meanings assigned to those expressions in rule 2 of Part A in relation to provident funds. Approval and withdrawal of approval. 2. (1) The 46[Principal Chief Commissioner or] Chief Commissioner or 46[Principal Commissioner or] Commissioner may accord approval to any superannuation fund or any part of a superannuation fund which, in his opinion, complies with the requirements of rule 3, and may at any time withdraw such approval, if, in his opinion, the circumstances of the fund or part cease to warrant the continuance of the approval. (2) The 46[Principal Chief Commissioner or] Chief Commissioner or 46[Principal Commissioner or] Commissioner shall communicate in writing to the trustees of the fund the grant of approval with the date on which the approval is to take effect, and, where the approval is granted subject to conditions, those conditions. (3) The 46[Principal Chief Commissioner or] Chief Commissioner or 46[Principal Commissioner or] Commissioner shall communicate in writing to the trustees of the fund any withdrawal of approval with the reasons for such withdrawal and the date on which the withdrawal is to take effect. (4) The 46[Principal Chief Commissioner or] Chief Commissioner or 46[Principal Commissioner or] Commissioner shall neither refuse nor withdraw approval to any superannuation fund or any part of a superannuation fund unless he has given the trustees of that fund a reasonable opportunity of being heard in the matter.
North Brook Jute Company Assessment Year: 2006-07 Conditions for approval.
3. In order that a superannuation fund may receive and retain approval, it shall satisfy the conditions set out below and any other conditions which the Board may, by rules, prescribe— (a) the fund shall be a fund established under an irrevocable trust in connection with a trade or undertaking carried on in India, and not less than ninety per cent of the employees shall be employed in India; (b) the fund shall have for its sole purpose the provision of annuities for employees in the trade or undertaking on their retirement at or after a specified age or on their becoming incapacitated prior to such retirement, or for the widows, children or dependants of persons who are or have been such employees on the death of those persons ; (c) the employer in the trade or undertaking shall be a contributor to the fund ; and (d) all annuities, pensions and other benefits granted from the fund shall be payable only in India. Application for approval. 4. (1) An application for approval of a superannuation fund or part of a superannuation fund shall be made in writing by the trustees of the fund to the Assessing Officer by whom the employer is assessable, and shall be accompanied by a copy of the instrument under which the fund is established and by two copies of the rules and, where the fund has been in existence during any year or years prior to the financial year in which the application for approval is made, also two copies of the accounts of the fund relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up, but the47[Principal Chief Commissioner or] Chief Commissioner or 47[Principal Commissioner or] Commissioner may require such further information to be supplied as he thinks proper. (2) If any alteration in the rules, constitution, objects or conditions of the fund is made at any time after the date of the application for approval, the trustees of the fund shall forthwith communicate such alteration to the Assessing Officer mentioned in sub-rule (1), and in default of such communication any approval given shall, unless the 47[Principal Chief Commissioner or] Chief Commissioner or 47[Principal Commissioner or] Commissioner otherwise orders, be deemed to have been withdrawn from the date on which the alteration took effect. Contributions by employer when deemed to be income of employer.
Where any contributions by an employer (including the interest thereon, if any) are repaid to the employer, the amount so repaid shall be deemed for the purpose of income-tax to be the income of the employer of the previous year in which it is so repaid. Deduction of tax on contributions paid to an employee.
Where any contributions made by an employer, including interest on contributions, if any, are paid to an employee during his lifetime in circumstances other than those referred to in clause (13) of section 10, tax on the amounts so paid shall be deducted at the average rate of tax at which the employee was liable to tax during the preceding three years or during the period, if less than three years, when he was a member of the fund, and shall be paid by the trustees to the credit of the Central Government within the prescribed time and in such manner as the Board may direct. Deduction from pay of and contributions on behalf of employee to be included in return.
Where an employer deducts from the emoluments paid to an employee or pays on his behalf any contributions of that employee to an approved superannuation fund, he shall include all such deductions or payments in the return which he is required to furnish under section 206.
North Brook Jute Company Assessment Year: 2006-07
The PART A of THE FOURTH SCHEDULE which deals with RECOGNISED PROVIDENT FUNDS under many sections including the sections 2(38) of the Act establishes that this Part-A shall not apply to any provident fund to which the Provident Funds Act, 1925.
The PART B describes about APPROVED SUPERANNUATION FUNDS involving sections 2(6), 10(13), 10(25)(iii), 36(1)(iv), 87(1)(e), 192(5), 206 of the Act. This PART B particularly deals with a fund established under an irrevocable trust in connection with a trade or undertaking carried on in India and requires continuous Approval Principal Chief Commissioner or Chief Commissioner as the case may be.
In the present case, the AO added the said addition Section 115WB of the Act by invoking section 2(6) of the Act which defines approved superannuation fund to be approved by the Chief Commissioner or Commissioner in accordance with the rules contained in part B of the Fourth Schedule, as discussed above part B deals with in connection with a trade or undertaking carried on in India, where as the assessee is jute manufacturing company to which the provisions of the Employees' Provident Funds & Miscellaneous Provisions Act, 1952 is applicable. It is an Act to provide for the institution of provident funds and pension fund and deposit linked insurance fund for employees in factories and other establishments in India. The said Act applicable to every establishment which is a factory engaged in any industry specified in Schedule-I contained therein and in which twenty or more persons are employed and to any other establishment employing twenty or more persons or class of such establishments which the Central Government may, by notification in the Official Gazette specify on this behalf.
North Brook Jute Company Assessment Year: 2006-07 14. In this regard, in appellate proceedings Ld AR has explained, how addition under Section 115WB r/w section 2(6) of the Act is not applicable vide his letter dated 12.02.2013 is placed as under.- 1). "That the company is an employer to which the provisions of the Employees' Provident Funds & Miscellaneous Provisions Act, 1952 applies.
2). That under the provisions contained in Section 6A of the said Act, the Central Government has framed a scheme namely The Employees’ Pension Scheme, 1995 for the purpose of providing pension to the employees of an establishment to which the Act applies.
3). That the company, as an employer, was required to contribute to the Employees' Pension Fund set up under the said statutory Employees' Pension Scheme @8.33% of the employees pay as provided under Clause 3 of the scheme.
4). That such employer's contribution towards the employees' pension fund was paid to the Employees Provident Fund Organization in its Account No. 10 prescribed for this purpose.
5). That the break of the company's contribution to the Employees Pension Fund for the financial year 2005-06 is as follows:- i) In respect of Head Office Employees 1,40,081/- ii] In respect of Head Office Employees 1,12,02,776/- Total 1,13,42,857/-
The relevant evidences for verification of such payment are being produced before your honour for necessary verification.
6). That we are enclosing herewith a copy of The Employees' Pension Scheme, 1995 under the provisions of which the above mentioned contributions were made by the company as an employer.
We hope, this proves beyond doubt that the amount paid by the company was a statutory contribution paid to a scheme North Brook Jute Company Assessment Year: 2006-07 framed by the Central Government under the provisions of the Employees' Provident Fund & Miscellaneous Provisions Act, 1952 and not a contribution to any "approved superannuation fund" defined u/ s. 2(6) of the Income Tax Act."
For that matter the Central Government enacted the Employees' Provident Fund & Miscellaneous Provisions Act under which a Scheme framed for the purpose of providing for the benefit to the employees of any establishment or class of establishments to which this Act applies in order to provide benefit to the employees of any establishment by giving superannuation pension, retiring pension or permanent total disablement pension. In the present case the assessee’s contention was that the employer’s contribution to the employees provident fund is a statutory contribution to the employee’s pension scheme framed by the Government of India under the provisions contained in the Employees Provident Fund & Miscellaneous Provision Act 195, perusal of the record show that the employees of assessee have opted for becoming the members of the said Scheme to avail the benefit of superannuation pension, retiring pension or permanent total disablement pension. In this regard, the CIT-A examined the notification issued by the Government of India vide its Notification No. G.S.R. 748-E, dt: 16-11-1995 which is reproduced herein below: The Employees' Pension Scheme, 1995 has been framed by the Central Government in exercise of the powers conferred by section 6A of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. The relevant part of the scheme reads as under:-
"Notification No. G.S.R. 748(E, dated November 16, 1995 - In exercise of the powers conferred by section 6A of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952), the Central Government hereby makes the following Scheme, namely:-
1. Short title, Commencement and Application - North Brook Jute Company Assessment Year: 2006-07
(1) This Scheme may be called the Employees' Pension Scheme, 1995. (2) (a) This Scheme shall come into force on 16th day of November, 1 995.
(b) Subject to the provisions of this Scheme the employees have an option to become the members of the Scheme with effect from the 1st April, 1993.
(3) Subject to the provisions of section 16 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, this Scheme shall apply to the employees of all factories and other establishments to which the Employees' Provident Funds and Miscellaneous'· Provisions Act, 1952 applies or is applied under sub-section (3) or sub-section (4) of section 1 or section 3 thereof.
In the present case, the assessee has made the contributions for its employees of Rs. 1,13,42,857/- to the Employees Provident Fund under the Employees Pension Fund Scheme, 1995. In this connection a question arose for which CBDT has given explanation which is reproduced herein below:
FINANCE ACT, 2005 - FBT Finance Act, 2005 - Explanatory Notes on the Provisions relating to Fringe Benefit Tax CIRCULAR NO. 8/2005, DATED 29-8-2005
The Finance Act, 2005 has introduced a new levy, namely, Fringe Benefit Tax (hereafter referred to as FBT) on the value of certain fringe benefits. The provisions relating to levy of this tax are contained in Chapter XII-H (sections 115W to 115WL) of the Income-tax Act, 1961. This circular seeks to provide a harmonious, purposive and contextual interpretation of the provisions of the Finance Act, 2005 relating to the FBT so as to further the objective of this levy.
Would contributions to approved gratuity fund or provident fund attract FBT? 38. Section 115WB read with section 115WC does not specifically contain any provision for chargeability of contribution to approved gratuity fund or North Brook Jute Company Assessment Year: 2006-07 provident fund to FBT. Accordingly, the contribution to the aforesaid funds would not attract levy of FBT.
The CBDT vide its CIRCULAR NO. 8/2005, dt: 29-8-2005 has clarified that the contribution to approved gratuity fund or provident fund was not chargeable to FBT. In view of the above discussions, we hold that contributions made to the Employees Provident Fund under the Employees Pension Scheme,1995 which is a statutory contribution as framed by the Government of India exercising the powers conferred on it by section 6A of the provisions of the Employees Provident Fund & Miscellaneous Act, 1952 is not a superannuation fund as defined u/s. 2(6) of the Act Therefore addition of Rs. 1,13,42,857/- made by the AO towards fringe benefits u/s.115WB(1)(c) of the Act is not sustainable. Accordingly, We confirm the order of CIT-A and the ground raised by Revenue is dismissed.
In the result, the appeal filed by the Revenue is dismissed.
Order Pronounced in the Open Court on 6th May,2016.