Commissioner of Income Tax vs Best and Crompton Engineering Ltd.

R. Jayasimha Babu, J.—The question that requires our consideration is as to whether the Tribunal is correct in deleting the disallowance of

contribution made to the employees benefit fund. The assessment years are 1982-83, 1983-84 and 1984-85.

The employees benefit fund to which the employer made the contribution had been established for providing educational facility to the children

of the members of the fund and also to render aid and assistance to the family members of the deceased members as also to provide aid to the

members who need medical assistance. The fund had been established prior to March 1, 1984.

Though the Assessing Officer declined to allow the expenditure as a deduction on the ground that such deduction is barred by Section 40A(9)

read with Section 40A(1), the Commissioner allowed the same on the ground that the contribution had been made to a fund set up prior to March

1, 1984, and that similar contributions had been allowed by the Tribunal for the assessment year 1981-82 as it was found by the Tribunal that it

was not the Revenue''s case that the contribution was not actually used for the welfare and benefit of the employees.

For the Revenue it is contended that the view of the Tribunal is erroneous as what is allowed u/s 40A(10) is the amount of expenditure incurred

from the fund in a case where the fund is established before March 1, 1984, and that provision does not permit deduction of the amount of the

contribution made by the employer to that fund. His further submission was that such contribution is not allowable under any other provision of the

Act having regard to the non obstante clause to Section 40A(1), which provides that Section 40A would have effect notwithstanding anything to

the contrary contained in any other provision of the Act relating to the computation of income under the head ""Profits and gains of business or

profession."" The latter submission is certainly well-founded and is supported by the decision of this court in the case of Commissioner of Income

Tax Vs. Coimbatore Premier Corporation Pvt. Ltd., as also by an earlier decision of this court in the case of Commissioner of Income Tax Vs.

Coimbatore Premier Corporation (P.) Ltd., .

The submission that Sub-section (10) of Section 40A only permits the expenditure incurred by the employer from the fund set up for the welfare

of the employees and not the amount of contribution made by the employer to the fund is correct. The Tribunal in this case has followed an order

made by it in an earlier case of the same assessee in respect of an earlier assessment year. It was not the stand of the Revenue that an amount

corresponding to the contribution made by the employer had not been expended from the fund to which the contribution was made. The attention

of the parties was apparently not focussed on bringing on record the expenditure incurred by the fund to which the contribution had been made,

having regard to the view that had been taken by the Tribunal in the order made by it for the assessment year 1981-82.

We, therefore, consider it just, while setting aside the order of the Tribunal, to remand the matter to the Tribunal with a direction to give

opportunity to the respondent to place materials before it to show the extent of expenditure incurred from the fund to which the contribution had

been made by the employer so that, to the extent it is able to show that such expenditure had been made from the amount of contribution, it could

have the benefit of Section 40A(10). The matter is, therefore, remanded to the Tribunal.