Haryana Power Generation Corporation Ltd., Panchkula V. DCIT, Panchkula

ITA 1014/CHANDI/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90174 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 20-05-2015
• Assessment Year: 1999-2000
• Appeal Filed On: 24-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Assessee Lawyers: HARISH NAYYAR
• Keywords: Business expenditure; Deemed to accrue or arise in india; Revenue expenditure
• Section: 43B; 37; 6; 28; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO.1014/CHD/2011 ASSESSMENT YEAR: 1999-2000 HARYANA POWER GENERATION, VS. THE DCIT CORPORATION LTD. PANCHKULA CIRCLE URJA BHAWAN, SECTOR-6 PANCHKULA PANCHKULA PAN NO. AABCH4536J (APPELLANT) (RESPONDENT) APPELLANT BY : SH. HARISH NAYYAR RESPONDENT BY : SMT. JYOTI KUMARI DATE OF HEARING : 20/05/2015 DATE OF PRONOUNCEMENT : 26/05/2015 ORDER PER T.R.SOOD, A.M. THE APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 29/07/2011 PASSED BY THE CIT(A) PANCHKULA. 2. IN THIS APPEAL ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1] THAT THE ORDERS OF ASSESSMENT HAVE BEEN PASSED I N HASTE WITHOUT CONSIDERING THE DETAILED FACTS OF THE APPELLANT. THESE ORDERS HAVE BEEN PASSED IN AN ARBITRARY MANNER AND HAVE NOT TAKEN INTO CONSIDERATION THE FACTS OF THE APPELLANT CORRECTLY. THESE ORDERS ARE THEREFORE ILLEGAL AND DESERVE TO BE STRUCK OFF. 2] THAT THE AO HAS ERRED BOTH ON FACTS AND LAW IN N OT ALLOWING RELIEF IN RESPECT OF CONTRIBUTION MADE TO PENSION FUND AND PROVIDENT FUN D AND CONFIRMING THE ADDITION OF RS. 120553911 MADE N THE ORIGINAL ORDER OF ASSESSME NT. THE ADDITION HAS BEEN MADE WITHOUT CONSIDERING THE FACTS OF THE CASE CORRECTLY. THE ADDITION IS UNJUST, ILLEGAL AND DESERVES TO BE DELE TED. IT IS PRAYED THAT ADDITION OF RS. 120553911 MAY KIN DLY BE ORDERED TO BE DELETED. 2 3. AFTER HEARING BOTH THE PARTIES WE FIND THAT ORIG INALLY THE ASSESSEE HAD FILED AN APPEAL BEFORE THE TRIBUNAL AND THE ISSUE REGARDI NG DISALLOWANCE OF EXPENDITURE ON ACCOUNT OF CONTRIBUTION TO PROVIDENT FUND AND PENSION FUND WAS RESTORED TO THE FILE OF AO. THIS EXPENDITURE HA S BEEN AGAIN DISALLOWED ON THE BASIS THAT FUND IS NOT RECOGNIZED. IT IS FURTHE R STATED THAT NO EVIDENCE WAS FILED SHOWING THAT FUND WAS ESTABLISHED UNDER PROVI DENT FUNDS ACT 1925. 4. ON APPEAL THE ACTION OF THE AO WAS CONFIRMED BY THE LD. CIT(A). 5. BEFORE US LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT FUND WAS ORIGINALLY STARTED UNDER THE PROVIDENT FUND ACT 1925 AND LATER ON APPLICABILITY OF THE PROVISIONS OF EMPLOYEE PROVIDENT FUND AND MISC. PRO VISIONS ACT WAS EXCLUDED FOR THE ASSESSEE BY THE GOVT. OF HARYANA IN THIS RE GARD HE REFERRED TO THE LETTER OF THE GOVERNMENT PLACED IN THE PAPER BOOK. 6. ON THE OTHER HAND LD. DR SUBMITTED THAT THIS DOE S NOT SHOW WHETHER THERE WAS ANY INDEPENDENT CONTROL WAS BEING EXERCISED OR NOT AS LAID DOWN BY THE HON,BLE SUPREME COURT IN CASE OF CIT V. TEXTOOL CO. LTD. IN CIVIL APPEAL NO. 447 OF 2003. IN THIS REGARD SHE RELIED ON THE DECISION OF THIS BENCH OF TRIBUNAL IN CASE OF ACIT VS. PUNJAB URBAN DEVELOPMENT AUTHORITY IN I TA NO. 762/CHD/2007 AND OTHERS. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS CAREFULL Y WE FIND THAT ISSUE IS TOTALLY COVERED BY THE DECISION IN CASE OF ACIT VS. PUDA(SU PRA) IN THAT CASE THIS ISSUE WAS ADJUDICATED IN PAGE 84 TO 86 WHICH ARE AS UNDER : 84 WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY. FIRST OF ALL WE WOULD LIKE TO POINT OUT THAT THIS ISSUE IS ARISING IN ALL THE YEARS IN WHICH THE APPE ALS WERE HEARD BY US, THEREFORE, THE DECISION IN THESE PARAS WOULD BE APPLICABLE IN ALL THE YEARS WHEREIN APPEAL S ARE BEING ADJUDICATED THROUGH THIS ORDER. THE ASSE SSEE AUTHORITY WAS FORMED IN 1995 PRIOR TO WHICH THIS ORGANIZATION WAS KNOWN AS PUNJAB HOUSING DEVELOPMENT BOARD WHICH WAS STATED TO HAVE BEEN FORMED IN 1972. THROUGH A GAZETTE NOTIFICATION DAT ED 12TH AUGUST 1983 (COPY PLACED AT PAPER BOOK AT PAGE S 135-136) GOVERNMENT OF PUNJAB MADE CERTAIN RULES FO R PUNJAB HOUSING DEVELOPMENT BOARD THROUGH GSR NO. 70/PA6Z/73/S/98/83.RULE 16 OF THIS NOTIFICATION REA DS AS UNDER: PROVIDENT FUND-(1) THE STATE GOVERNMENT SHALL ESTAB LISH A PROVIDENT FUND FOR THE EMPLOYEES OF THE BOARD AND SUCH PROVIDENT F UND SHALL BE DEEMED TO BE A GOVERNMENT PROVIDENT FUND FOR THE PURPOSE O F THE PROVIDENT FUND ACT, 1925(CENTRAL ACT XIV OF 1925) AND NOTWITHSTAND ING ANYTHING 3 CONTAINED IN SECTION 8 THEREOF, SUCH FUND MAY BE AD MINISTERED BY SUCH OFFICERS OF THE STATE GOVERNMENT OR OF THE BOARD AS THE STATE GOVERNMENT MAY SPECIFY IN THAT BEHALF. THE ABOVE CLEARLY SHOWS THAT GOVERNMENT THROUGH THI S NOTIFICATION WAS MANDATED TO ESTABLISH A GOVERNMENT PROVIDENT FUND UNDER PROVIDENT FUND ACT, 1925. FURT HER PAGE 152 OF THE PAPER BOOK IS COPY OF ANOTHER ORDER OF THE GOVERNMENT OF PUNJAB SHOWING THAT ON CONSTITUT ION OF PUNJAB URBAN PLANNING AND DEVELOPMENT AUTHORITY VARIOUS TERMS IN PUNJAB HOUSING DEVELOPMENT BOARD RULES, 1983 WOULD STAND AMENDED BY SUBSTITUTION OF THE WORDS PUNJAB HOUSING DEVELOPMENT BOARD TO PUNJAB URBAN PLANNING DEVELOPMENT AUTHORITY THIS SHOWS T HAT SAME RULES WHICH WERE MADE FOR PUNJAB HOUSING DEVELOPMENT BOARD WERE ADOPTED FOR THE ASSESSEE AUTHORITY ALSO. THEREFORE, IT BECOMES CLEAR THAT PROVIDENT FUND ESTABLISHED BY THE ASSESSEE IS GOVER NED BY THE PROVISIONS OF PROVIDENT FUND ACT, 1925. RUL E (1) OF PART A TO THE FOURTH SCHEDULE OF THE ACT READS AS UNDER: APPLICATION OF THE PART THIS PART WAS NOT APPLIED TO ANY PROVIDENT FUND TO WHICH THE PROVIDENT FUND ACT, 1925 (19 OF 1925) APPLIES. THE ABOVE MAKES IT CLEAR THAT PROVIDENT FUND WHICH ARE GOVERNED BY PROVIDENT FUND ACT, 1925 ARE NOT COVERE D BY THE RULES MADE UNDER THE FOURTH SCHEDULE. IN OT HER WORDS, THE PROVISIONS REGARDING RECOGNITION OF THE PROVIDENT FUND WOULD NOT BE APPLICATION TO SUCH FUN DS, THEREFORE, IT DOES NOT MAKE ANY DIFFERENCE WHETHER ASSESSEES PROVIDENT FUND IS RECOGNIZED OR NOT RECOGNIZED. THEREFORE, THERE IS NO FORCE IN THE SUBMISSIONS OF THE LD. DR FOR THE REVENUE THAT THE CONTRIBUTION SHOULD NOT BE ALLOWED BECAUSE THE ASSESSEE HAS NOT GOT ITS FUNDS RECOGNIZED OR CONTRI BUTION WAS NOT MADE TOWARDS RECOGNIZED PROVIDENT FUND. TH IS ALSO LEADS TO THE CONCLUSION THAT SECTION 36(1)(IV) WHICH WAS FOR CONTRIBUTION TOWARDS RECOGNIZED PROVIDENT F UND, IS NOT APPLICABLE. HOWEVER, AS FAR AS SECTION 36(1 )(VA) IS CONCERNED, THE SAME IS STILL APPLICABLE BECAUSE SECTION 36(1)(VA) READS AS UNDER: 36. (1) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWING CL AUSES SHALL BE ALLOWED IN RESPECT OF THE MATTERS DEALT WITH THEREI N, IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 (I) TO (V) - NOT RELEVANT [(VA) ANY SUM RECEIVED BY THE ASSESSEE FROM ANY O F HIS EMPLOYEES TO WHICH THE PROVISIONS OF SUB-CLAUSE (X) OF CLAUSE (2 4) OF SECTION 2 APPLY, IF SUCH SUM IS CREDITED BY THE ASSESSEE TO THE EMPLOYE E'S ACCOUNT IN THE RELEVANT FUND OR FUNDS ON OR BEFORE THE DUE DATE. EXPLANATION.FOR THE PURPOSES OF THIS CLAUSE, 'DUE DATE' MEANS THE DATE BY WHICH THE ASSESSEE IS REQUIRED AS AN EMPLOYER TO CREDIT AN EMPLOYEE'S CONTRIBUTION TO THE EMPLOYEE'S ACCOUNT IN THE RELEV ANT FUND UNDER ANY ACT, RULE, ORDER OR NOTIFICATION ISSUED THEREUNDER OR UNDER ANY STANDING ORDER, AWARD, CONTRACT OF SERVICE OR OTHERWISE;] 4 THE ABOVE PROVISION DEALS WITH EMPLOYEES SHARE OF T HE CONTRIBUTION. ACCORDING TO THE SCHEME OF THE ACT T HE EMPLOYEES SHARE IS TREATED AS INCOME WHEN SOME CONTRIBUTION IS RECEIVED BY THE ASSESSEE AND WHEN S AME IS CONTRIBUTED TO PROVIDENT FUND THEN SAME IS ALLOW ED AS DEDUCTION UNDER THIS PROVISION. AT THE SAME TIME R ECEIPT OF SUCH CONTRIBUTION IS TREATED AS DEEMED INCOME U/ S 2(24)(X) WHICH READS AS UNDER: ANY SUM RECEIVED BY THE ASSESSEE FROM HIS EMPLOYEES AS CONTRIBUTIONS TO ANY PROVIDENT FUND OR SUPERANNUATION FUND OR ANY FU ND SET UP UNDER THE PROVISIONS OF THE EMPLOYEES' STATE INSURANCE ACT, 1 948 (34 OF 1948), OR ANY OTHER FUND FOR THE WELFARE OF SUCH EMPLOYEES ; IN THIS CLAUSE WHICH IS PART OF THE DEFINITION OF I NCOME, THERE IS NO MENTION OF THE WORD RECOGNIZED PROVIDE NT FUND THEREFORE, ANY CONTRIBUTION RAISED FROM THE EMPLOYEE TOWARDS ANY PROVIDENT FUND WOULD FORM PART OF THE DEEMED INCOME UNDER THIS PROVISION. IN OUR OPINION, THIS HAS BEEN DELIBERATELY DONE BY THE LEGISLATURE BECAUSE AS FAR AS EMPLOYEES CONTRIBUTIO N IS CONCERNED, THE PARLIAMENT WANTED THAT THE SAME SHOU LD NOT BE USED BY THE BUSINESS PEOPLE AND SHOULD BE DEPOSITED WITH THE PROVIDENT FUND AUTHORITIES AND O R TRUST AT THE EARLIEST AND THAT IS WHY NO DIFFERENCE HAS BEEN MADE BETWEEN RECOGNIZED PROVIDENT FUND OR OTHE R FUNDS. FROM THIS IT BECOMES CLEAR THAT AS FAR AS EMPLOYEES CONTRIBUTION IS CONCERNED, THE SAME IS N OT COVERED BY SECTION 36(1)(IV). HOWEVER, AT THE SAME TIME IT CANNOT BE DENIED THAT THE CONTRIBUTION MADE BY THE ASSESSEE TOWARDS PROVIDENT FUND IS CLEARLY IN T HE NATURE OF BUSINESS EXPENDITURE AND THEREFORE, SAME IS ALLOWABLE U/S 37 OF THE ACT WHICH IS RESIDUARY PROV ISION. SINCE THE CONTRIBUTION OF EMPLOYER SHARE TOWARDS PROVIDENT FUND IS IN NATURE OF REVENUE EXPENDITURE AND NOT COVERED BY ANY OTHER PROVISION AS EXPLAINED ABO VE, SAME IS COVERED BY SECTION 37 OF THE ACT. THIS ANA LYSIS LEADS TO THE CONCLUSION THAT AS FAR AS EMPLOYER SHA RE IS CONCERNED, THE SAME IS ALLOWABLE U/S 37 AND AS FAR AS EMPLOYEES SHARE IS CONCERNED, THE SAME IS ALLOWABL E U/S 36(1)(VA). LOT OF ARGUMENTS HAVE BEEN MADE BY BOTH THE PARTIES IN RESPECT OF SECTION 40A(9) WHIC H READS AS UNDER: (9) NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF ANY SUM PAID BY THE ASSESSEE AS AN EMPLOYER TOWARDS THE SETTING UP OR F ORMATION OF, OR AS CONTRIBUTION TO, ANY FUND, TRUST, COMPANY, ASSOCIAT ION OF PERSONS, BODY OF INDIVIDUALS, SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1860 (21 OF 1860), OR OTHER INSTITUTION FOR ANY PURPOSE, EXCEPT WHERE SUCH SUM IS SO PAID, FOR THE PURPOSES AND TO THE EXTENT PROVIDE D BY OR UNDER CLAUSE (IV) [OR CLAUSE (IVA)] OR CLAUSE (V) OF SUB-SECTIO N (1) OF SECTION 36 , OR AS REQUIRED BY OR UNDER ANY OTHER LAW FOR THE TIME BEI NG IN FORCE. PLAIN READING OF THIS PROVISIONS SHOWS THAT THE CONTRIBUTION MADE BY AN ASSESSEE AS A EMPLOYER TOWARDS VARIOUS FUNDS FOR THE BENEFIT OF THE EMPLOY EES ARE NOT ALLOWABLE EXCEPT FOR CONTRIBUTION PROVIDED IN THIS SECTION ITSELF. THEREFORE, THE LD. DR FOR TH E REVENUE IS CORRECT THAT CONTRIBUTION WHICH ARE NOT MENTIONE D IN THIS SECTION CANNOT BE ALLOWED BECAUSE THIS PROVISI ONS STARTS WITH NON OBSTANTE CLAUSE WHICH IS MADE CLEAR BY STARTING OF SECTION 40A(1) WHICH READS AS UNDER: 5 40A. (1) THE PROVISIONS OF THIS SECTION SHALL HAVE EFFE CT NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN ANY OTHER PRO VISION OF THIS ACT RELATING TO THE COMPUTATION OF INCOME UNDER THE HEA D 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. HOWEVER, CAREFUL READING CLEARLY SHOWS THAT EXCEPTI ON PROVIDED IN THIS SECTION ARE IN RESPECT OF DEDUCTI ON ALLOWED U/S 36(1)(IV) OR 36(1)(IVA) OR 36(1)(V). T HERE IS ANOTHER EXCEPTION WHICH READS AS UNDER: OR AS REQUIRED BY OR UNDER ANY OTHER LAW FOR THE TIME BEING IN FORCE THEREFORE, THE LD. COUNSEL OF THE ASSESSEE IS CORR ECT THAT SINCE PROVIDENT FUND ESTABLISHED BY THE ASSESSEE WA S IN TERMS OF INDIAN PROVIDENT FUND ACT, 1925, THEREFORE , THIS HAS TO BE READ INTO THE EXCEPTIONS AND ACCORDINGLY FETTER FOR NOT ALLOWING THE DEDUCTION U/S 40A(9) WO ULD NOT BE APPLICABLE FOR THE FUNDS CONTRIBUTED TOWARDS PROVIDENT FUND AS THE EMPLOYER SHARE IN TERMS OF I NDIAN PROVIDENT FUND ACT, 1925 WHICH WAS ADOPTED BY THE ASSESSEE. THEREFORE, WE HOLD THAT THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION IN RESPECT OF CONTRIBU TIONS MADE TOWARDS PROVIDENT FUND EVEN IF SUCH FUND IS NO T RECOGNIZED. 85 THE NEXT CONTENTION RAISED IS WHETHER DEDUCTION CAN BE ALLOWED EVEN IF THE CONTRIBUTION WAS PAID AF TER THE END OF THE YEAR. THE CLAIM OF THE ASSESSEE IS THAT THE PAYMENTS HAVE BEEN MADE BEFORE THE DUE DATE OF FILING OF RETURN AS PROVIDED IN SECTION 43B. RELEV ANT PORTION OF SECTION 43B READS AS UNDER: 43B. NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER P ROVISION OF THIS ACT, A DEDUCTION OTHERWISE ALLOWABLE UNDER THIS ACT IN RESPECT OF [(A) ANY SUM PAYABLE BY THE ASSESSEE BY WAY OF TAX , DUTY, CESS OR FEE, BY WHATEVER NAME CALLED, UNDER ANY LAW FOR THE TIME BE ING IN FORCE, OR] (B) ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPLOYER BY WAY OF CONTRIBUTION TO ANY PROVIDENT FUND OR SUPERANNUATIO N FUND OR GRATUITY FUND OR ANY OTHER FUND FOR THE WELFARE OF EMPLOYEES, [OR ] [(C) TO (F) NOT RELEVANT SHALL BE ALLOWED (IRRESPECTIVE OF THE YEAR IN WHIC H THE LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE ASSESSEE ACCORDING TO THE M ETHOD OF ACCOUNTING REGULARLY EMPLOYED BY HIM) ONLY IN COMPU TING THE INCOME REFERRED TO IN SECTION 28 OF THAT PREVIOUS YEAR IN WHICH SUCH SUM IS ACTUALLY PAID BY HIM> [ PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY IN RELATION TO ANY SUM [***] WHICH IS ACTUALLY PAID BY THE ASSESS EE ON OR BEFORE THE DUE DATE APPLICABLE IN HIS CASE FOR FURNISHING THE RETU RN OF INCOME UNDER SUB- SECTION (1) OF SECTION 139 IN RESPECT OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED AS AFORESAID AND THE EVIDENCE OF SUCH PAYMENT IS FURNISHED BY THE ASSESSEE ALONG WIT H SUCH RETURN. CAREFUL READING OF THE ABOVE PROVISION SHOW THAT A FETTER HAS BEEN PROVIDED FOR ALLOWABILITY OF CERTAI N EXPENSES. THE EXPENDITURE EVEN IF IS ALLOWABLE BEC AUSE OF THE METHOD OF ACCOUNTING FOLLOWED BY HE ASSESSEE THE SAME IS STILL NOT ALLOWABLE UNLESS AND UNTIL SU CH 6 EXPENDITURE IS PAID. THIS MEANS THAT THIS SECTION PROVIDES FURTHER RESTRICTION ON ALLOWABILITY OF AN EXPENDITURE WHICH ARE OTHERWISE ALLOWABLE U/S 30 TO 44. IN OTHER WORDS EVEN IF AN EXPENDITURE IS ALLOWABLE UNDER VARIOUS PROVISIONS UNDER THE HEAD PROFITS AND GAIN S OF BUSINESS AND PROFESSION THE SAME IS NOT ALLOWABLE BECAUSE OF SECTION 43B UNLESS SUCH EXPENDITURE IS ACTUALLY PAID. IN CASE BEFORE US, THE ASSESSEE IS FOLLOWING THE CASH SYSTEM OF ACCOUNTING WHICH WE HA VE ALREADY DISCUSSED WHILE ADJUDICATED GROUND NO. 5. THEREFORE, ANY EXPENDITURE IN CASE OF THE ASSESSEE HAS TO BE ALLOWABLE ONLY IF ACTUAL CASH HAS BEEN PAID D URING THE YEAR. THEREFORE, IF NO CASH HAS BEEN PAID EXPENDITURE IS NOT ALLOWABLE. NO DOUBT SECTION 43B HAS CARVED OUT AN EXCEPTION BY WAY OF PROVISO THAT EVEN IF EXPENDITURE IS PAID BEFORE DUE DATE OF FILING OF RE TURN THEN THE SAME SHALL BE ALLOWED AND THE HON'BLE PUNJ AB & HARYANA HIGH COURT IN CASE OF CIT V. NUCHEM LTD. IN ITA NO. 323 OF 2009 FOLLOWING THE DECISION OF HON'B LE APEX COURT IN CIT V. ALOM EXTRUSIONS (2009) 227 CTR 417 HAS CLEARLY HELD THAT IF SUCH PAYMENTS ARE MADE BEF ORE DUE DATE OF FILING OF RETURN THEN THE SAME HAS TO B E ALLOWED. HOWEVER, AS OBSERVED EARLIER THIS BENEFIT COULD NOT BE GIVEN TO THE ASSESSEE BECAUSE THE ASSESSEE I S FOLLOWING THE CASH SYSTEM OF ACCOUNTING AND ALLOWAB ILITY OF EXPENDITURE ITSELF DEPENDS ON ACTUAL CASH PAYMEN T. HOWEVER, WE WOULD LIKE TO OBSERVE THAT AT THE BEGIN NING OF THIS ISSUE WE HAVE CLEARLY MENTIONED THAT THIS I SSUE RELATES TO MANY YEARS, THEREFORE, IF THE PAYMENT F OR THIS YEAR WAS MADE IN NEXT YEAR THE SAME WOULD BE CLEARL Y ALLOWABLE IN THE NEXT YEAR. THEREFORE, THE ASSESS ING OFFICER SHOULD EXAMINE THIS ISSUE CLEARLY AND ALLOW THE PAYMENTS ON CASH BASIS EVEN IF THEY RELATE TO EARLI ER YEARS. THE LAST DISPUTE RAISED BY THE REVENUE IS T HAT THE ASSESSEE WAS NOT MAINTAINING SEPARATE BANK ACCOUNTS AND OR FDRS IN THE ACCOUNT IN RESPECT OF PROVIDENT FUND BECAUSE THE SAME HAVE BEEN SHOWN IN THE BALANCE SHEET. IN THIS REGARD THE LD. DR FOR THE REVENUE H AS RELIED ON THE DECISION OF CIT VS. TEXTOOL CO. LTD ( SUPRA). IN THAT CASE THE ASSESSEE HAD CLAIMED DEDUCTION OF RS. 92,06,978/- AS CONTRIBUTION TOWARDS APPROVED GRATUI TY FUND. A SUM OF RS. 50 LAKHS WAS PAID AS INITIAL CONTRIBUTION AND RS. 5,84,754/- WAS PAID TOWARDS A NNUAL PREMIUM. THE BALANCE OF RS. 36,22,224/- WAS PROVID ED FOR INITIAL CONTRIBUTION. ALL THE SUMS WERE PAID T O LIC. THE QUESTION AROSE WHETHER DIRECT PAYMENT TO LIC WA S COVERED BY SECTION 36(1)(V). IN THIS CONNECTION TH E HON'BLE SUPREME COURT OBSERVED AS UNDER: HAVING CONSIDERATION THE MATTER IN THE LIGHT OF TH E BACKGROUND FACTS, WE ARE OF THE OPINION THAT THERE IS NO MERIT IN THE APPEAL. TRUE THAT A FISCAL STATUTE IS TO BE CONSTRUCTED STRICTLY AND NOTHING SHOULD BE ADDED OR SUBTRACTED TO THE LANGUAGE EMPLOYED IN THE SECTION, YET A STRICT CONSTRUCTION OF A PROVISION DOES NOT RULE OUT THE APPLICATION OF THE PRINCIPLES OF REASONABLE CONSTRU CTION TO GIVE EFFECT TO THE PURPOSE AND INTENTION OF ANY PARTICULAR PROVISION OF THE ACT (SEE SHRI SAJJAN MI LLS LTD. VS. CIT, M.P. & ANR (1985) 156 ITR 585). FROM A BA RE READING OF SECTION 36(1)(V) ;OF THE ACT, IT IS MANI FEST THAT THE REAL INTENTION BEHIND THE PROVISION IS THAT THE EMPLOYER SHOULD NOT HAVE ANY CONTROL OVER THE FUNDS OF THE IRREVOCABLE TRUST CREATED EXCLUSIVELY FOR THE B ENEFIT OF THE EMPLOYEES. 7 IT IS CLEAR THAT INTENTION BEHIND THE PROVISIONS FO R VARIOUS FUNDS FOR EMPLOYEES IS THAT EMPLOYER SHOULD NOT HAV E CONTROL OVER THE FUNDS WHICH HAS BEEN CONTRIBUTED B Y THE ASSESSEE OR THE WORKERS. IN THIS REGARD THE LD . COUNSEL OF THE ASSESSEE REFERRED TO SECTION 3 OF TH E NOTIFICATION WHICH READS AS UNDER: ALL MONEYS BELONGING TO THE FUND SHALL BE INVESTED EITHER IN SECURITIES OF THE NATURE SPECIFIED IN CLA USE (A), (B), (C), (D) OR (E) OF SECTION 20 OF THE INDIAN TR USTS ACT, 1882 (CENTRAL ACT 2 OF 1882) OR IN THE POST OFFICE SAVINGS BANK ACCOUNTS OR IN LONG TERM FIXED DEPOSITS WITH SCHEDULED BANKS. POST OFFICE NATIONAL SAVING CERTIFICATES OR KEPT AS A DEPOSIT WITH THE STATE GOVERNMENT BEATING INTEREST. FURTHER THE ASSESSEE ALSO ISSUED OFFICE ORDER COPY OF WHICH IS PLACED AT PAGE 70 OF THE PAPER BOOK WHICH READS AS UNDER: IN PURSUANCE TO RULE 3(1)(2) OF THE PUNJAB HOUSING DEVELOPMENT BOARD (PROVIDENT FUND) RULES 1983 AND FURTHER ADOPTED PUD A IN ITS MEETING HELD ON 17 TH JULY 1995 VIDE AGENDA ITEM NO. 17 A COMMITTEE, IS HEREBY CONSTITUTED TO ADMINISTER AND MANAGE THE CONTRIBUTO RY PROVIDENT FUND OF THE EMPLOYEES OF PUDA. THE COMMITTEE SHALL INCLUDE: (A) THE CHIEF ADMINISTRATOR AS EX-OFFICIO CHAIRMAN OF T HE COMMITTEE OR HIS NOMINEE (B) ACCOUNTS OFFICER (PENSION) AS SECRETARY OF THE COM MITTEE (C) ADMINISTRATIVE OFFICER (ADMIN-I)- MEMBER (D) SH. KARAM CHAND, SENIOR ASSISTANT AND SH. SHISHU PA L, SENIOR ASSISTANT- MEMBERS (REPRESENTING THE EMPLOYEES OF PUDA, APPROV ED VIDE ITEM NO. 9,10 IN THE MEETING OF THE AUTHORITY HELD ON 29.11. 02). RAKESH SINGH VICE CHAIRMAN, PUDA THUS IT IS CLEAR THAT SEPARATE COMMITTEE HAS BEEN CONSTITUTED BUT IT IS NOT CLEAR WHETHER THIS COMMIT TEE WAS MONITORING THE FUNDS OF THE PROVIDENT FUND. TH E FDRS HAVE BEEN DEBITED AND MADE IN THE NAME OF THE CPF FDRS WHICH MEANS SEPARATE FDRS HAVE BEEN MADE BUT HOW IT HAS CLEARLY BEEN CONTROLLED BY THE MANAG ING COMMITTEE, IS NOT VERY CLEAR. THEREFORE, TO THIS EXTENT WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE AO TO EXAMINE WHETHER PROVIDENT FUND WAS INDEPENDENTLY MONITORED IN THE LIGHT OF THE DIRECTI ONS ISSUED BY HON'BLE SUPREME COURT IN CASE OF TEXTOOL CO.LTD (SUPRA). 86 ANOTHER CONTENTION WAS ALSO RAISED THAT THE FUND S HAVE NOT BEEN INVESTED IN THE LONG TERM FDRS. WE H AVE SEEN VARIOUS NOTES ISSUED BY THE COMMITTEE WHERE F DRS HAVE BEEN MADE ONLY FOR ONE YEAR AND JUSTIFICATION FOR THE SAME HAS BEEN GIVEN THAT PRESENTLY INTEREST IS ON LOWER SIDE AND INTEREST IS LIKELY TO GO UP THEREFOR E, FDR WAS MADE FOR ONE YEAR. THIS ASPECT ALSO NEED FURTH ER EXAMINATION BY THE ASSESSING OFFICER WHERE REGULARL Y FDRS HAVE BEEN MADE FOR A PERIOD OF ONE YEAR OR LON GER PERIOD AND WHERE NO JUSTIFICATION FOR SUCH SHORTER PERIOD IS THERE OR NOT? THEREFORE, THE ASSESSING OFFICE R SHOULD 8 EXAMINE THIS MATTER FURTHER AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW. IN THE RESULT, THIS GROUND I S ALLOWED FOR STATISTICAL PURPOSES. FOLLOWING THE ABOVE ORDER WE SET ASIDE THE ORDER OF LD. CIT(A) AND REMIT THE SAME BACK TO THE FILE OF AO WITH A DIRECTION TO DECIDE THIS ISSUE AS PER OUR OBSERVATION IN PARA 84 TO 86 CONTAINED IN THE CASE OF ACIT VS. PUDA(SUPRA) REPRODUCED ABOVE. 8. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 26/05/2015 SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 26/05/2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR