COMMISSIONER OF INCOME TAX Vs. AMCO BATTERIES

JUDGEMENT

(1.) AT the instance of the revenue the following two questions of law are referred for our opinion by the Income Tax Appellate Tribunal under Section 256(1) of the Income Tax Act 1961 (for short hereinafter referred to as the Act). 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that Rs.30,000/- Paid for issue of shares is allowable as a business expenditure ? 2.Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that ESI contribution of RS.4,50,000/-is not to a fund and it does not come under Sec.43B(b) ?

(2.) THE facts leading to the reference are as under: THE assessment year involved is 1984-85. THE assessee is an employer. THE assessing officer allowed an expenditure of Rs.30,000/-incurred by the assessee in respect of issue of shares on the ground that it was a capital expenditure Secondly, a provision made in a sum of Rs.4,50,000/- towards ESI contribution was also given deduction to. THE Commissioner of Income Tax in exercise of power under section 263 held that the aforesaid two deduction allowed is erroneous and prejudicial to the interest of the revenue within the meaning of Section 263 of the Act and directed to modify the assessment and re-compute the income for the above assessment year after verifying the claims wherever necessary and as per directions given by him. Aggrieved by the said order the assessee preferred appeal to the Tribunal. THE Tribunal allowed the appeal of the assessee in part and restored the order of the assessing authority in so far as the aforesaid two deductions are concerned. It is at the instance of the revenue the aforesaid two questions of law are referred for our opinion.

(3.) THE answer to the second question depends upon the interpretation to be placed on Section reads as under: Certain deductions to be only on actual payment 43B. Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of- (a) xxxxx (b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees. (c) xxxx (d) xxxx (e) xxxx (f) xxxx shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him: A reading of the aforesaid provision makes it very clear that any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of the employees could be deducted only on actual payment. THE deduction is allowed only in computing the income referred to in Section 28 of the previous year in which such sum is actually paid by the assessee. In other words, actual payment is a condition precedent for claiming deduction. THErefore, unless the aforesaid sums are paid, as a matter of fact, the employer/assessee is not entitled to claim deductions.