TMI Blog2011 (1) TMI 1530X X X X Extracts X X X X X X X X Extracts X X X X ..... ordinary annual contribution, are not allowed as deduction. That is the only limitation for quantum of deduction under section 36(1)(iv). However, it is not in dispute that the amounts paid in excess of the 27% of salaries of the employees, are neither towards the ordinary annual contribution nor towards the initial contribution. This payment has been necessitated due to shortfall discovered in the course of actuarial valuation of the fund, and is in the nature of a one time exceptional payment to ensure that the superannuation fund is able to discharge its obligation. Its neither an annual contribution, nor an ordinary contribution - the very foundation of the impugned disallowance did not have legally sustainable basis; the amount was de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AO u/s.36(1)(vii) of the Income tax Act, being the amount paid to Approved Superannuation Fund exceeding 27% salary of an employee in violation of Rule 87 of Income tax Rules. 2. On the facts and in the circumstances of the case, ld CIT (A) has erred in law in holding that the amount disallowed u/s.36(1)(vii) is allowable u/s.37(1) of the Income tax Act even though section 37(1) specifically provides that section 37(1) is not applicable to an expenditure being expenditure of the nature described in section 30 to 36 of the income tax Act. 3. The relevant material facts are like this. During the course of scrutiny assessment proceedings, the Assessing officer noticed that the assessee has claimed deduction of ₹ 4,05,06,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st. It was contended that the payment so made is eligible for deduction. 5. None of these submissions, however, impressed the Assessing Officer. He was of the view that the payment, to the extent it is in excess of 27% of the salary of the employee, is not an allowable deduction. He, accordingly, disallowed ₹ 4,76,06,000. Aggrieved, assessee carried the matter in appeal before us. Learned CIT (A) allowed the appeal of the assessee on this issue, and observed as follows: I have duly considered the submissions of the AR and I find that in the case of CIT vs. Premier Cotton Spg. Mills ltd., excess gratuity contribution was allowed u/s.37, whereas u/s.36(1)(v), the same was not allowable. In the case of CIT v. Rayalseema Passenger ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the contributions are not in the nature of annual contributions of fixed amounts or annual contributions fixed on some definite basis by reference to the income chargeable under the head 'Salaries' or to the contributions or to the number of members of the fund ; 9. We may now refer to the Fourth Schedule. Part B of the Schedule deals with the approved superannuation funds. Conditions relating to the grant of approval and the procedure therefor are set out in these, two Parts. Rule 11 of Part B provides, that in addition to any power conferred by Part B, the CBDT may make rules, inter alia, limiting the ordinary annual contribution and any other contributions to an approved superannuation fund by an employer. Rules 87 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having been prescribed, amounts paid in excess of such limits, towards initial contribution and for ordinary annual contribution, are not allowed as deduction. That is the only limitation for quantum of deduction under section 36(1)(iv). However, it is not in dispute that the amounts paid in excess of the 27% of salaries of the employees, are neither towards the ordinary annual contribution nor towards the initial contribution. This payment has been necessitated due to shortfall discovered in the course of actuarial valuation of the fund, and is in the nature of a one time exceptional payment to ensure that the superannuation fund is able to discharge its obligation. Its neither an annual contribution, nor an ordinary contribution. Limitati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d v. CIT (323 ITR 397). In this view of the matter, the conclusions arrived at by the CIT(A), on this issue as well, do not call for any interference. 14. Ground No. 3 is also dismissed. 16. In the result, appeal is dismissed. C.O.No.16/Mum/2008: 17. The cross objection filed by the assessee is in support of CIT(A) s order in regard to deletion of bad debts. Since we have upheld the action of the CIT (A) on this issue in revenue s appeal, the cross objection filed by the assessee is rendered infructuous. Accordingly, the same is dismissed. 18. In the result, the appeal of the revenue and cross objection filed by the assessee is dismissed. Pronounced in the open court on 28th January, 2011 - - TaxTMI - TMITax - Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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