TMI Blog1981 (2) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... butions related to earlier years, it was allowable as a deduction in the computation of the assessee's income of the previous year relevant to the assessment year 1964-65, since the demand for the statutory contributions was raised by the statutory authority for the first time in the relevant previous year ? " It appears that the relevant previous year ended on May 31, 1963. The assessee is a firm dealing in wire ropes, chains and miscellaneous articles. In the computation of total income for the relevant previous year the assessee claimed deduction of Rs. 29,008 under the head " Provident Fund Contributions ". The ITO disallowed this claim on the ground that the provident fund contribution of Rs. 29,008 made by the assessee during the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Funds Act, 1952, it appears that the liability for the previous year had arisen in the earlier years. But we have noted that the assessee is firm dealing in wire ropes, chains and miscellaneous articles. It is common knowledge that under the scheme of the Employees' Provident Funds Act, 1952, disputes and doubts very often arise as to whether a particular employer is a factory and whether such an employer is contemplated by the Provident Funds Act and also whether such an employer employs the number of employees required to come under the mischief of the Act. In this connection, reference may be made to the letter of the Regional Provident Fund Commissioner which is dated 19th June, 1962. It was addressed to the partners of the assessee-f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a mercantile system of accounting the liability arose in the year in question, in reality it arose in the year when it was clarified to be applicable to the assessee and the assessee was asked to discharge that liability. It would be apparent from the tenor of the letter that a certain decision was pending. Now, this position seems to be quite apparent from the facts of the letter. Therefore, if having regard to the reality of the situation, the Tribunal took a view that in reality the liability matured in the relevant year, it cannot be said that such a finding was improper or incorrect. We must, however, point out that the Tribunal seems to have been influenced by decision of the Assam High Court in the case of CIT v. Nathmal Tolaram [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. v. CIT [1971] 82 ITR 363, and this decision of the Assam High Court was dissented from in a decision of the Division Bench of the Kerala High Court in the case of L. J. Patel Co. v. CIT [1974] 97 ITR 152, as well as decision of the Madras High Court in the case of CIT v. V. Krishnan [1980] 121 ITR 859. We are in respectful agreement with the views of the Madras High Court and the Kerala High Court as noted above. But with great respect, we are unable to agree with the view expressed by the Assam High Court. But, here, as we have mentioned , the position is not a theoretical position as to whether a statutory liability arose in the year when it became due or when it was discharged. Here the facts are that the assessee is a firm whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibution by a notice. Observations of the Division Bench of the Madras High Court must, therefore, be understood in the background of that controversy. We are not faced with that controversy. In that view of the matter, we are of the opinion that the Tribunal was correct in allowing this deduction. We would, however, say that it is not in all cases correct to say that a statutory liability discharged in particular year become eligible for deduction in the year in question in the mercantile system of accounting. It depends on the facts and circumstances of the case and on the statutory provisions. Here in part the statutory liability admittedly accrued in the year in question and in part became real and enforceable in view of the facts in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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