TMI Blog2002 (9) TMI 254X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 154 of the Act has held that the amount of Rs. 28,92,311 contributed by the assessee to the Society is an allowable deduction and is not hit by section 40A(9) of the Act. The Department has disputed the said order of the Ld. CIT(A) in the above appeal before us. In order to decide this issue the relevant facts are that the assessee is a company engaged in the business of production of sale of foot wears. 4.1 In the assessment year 1990-91, the assessee-company contributed to the Society an amount of Rs. 38,27,430 (subsequent stated Rs. 38,27,480) and in the assessment year 1991-92 an amount of Rs. 28,92,311 as an employer. During the course of assessment proceedings the assessee contended that the assessee was required to make the contribution to the Society as per standing rules. The Society was to provide medical assistance to all employees and workers of the assessee's Batanagar factory. The said Society is an unregistered body and is neither a Society registered under the provisions of the Society's Registration Act, 1860 or a Trust or a fund. The assessee contended that the Employees State Insurance Act was also not applicable to Batanagar area as the facilities prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 40A(9) of the Act. The Ld. CIT(A) held that the Society formed by the assessee was not under any law but it was in pursuance of an agreement made between the assessee company and its employees to provide medical facilities to the workers. Hence, the Society's fund did not have any statutory formation not being set up by or under any law. Hence, the assessee is in further appeals against the aforesaid orders of the Ld. CIT(A). 6. During the course of hearing of the appeals the Ld. Counsel for the assessee submitted that the Society was constituted for providing medical relief to its members in the year 1953 and referred to pages 1 to 11 of the paper book, which is a copy of the constitution of the said Society namely Bata Workers Sickness Benefit Society. The Ld. A.R. of the assessee submitted that all the employees of the assessee-company other than the managerial staff, must become and remain members of the said Society during their employment and as per clause 6 thereof the members were required to contribute to the fund of the society according to their salaries. The assessee-company was also required to pay equal contribution. The Ld. A.R. of the assessee submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e settlement or for their non-implementation. The Ld. A.R. of the assessee further submitted that as per section 33C the money due and recoverable under a settlement could be recovered as an arrear of land revenue. Thus, the liability of the assessee-company to pay the matching contribution to the Society was payable under the various settlement arrived at between the workmen and the assessee-company which have statutory force in terms of the Industrial Employment (Standing Orders) Act, 1946 and the Industrial Disputes Act, 1947. The Ld. A.R. of the assessee submitted that the provision of section 40A(9) of the I.T. Act are not attracted to the above amount contributed by the assessee to the Society as the amount was paid as was required by or under any other law for the time being in force. In support of his submission, the Ld. A.R. of the assessee also placed reliance on the following decisions : (i) Raasi Cement Ltd. v. ITO [1993] 45 ITD 233 (Hyd.) and (ii) General Fibre Dealers (P.) Ltd. v. Asstt. CIT[1994] 72 Taxman 163(Cal.) (Mag.). 7. On the other hand, the Ld. D.R. justified the orders of the Ld. CIT(A). The Ld. A.R. of the assessee referred to page 5 of the paper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or formation or as contribution to, any fund, trust, company, association of persons, body and individuals. Society registered under the Societies Registration Act, 1860, or other institution for any purpose, except where such sum is so paid for the purposes and to the extent provided by or under clause (iv) or clause (v) of sub-section (1) of section 36, or as required by or under any other law for the time being in force. On perusal of the section, it is clear that any payment made towards a fund, trust, institution etc. is to be disallowed unless the amount paid is towards - (i) Recognized Provident Fund or approved superannuation fund as mentioned in section 36(1)(vi), (ii) Approved Gratuity Fund as mentioned in section 36(1)(v), (iii) As required by or under any other law for the time being in force. 10. In this case, there is no dispute that the contribution made by the assessee was not towards a recognized fund or approved superannuation fund or approved gratuity fund. Hence, the question only is whether the payment made by the assessee to the Society is required by or under any other law for the time being in force. 11. On perusal of the constitution of the So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e employees otherwise than in the course of conciliation proceeding shall be binding on the parties to the agreement. Further, it is provided by section 19 of the Industrial Dispute Act, 1947 that a settlement come into operation on such date as is agreed upon by the parties to the dispute, and if no date is agreed upon, on the date on which the Memorandum of Settlement is signed by the parties to the dispute. Section 29 of the Industrial Dispute Act provides penalty for breach of any term of any settlement which is binding on the parties the Industrial Dispute Act and the same shall be punishable with the imprisonment or with fine or both. 12. Considering the above facts, the question now is whether the contribution made by the assessee pursuant to the settlement arrived at between the assessee-company with its employees could be regarded as a fund required to be set up by or under any other law for the time being in force. 13. In the case of General Fibre Dealers (P.) Ltd., Calcutta bench of the Tribunal has held that the expenses incurred by the assessee towards labour and staff welfare by way of contribution to hospitals, which were run by the trust and the trustees were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the contribution made to a school in which children of the employees were studying was not covered under section 40A(9) and the contribution for running the school was to be allowed as an expenditure for the smooth functioning of the business of the assessee and also an expenditure wholly and exclusively for the welfare of the employees and this is an allowable expenditure under section 37(1) as well as section 40A(10) of the Act. 17. In view of the above judicial decisions and considering the facts that there was a valid agreement entered into by the parties and enforceable in law against each other, it becomes legal obligation of the assessee company to make the contribution to the society and as such we are of the considered view that the contribution to the society is not hit by section 40A(9) of the Act as such an obligation falls within the last part of the said section that the contribution was made by the assessee-company to a fund required to be set up by or under any other law for the time being in force. Besides, there is no dispute that the fund was constituted bona fidely for the welfare of its employees in the smooth running of the business and hence, the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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