High Court Of Madras
CIT vs. Tamilnadu Magnesite Ltd.
Sections 36(1)(iv)
Asst. Year 1980-81
R. Jayasimha Babu & A.K. Rajan, JJ.
TC No. 674 of 1992
6th December, 2001
Counsel Appeared
Chitra Venkataraman, for the Revenue : P.P.S. Janardhana Raja, for the Assessee
JUDGMENT
A.K. RAJAN J.:
The asst. yr. is 1980-81. The assessee is a public Ltd. Co.. The assessee took over the business of SalemMagnesite Ltd., which was mining magnesite and the lease was renewed from time to time. Between 28th Nov., 1978, and January, 1979, the business was discontinued and the services of the workers were dispensed with. In January, 1979, all the fixed assets of Salem Magnesite Ltd. were purchased by the assessee which continued the business. The erstwhile employees were reabsorbed and they were covered under the Provident Fund Act. The provident fund CIT by letter dt. 16th Oct., 1979, informed the assessee that the Provident Fund Act would apply to its establishment and directed the assessee to implement the provisions w.e.f. 17th Jan., 1979. The assessee took the stand that it was entitled to infancy protection under s. 16(1)(b) of the Provident Fund Act. The provident fund CIT rejected the contention. Therefore, the assessee made a provision for the liability of Rs. 15,53,124, as on 31st March, 1980. The AO took the view that the provision would not be allowable for the asst. yr. 1980-81, as the liability became ascertained only on 24th May, 1980. The CIT(A), however, allowed the appeal of the assessee based upon the Supreme Court decision reported in the case of Kedarnath Jute Manufacturing Co. Ltd. vs. CIT (1971) 82 ITR 363 (SC). The Tribunal took the view that the liability under the provident fund Act had accrued to it in the previous year relevant to the asst. yr. 1980-81. In the circumstances, the question of law that is referred is
: “Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the liability of the assessee under the Employees Provident Fund Act had accrued to the assesseecompany during the previous year and the assessee would be entitled to a deduction of Rs. 15,53,124 ?”
2. In view of the Supreme Court’s decision in Kedarnath Jute Manufacturing Co. Ltd. vs. CIT (supra), the deduction has to be allowed and hence the question is answered in favour of the assessee and against the Revenue.
[Citation : 258 ITR 324]
