Case Law Details
CIT Vs M/s. Muthoot Finance Ltd. (Kerala High Court)
Conclusion:
Assessee-employer had contributed a specific amount to each employee which was credited to a Staff Welfare Fund Account alongwith interest thereon and the amounts retained with the employer and the interest accrued in the name of a particular employee, was taxed in the hands of that employee. Hence though there was a common fund and accrual of interest, the same had to be treated as having been credited separately on the employees account in the relevant fund which was permissible for deduction under Section 36(1)(va).
Held:
Assessee was not covered under the Provident Fund Scheme as framed under the Employees Provident Fund and Miscellaneous Provisions Act, 1952. Assessee/employer hence, as a welfare measure contributed a specific amount to each employee which was credited to a Staff Welfare Fund Account. It was retained in a Staff Welfare Fund Account. Interest also accrued with respect to amounts kept in the account which was also claimed as expenditure by the assessee/ employer. The account was to be maintained continuously and on the retirement of each employee the amounts so shown in the salary of each month, retained with the employer, was paid to the employee along with interest that accrued from the date of such retention in the Staff Welfare Fund Account. AO found that there was no separate credit made to the employee’s account in the relevant fund or funds so as to enable deduction under Section 36(1)(va). It was held the provision does not speak of an approved or a statutory fund and the words employed are: “sum credited by the assessee to the employee’s account in the relevant fund”. Admittedly, there was a welfare scheme for the employees as spoken of in sub-section (x) of Section 2(14). The amounts though credited in a common account the amounts retained from an individual employee, whose credits were evident from the books of accounts, along with interest accrued on such amounts was eventually payable to that employee. The amounts retained with the employer and the interest accrued in the name of a particular employee, was taxed in the hands of that employee. Hence though there was a common fund and accrual of interest, the same had to be treated as having been credited separately on the employees account in the relevant fund; the principal and interest accrued, being eventually payable to the employee on his superannuation. Thus, the deduction under Section 36(1)(va) was permissible.
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It is mentioned in the order that Muthoot Finance Ltd, is not covered under EPF & MP Act. How such a big organisation is not covered under The Act? What is the nature of appointment of the personnel working for them?
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