CIT- International Taxation -3 Vs Standard Chartered Grindlays Ltd (Delhi High Court)
Delhi High Court held that limits prescribed under section 36(1)(iv) of the Income Tax Act would only apply to an initial or an ordinary annual contribution. Thus, contribution made additionally in discharge of an overarching obligation would not be rendered as disallowable expense.
Facts- The disputes centres around the extent of contributions which were made by the respondent/assessee to a recognised superannuation fund and whether those could be said to have breached the limits prescribed by Section 36(1)(iv) and thus not liable to be allowed as deductions bearing in mind the provisions made in Section 40A(10).
Notably, the respondent/assessee had made a contribution of INR 9.81 Crores and in respect of which deductions were claimed as a whole. AO, however, disallowed that claim and took the position that the amount in excess of the limit as specified in Rule 87 of the Income Tax Rules, 1962 would be disallowable in light of Section 36(1)(iv) read along with 40A(9) of the Act.
Conclusion- Held that the factual position which had fallen for notice of the Calcutta High Court in Exide Industries and which lead it to draw a distinction between an initial or qualificatory contribution as distinguished from a contribution made in a particular year in discharge of employer obligations. It thus held that the limits that the Board could prescribe would only apply to an initial or an ordinary annual contribution. Any contribution made additionally in discharge of an overarching obligation would thus not be rendered as a disallowable expense. We find ourselves in agreement with the view expressed in Exide Industries.
