PCIT-5 Vs Syama Prasad Mookherjee Port (Calcutta High Court)
Summary: The Calcutta High Court dismissed the Revenue’s appeal concerning deductions claimed by Syama Prasad Mookherjee Port Kolkata, formerly Kolkata Port Trust, for substantial contributions made towards its Superannuation Fund and Gratuity Fund. For AY 2017-18, the assessee had filed its return declaring Nil income after set-off of brought-forward business loss of Rs.47,61,12,252/- and claiming carry-forward loss of Rs.122,41,79,063/-. The assessment under Section 143(3) determined income at Rs.394,15,94,900/- after several additions and disallowances, including Rs.208,86,57,648/- towards the Superannuation Fund and Rs.63,85,13,674/- towards the Gratuity Fund. The CIT(A) deleted the contested additions, and the Revenue carried only the superannuation and gratuity issues before the ITAT. The Tribunal, relying upon PCIT v. Exide Industries Ltd. and CIT v. Eastern Equipment & Sales Limited, upheld the deletions.
The principal controversy concerning the Superannuation Fund was whether the 27% ceiling under Rule 87 of the Income-tax Rules, 1962 applied to the contribution of Rs.208,86,57,648/-. The assessee explained that the contribution was necessitated by a severe deficit disclosed by actuarial valuation. Due to funding constraints in earlier years, the fund had not been fully funded and the payment made during the relevant financial year was an extraordinary ad hoc interim contribution intended to bridge past and current deficiencies. The High Court held that such gap-filling payments were neither ordinary annual contributions under Rule 87 nor initial contributions under Rule 88. Rejecting the Revenue’s contention that repeated funding of shortfalls made the payment a regular contribution, the Court held that the legal character of the contribution depended upon its purpose—remedying an actuarial deficit—and not upon the number of years over which the deficit was addressed. Applying the Rule 87 ceiling to necessary actuarially-backed funding of an approved fund would compromise its solvency and run contrary to the scheme of Section 36(1)(iv). The deletion of Rs.208,86,57,648/- was therefore upheld.
