PCIT Vs Syama Prasad Mookherjee Port (Calcutta High Court)
Actuarial deficit funding of an approved superannuation fund is not an ordinary annual contribution merely because similar deficit funding has been made in earlier years.
Summary: In PCIT Vs Syama Prasad Mookherjee Port, the Calcutta High Court considered the Revenue’s challenge to the ITAT Kolkata order concerning AY 2021-22 and deletion of a ₹648,84,64,174 disallowance for contribution to an approved Superannuation Fund. The AO had disallowed the amount as exceeding the 27% ceiling under Rule 87 of the Income-tax Rules, 1962. The assessee submitted that the payment was necessitated by a severe actuarial deficit arising from persistent funding constraints and was an extraordinary ad hoc interim contribution to bridge the gap between the fund’s assets and actuarial liabilities. The CIT(A) and ITAT deleted the disallowance, treating the payments as neither ordinary annual contributions under Rule 87 nor initial contributions under Rule 88. The High Court, relying on PCIT v. Exide Industries Ltd. (2023) and Eastern Equipment & Sales Ltd., rejected the Revenue’s contention that recurring funding of shortfalls made the contributions ordinary. It held that the legal nature of the contribution depended on its purpose of remedying the actuarial deficit, not the number of years taken to address it, and upheld deletion of ₹648,84,64,174. The Revenue’s three substantial questions of law were answered against it.
