Contribution to PF under EPF Act allowable despite non recognition from I.T. dept u/s 2(38)

1. Brief facts of the case are that during the course of assessment proceedings, the A.O observed that the assessee has claimed an expenditure of Rs. 15,36,414/- as contribution towards Employee’s Provident Fund. The assessee was specifically asked by the A.O to provide copy of approval by the CCIT/ CIT vide question No. 14 to letter dated 10.10.2013 whether the provident fund is recognized by the ld. CIT.

4. The A.O was not satisfied with the explanation of the assessee and he disallowed the contribution made to the recognized Provident Fund amounting to Rs. 15,36,414/-.

5. The ld. counsel for the assessee relied upon the submissions made before the ld. CIT(A) and the decisions relied upon therein whereas the ld. DR. on the other hand, relied upon the orders of the authorities below.

6. ITAT heard the rival contentions and perused the facts of the case available on record. It was pointed out by the ld. AR that the meaning of Recognized Provident Fund in Section 2(38) of the Income Tax Act, 1961 is quoted as here under:

“Recognized provident fund means a provident fund which has been and continues to be recognized by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner in accordance with the rules contained in Part A of the Fourth Schedule, and includes a provident fund established under a scheme framed under the Employees Provident Funds Act, 1952 (19 of 1952)”

7. It was argued by the ld. counsel for the assessee that the from above explanation and sections quoted above it is evident that definition of ‘recognized provident fund’ is an inclusive definition and the second condition of a provident fund established under a scheme framed under the Employees’ Provident Funds Act, 1952 (19 of 1952) is independent from the first condition of recognition of the fund by the Chief Commissioner as lays down under section 2(38) of the Income Tax Act, 1961. Therefore, to claim deduction under section 38( 1)(iv) of the Income Tax Act, 1931 scheme should either be framed under the Employees’ Provident Funds or should be approved by Commissioner under the Income Tax Act, 1961. The appellant has relied on the following case laws:-

b) (2009) 27 SOT 31 (DELHI) In the ITAT Delhi Bench ‘G’ Deputy Commissioner of Income Tax”, Central Circle-6, New Delhi Vs. Sahara India Employees Contributory Provident Fund.

b) ITA No. 3107/Del/2010 In the Income Tax Appellate Tribunal Delhi Bench : H : New Delhi ACIT, Haldwani, Uttarakhand Vs Udham Singh Nagar Distt. Co- operative bank