1. This is a reference under Section 66(1) of the Indian Income-tax Act, 1922, at the instance of the Commissioner of Income-tax, U. P., Kanpur.
2. At the outset, we are constrained to say that this case has given us a great deal of difficulty, because, the Income-tax Appellate Tribunal has not referred to the relevant provisions bearing on the question involved either in its appellate order or in the statement of the case. The learned counsel for the Commissioner of Income-tax, at whose instance this reference has been made, has also not been able to give us much assistance. As a result we had to spend a good deal of time in hunting out the relevant provisions. We take this opportunity of emphasising that the Tribunal should ordinarily refer to the relevant statutory provisions in the appellate order and, failing that, the relevant provisions must be incorporated in the statement of the case submitted along with the question of law referred to the High Court for opinion.
3. The question involved is as to whether the assessee was entitled to claim a deduction out of its total income of a sum of Rs. 1,24,877 which it has alleged to have contributed to an employees provident fund. The fund was not a recognised fund during the relevant previous year. The Commissioner accorded recognition to the fund by his order dated October 28, 1963, with effect from May 31, 1960. However, he issued instructions to the Income-tax Officer to grant relief to the assessed in respect of, its contributions to the fund relating to a period prior to the date of recognition. The Tribunal has relied mainly on these instructions of the Commissioner for upholding the assessee's claim. The contention of Dr. K. R. Misra, the learned counsel for the Commissioner of Income-tax, is that, the instructions were not a part of the order of the Commissioner as they were contained in an endorsement made at the foot of the order and, as such, were not binding. There is not much, force in this argument because, in our opinion, it is immaterial how the instructions are conveyed to the Income-tax Officer. We are, however, not sure as to, whether the Commissioner was competent to issue instructions to the Income-tax Officer to allow relief to the assessee even for a period prior to the date of recognition.
4. The fund in question had been created under the Employees' Provident. Funds Act, 1952. Section 9 of the said Act provides that for the purposes of the Indian Income tax Act, 192.2, the fund shall be deemed to be a recognised provident fund within the meaning of Chapter IX-A of the said Act. In view of this provision the order passed by the Commissioner recognising the fund loses all significance. The fund shall be deemed to be a recognised fund from the date it came into existence, by virtue of Section 9 of the Employees' Provident Funds Act. But the real question which arises and to which no satisfactory reply has been given to us by the learned counsel for the parties is whether the recognition of the fund was at all material. Chapter IX-A of the Indian Income-tax Act, 1922, which governs the present case, deals with the recognition of a provident fund. But no provision in that Chapter or anywhere else in the Income-tax Act has been brought to our notice which permits the allowance of contributions made by an employer to a recognised provident fund. Section 58K merely permits a deduction of the employer's share of ontribution when a payment is made to an employee out of the fund. It does not permit the allowance of periodical contributions of an employer to the fund. If that is the position, then the question as to whether the fund was recognised by the Commissioner or not becomes immaterial. In such a situation, the question will have to be decided with reference to Section 10(2)(xv) read with Section 10(4)(c) of the Act Under the latter provision no allowance can be made in respect of a payment to a provident fund unless the employer has made effective arrangements to secure that tax shall be deducted at source from any payments made from the fund which are taxable under the head 'salaries'. The Tribunal has not dealt with this aspect at all and, as such, 'has given no finding that the assessee had made such arrangements. To decide such a question it would also be necessary to find out as to how the payments were made to the fund, From the order of the Tribunal it appears that actual payment was not made but credit entries were passed in the books of accounts, la order to determine as to whether such credit entries would amount to payment within the meaning of Section 10(4)(c) it would be necessary to know the nature of the entries, vis., as to whether the credit entries are in favour of the trustees or in favour of the employees concerned, etc. In the absence of such facts the question cannot be answered.
5. We accordingly direct the Income-tax. Appellate Tribunal to record a finding on the material already on the record on the question as to whether the contributions in question can be allowed as a deduction under Section 10(2)(xv) read with Section 10(4)(c) of the Act. As the case has been pending since long we direct the Tribunal to submit a supplementary statement of the case within one month. At this stage we make no order as to costs.