Satish Chandra, J.
1. The assessee is a bank. It derived income, inter alia, from banking business.
2. For the assessment years 1966-67, 1967-68 and 1968-69, the assessee claimed deduction of Rs. 1,201, Rs. 3,272 and Rs. 2,814, respectively, on account of contribution to the employees' provident fund. The ITO rejected this claim, whose view was affirmed on appeal. The assessee then went up to the Tribunal. The Tribunal held that though the assessee's claim may not be allowable under Section 36(1)(iv) of the I.T. Act, 1961, yet since the contribution was a statutory liability, it was in the nature of an expenditure made wholly and exclusively for the purpose of business, and as such was allowable under Section 37(1) of the Act.
3. At the instance of the Commissioner, the Tribunal has referred the following question of law for our opinion :
'Whether, on the facts and in the circumstances of the case, the contribution made by the assessee to the employee's provident fund set up under Section 63 of the U.P. Co-operative Societies Act, 1965, was an allowable expenditure under Section 37(1) even though the same was not an allowable expenditure under Section 36(1)(iv) of the I.T. Act, 1961 ?'
4. The ITO had found that the assessee had created a reserve fund consisting of the employees' contribution, the contribution made by the bank to the employees' provident fund, one-fourth of the business profits of the assessee and the interest paid by the bank. This fund has been invested in securities like debentures, land mortgage bank, national plan certificates, etc. On these investments the bank was earning income. The reserve fund has not been set apart in trust. It forms part of the income-earning fund of the bank, and so it cannot be allowed as a deduction. The Tribunal has not given any finding on these factual aspects. It assumed that the liability created by Section 63 of the U.P. Co-operative Societies Act, 1965, read with Rules 201 to 204, being statutory liability, was an allowable expense.
5. Section 63 requires the co-operative society to establish a contributory provident fund, to which shall be credited all contributions made by the employees as well as by the society. A contributory provident fund shall not be used in the business of the society and shall not form part of the assets of the society. Rule 203 provides that the interest accrued on the investment of the contributory provident fund shall be credited to the account of the individual employee concerned, in proportion to the balance standing to his credit at the close of the preceding co-operative year. Rule 204 provides the modes in which the contributory provident fund shall be invested.
6. The Tribunal has not gone into the facts and recorded any finding whether the assessee had in fact established a contributory provident fund in accordance with Section 63. There is no finding whether the contributory provident fund was not used in the business of the society and did not form part of the assets of the society. Further, there is no finding whether the interest was credited as required by r, 203, and whether the provident fund was invested in accordance with r. 204.
7. Unless the assessee satisfies these statutory requirements it will be difficult to hold that the deduction claimed by it was in discharge of its statutory liability. The ITO found that the assessee was earning income on the investment of the reserve fund, to which the provident fund account had also been credited. This creates some doubt whether the statutory requirements have, in fact, been fulfilled.
8. We, therefore, direct the Tribunal to draw up a supplementary statement of the case, giving its findings on the various aspects mentionedabove.