D.P. Wadhwa, C.J.
1. At the instance of the Revenue, on an application filed under Section 256(1) of the Income-tax Act, 1961 (for short 'the Act'), the Income-tax Appellate Tribunal, Patna Bench, Patna, has referred
to this court the following question of law for its opinion with respect to the assessment years 1978-79 and 1979-80 :
'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in allowing the contribution made by the assessee to the provident fund of the parent company, namely, MMTC, which was recognised ?'
2. The facts are common in respect of both the assessment years.
3. The assessee is a company registered under the Companies Act. It is in fact a Government company as defined under Section 617 of the Companies Act. Government company means any company in which not less than fifty one per cent, of the paid up share capital is held by the Central Government, or by any State Government or Governments, and includes a company which is a subsidiary of a Government company. The Minerals and Metal Trading Corporation of India Ltd. (for short 'the MMTC'), is also a Government company within the meaning of Section 617 of the Companies Act. It is the admitted case that the assessee is a subsidiary company of the MMTC. It is not that in exercise of the powers conferred upon the Central Government under Section 620 of the Companies Act, any notification has been issued directing that any of the provisions of the Companies Act shall not apply to any Government company meaning thereby that the provisions of the Companies Act shall apply to both the MMTC and the assessee-company.
4. Both the MMTC and the assessee-company are thus separate entities under the Companies Act. It is not that the assessee is an extended arm of the MMTC, the holding company. Both are assessed separately under the taxation laws. While the MMTC has a recognised provident fund, the assessee-company has not got any recognised provident fund. It so happened that the assessee-company deposited the contribution of provident fund of its employees in the provident fund account of the MMTC and thus started claiming the amounts so deposited towards the provident fund as admissible deduction. The Income-tax Officer disallowed the claim of the assessee towards this contribution. On appeal by the assessee, the Commissioner of Income-tax (Appeals) upheld the view of advanced by the assessee. The appeal of the Revenue to the Appellate Tribunal against the order of the Commissioner of Income-tax (Appeals) was dismissed. This has led to the reference of the aforesaid question of law.
5. Under Clause (iv) of Sub-section (1) of Section 36 of the Act, deduction is allowed in computing the income of the assessee in respect of any sum
paid by the assessee as an employer by way of contribution towards a recognised provident fund. As to what is a recognised provident fund reference may be made to Clause (38) of Section 2 of the Act. According to this clause recognised provident fund means a provident fund which has been and continues to be recognised by the 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). This definition of 'recognised provident fund' leads us to Part A of the Fourth Schedule to the Act. There is no scheme framed by, the assessee-company under the Employees' Provident Funds Act establishing a provident fund, which Act is now called the Employees' Provident Funds and Miscellaneous Provisions Act. Under para 2 of the Fourth Schedule 'employer' means any person, who maintains a provident fund for the benefit of his or its employees. This Fourth Schedule provides as to how recognition is accorded to the provident fund of the assessee and how that approval could be withdrawn as well. It also provides for conditions to be satisfied by the recognised provident fund. The Commissioner of Income-tax is authorised to relax the conditions in a given case. The employer in the present case before us is the assessee, which is a distinct entity from the MMTC. It cannot be said that the MMTC is the employer of the employees of the assessee. Admittedly, the assessee does not have recognised provident fund. As noted above it is assessed separately from the MMTC, under the Act. Simply because it is a subsidiary company of the MMTC, the holding company, it does not mean that the assessee loses its identity as a separate entity. The effect of registration of the assessee as a company under the Companies Act is that from the date of its incorporation, it shall be a body corporate by its name, capable forthwith of exercising all the functions of an incorporated company, and having perpetual succession and a common seal (see Section 34 of the Companies Act).
6. That being the position, it is difficult to agree with the views advanced by the assessee that the contribution made by the assessee to the recognised provident fund of the MMTC would be admissible deduction. Mr. Katriar, learned counsel appearing for the assessee, submitted that before the assessee-company was carved out of the MMTC, the employees of the assessee were earlier employees of the MMTC. That may be so but that would not alter the position. The employer is now the assessee and in order to claim deduction, contribution towards the provident fund of its employees has to be deposited in its own recognised provident fund as provided under the Act. Mr. Katriar has referred to the following decisions
in support of his contention, (i) CIT v. Burma Corporation Ltd. ILR [1929] Rang. 608 ; AIR [1929] Rang. 193 ; (ii) CIT v. British India Corporation : [1983]142ITR563(All) and (iii) Gestetner Duplicators P. Ltd. v. CIT : [1979]117ITR1(SC) .
7. But we do not think that these decisions help Mr. Katriar in any way and we do not think it even necessary to deal with the same.
8. Accordingly, we hold that the contribution made by the assessee to the recognised provident fund of its holding company cannot be allowed as deduction from the income of the assessee under Section 36(1)(iv) of the Act. The question is thus answered in the negative, i.e., in favour of the Revenue and against the assessee. There shall be no order as to costs.
9. We may also note that during the course of hearing, it was brought to our notice that the assessee-company had since merged with the MMTC Ltd., with effect from April 1, 1995. We have, therefore, allowed the MMTC to be substituted in place of the assessee-company, i.e., Mica Trading Corporation of India. However, the question as referred to and answered by us cannot be any different on account of the substitution of the MMTC Ltd. in place of the assessee-company.
S.J. Mukhopadhaya, J.
10. I agree.