JUDGMENT
Dr. B.P. Saraf, J.
1. By this reference under s. 256(1) of the IT Act, 1961, made at the instance of the Revenue, the Tribunal has referred the following four questions of law to this Court for opinion :
“1. Whether, on the facts and in the circumstances of the case, the assessee was entitled to depreciation on increased repayment liability arising as a result of fluctuations in the rate of exchange of foreign currencies in which the World Bank loans were required to be repaid ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee was entitled to depreciation on the increased repayment liability due to revaluation of the German Mark and Netherland Guiders in 1967 ?
13. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the meaning of word ‘paid’ as used in s. 36(1)(iv) in connection with the contribution of an employer towards an approved superannuation fund is that given in s. 43(2) ?
4. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee is entitled to the deduction of Rs. 1,49,708 in respect of the provision for the approved superannuation fund scheme, though not actually paid ?”
2. Counsel for the parties are agreed that question Nos. 1 and 2 are covered in favour of the assessee by the decision of this Court in assessee’s own case CIT vs. Tata Hydro Electric Power Supply Co. Ltd. (1986) 159 ITR 28 (Bom). In that view of the matter, we answer both these questions in the affirmative and in favour of the assessee.
3. The facts relevant for question Nos. 3 and 4 are as follows : During the previous year relevant to the asst. yr. 1978-79, the assessee had made a provision for contribution to the approved superannuation fund to the tune of Rs. 1,49,703. The assessee claimed deduction of the above amount in computation of its income by virtue of s. 36(1)(iv) of the Act. The ITO did not allow the claim of the assessee as, according to him, the amount had not been actually paid during the relevant previous year as required by s. 36(1)(iv) of the Act. The assessee appealed against this disallowance to the CIT(A). The contention of the assessee before the CIT(A) was that as it was following the mercantile system of accounting, it was obligatory on its part during the previous year to provide for the liability on account of contribution to the superannuation fund on accrual basis. It was submitted by the assessee that by virtue of definition contained in s. 43(2) of the Act, the expression “paid” appearing in s. 36(1)(iv) would mean both “actually paid” or “incurred according to the method of accounting upon the basis of which profits or gains are computed”. This submission of the assessee found favour with the CIT(A). The CIT(A) accordingly set aside the order of the ITO disallowing deduction of a sum of Rs. 1,49,708 and held that the assessee was entitled to deduction of the same under s. 36(1)(iv) of the Act. The appeal of the Revenue against the above order of the CIT(A) was dismissed by the Tribunal. Hence, this reference at the instance of the Revenue.
4. We have heard the learned counsel for the Revenue who submits that the word “paid” appearing in s. 36(1)(iv) would mean “actually paid” and that it cannot be construed to mean and include expenditure “incurred but not paid”. We have given our careful consideration to the above submission. We, however, find it difficult to accept the same in view of s. 43(2) of the Act which specifically defines the expression “paid” for the purposes of ss. 28 to 41 which obviously would include s. 36(1)(iv) of the Act. Sec. 36(1)(iv) of the Act provides, inter alia, for allowance of deduction in computing the income of an assessee referred to in s. 28 of the Act of any sum paid by the assessee as an employer “by way of contribution towards an approved superannuation fund” subject to such limits as have been prescribed for the purpose of approving the superannuation fund. Sec. 36(1)(iv) reads as follows :
“36. Other deductions. – (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in s. 28…………… (iv) any sum paid by the assessee as an employer by way of contribution towards a recognised provident fund or an approved superannuation fund, subject to such limits as may be prescribed for the purpose of recognising the provident fund or approving the superannuation fund, as the case may be; and subject to such conditions as the Board may think fit to specify in cases where the contributions are not in the nature of annual contributions of fixed amounts or annual contributions fixed on some definite basis by reference to the income chargeable under the head “Salaries” or to the contribution or to the number of members of the fund.”
Sec. 43 contains definitions of certain terms relevant to income from profits and gains of business or profession. Clause (2) thereof defines the expression “paid”. Sec. 43, so far as it is relevant reads :
“43. Definitions of certain terms relevant to income from profits and gains of business or profession. – In ss. 28 to 41 and in this section, unless the context otherwise requires……………
(2) “paid” means actually paid or incurred according to the method of accounting upon the basis of which the profits or gains are computed under the head “profits and gains of business or profession”.
The effect of s. 43(2) is to give the meaning assigned by it to the word “paid” in all places in ss. 28 to 41 of the Act wherever it occurs “unless the context otherwise requires”. These words appear in s. 36(1)(iv) of the Act. It has, therefore, to be understood to mean what is conveyed by the definition contained in s. 43(2) of the Act. There is nothing in the subject or context which requires otherwise or a departure from the meaning conveyed by the definition. On the other hand, a conjoint reading of s. 36(1)(iv) and s. 43(2) of the Act makes it abundantly clear that the term “paid” appearing in s. 36(1)(iv) of the Act means not only “actually paid” but also “incurred according to the method of accounting upon the basis of which the profits and gains are computed under the head profits and gains of business or profession”.
5. There is no dispute in this case about the fact that the assessee was following mercantile system of accounting. Further uncontroverted factual position is that a liability of Rs. 1,49,708 was incurred by the assessee during the previous year in respect of contribution to the approved superannuation fund. The entitlement of the assessee to deduction has not been challenged on the ground of non-fulfilment of any of the conditions of s. 36(1)(iv) of the Act. The only ground on which the claim of the assessee has been rejected by the ITO is that the word ‘paid’ occurring in s. 36(1)(iv) of the Act has to be construed as “paid” in the ordinary sense of the term and not in the sense set out in cl. (2) of s. 43 of the Act. We do not find any merit in this stance of the Revenue which goes counter to the plain language of the statute. As stated earlier, “paid” occurring in s. 36(1)(iv) of the Act has to be given the same meaning as have been assigned to it by the legislature in s. 43(2) of the Act unless the context otherwise requires. There is nothing in the context in which it occurs in s. 36(1)(iv) of the Act to require otherwise. Situated thus, we are of the clear opinion that the Tribunal was right in holding that the meaning of the word “paid” used in s. 36 in connection with contribution towards approved superannuation fund is the one given to it by s. 43(2) of the Act. Accordingly, we answer question No. 3 in the affirmative and in favour of the assessee. 6. In view of the above answer to question No. 3, question No. 4 which is consequential has also to be answered in the affirmative and in favour of the assessee. It is answered accordingly.
7. This reference is answered accordingly.
8. In view of the facts and circumstances of the case, we direct the Revenue to pay the sum of Rs. 750 to the assessee as costs.