JUDGMENT
M.H.S. Ansari J.
1. Heard Mr. S. Ravi, learned counsel for the assessee and Mr. S. R. Ashok, learned senior standing counsel for the Revenue.
2. The instant reference arises out of an order of the Income-tax Appellate Tribunal in I. T. A. No. 1237/Hyd. of 1992 pertaining to the assessment year 1984-85. It is at the instance of the assessee that the following two questions have been referred to us for our opinion :
“1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that the contributions made by the applicant in M/s. Raasi Cement Executives Welfare Trust was not deductible in computing the income of the applicant ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the Executive Welfare Trust was hit by the provisions of Section 40A(9) of the Income-tax Act ?”
3. The brief facts relevant to the questions as posed for our consideration are : the assessee is a company engaged in the manufacture and generally to deal in all kinds of Portland cement. The claim of the assessee for the assessment year in question in the sum of Rs. 1,50,00,000 which represented initial contributions made by it to M/s. Raasi Cement Employees’ Welfare Trust and M/s. Raasi Cement Executives Welfare Trust, debited to staff welfare expenses account was disallowed by the Income-tax Officer on the ground that the same was capital contribution in terms of Section 40A(9) of the Income-tax Act (for short “the Act”). The disallowance was confirmed by the first appellate authority. On further appeal, the Income-tax Appellate Tribunal (ITAT) allowed the claim of the assessee for deduction regarding the contribution to M/s. Raasi Cement Employees’ Welfare Trust. However, as regards the contribution to M/s. Raasi Cement Executives Welfare Trust, the Tribunal rejected the claim of the assessee. It held that the contribution neither pertained to the staff and workers union so as to be covered by the Act nor was pursuant to any agreement between the assessee and its executives.
4. Sub-section (9) of Section 40A of the Act was inserted by the Finance Act, 1984, with retrospective effect from April 1, 1980. The said provision reads as under :
“(9) No deduction shall be allowed in respect of any sum paid by the assessee as an employer towards the setting up or formation of, or as contribution to, any fund, trust, company, association of persons, body of individuals, society registered under the Societies Registration Act, 1860 (21 of 1860) or other institution for any purpose, except where such sum is so paid, for the purposes and to the extent provided by or under Clause (iv) or Clause (v) of Sub-section (1) of Section 36, or, as required by or under any other law for the time being in force.”
5. By the said provision, only such deductions are to be allowed which are for the purposes and to the extent provided by or under Clause (iv) or Clause (v) of Sub-section (1) of Section 36 of the Act, or as required by or under any other law for the time being in force. There is no dispute that there is no law requiring the assessee to make such contributions or expend money on the said account.
6. A perusal of Clauses (iv) and (v) of Section 36(1) referred to in the aforesaid Sub-section (9) of Section 40A of the Act would show that the deductions that are to be allowed to an employer are contributions towards a recognised provident fund or an approved superannuation fund or by way of contribution towards approved gratuity fund created by him for the exclusive benefit of his employees under an irrevocable trust.
7. Admittedly, the payments in question do not fall either under Clause (iv) or Clause (v) of Sub-section (1) of Section 36 of the Act.
8. It also appears that the main grievance of the assessee, as can be seen from the order of the Income-tax Officer was that the provision of Section 40A(9) having been brought in with retrospective effect was unconstitutional. There is no decision of the court, at least, no such decision has been brought to our notice, holding the said provision to be unconstitutional.
9. In the light of the above, question No. 1 is answered in the affirmative, i.e., in favour of the Revenue and against the assessee. Question No. 2 is likewise answered in the affirmative, i.e., in favour of the Revenue and against the assessee.
10. The reference is answered accordingly.