H.N.Seth, J. - (1.) Income-tax Appellate Tribunal has, in the case of the assesses, British India Corporation, Kanpur, for the assessment years 1956-57, 1958-59 and 1959-60, stated the case and referred the following questions of law for the opinion of this court : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Income-tax Officer could not reasonably believe that any income of the assessee had escaped assessment during these years on account of the assessee's failure to disclose fully and bring all the material facts ?
(2.) H the answer to question No. 1 is in the negative, whether on the facts, and in the circumstances of the case, the Tribunal was correct in holding that the amounts paid by the assessee as contributions to the provident fund were allowable as a deduction during these years ?" 2. According to the statement of the case, the assessee is a public limited company which maintains its accounts on calendar year basis. Originally assessments for the years 1956-57, 1958-59 and 1959-60 were completed on March 8,1961, January 31, 1962, and February 14, 1962, respectively. In these assessments the ITO, while computing the assessee's income, deducted the amount contributed by it to the provident fund account of its employees. Subsequently, these assessments were reopened by issuing notices under Section 148 on March 23, 1974, on the ground that the assessee had not disclosed the primary facts which were relevant for deciding its claim for deduction of its contributions to the provident fund of its employees. The ITO found that these contributions had been made by the assessee in violation of Article 116 of the articles of association, which provided that the company was riot to make any contribution to the provident fund for any year in respect of which the shareholders were paid dividend at a rate lower than one anna per share. For the calendar years 1955, 1957 and 1958, the company did not declare any dividend. The ITO, therefore, felt that the contributions made by the assessee-company to the provident fund in these years were ultra vires and not allowable as deductions. He, therefore, required the assessee to show cause why the contributions made by it for these three years should not be disallowed.
(3.) The company claimed that the articles of association could not override the law of the land. It was under a legal obligation to make contributions to its employees' provident fund, recognised by the Commissioner of Income-tax and set up as far back as December, 1944. Accordingly, the contributions made by the assessee to the said fund in accordance with the scheme, therefore, were allowable as deductions. It was also pointed out on behalf of the assessee that Article 116 of the articles of association had been amended by the shareholders in an extraordinary general body meeting held on May 8, 1959. After its amendment, Article 116 did not contain any restriction on the payment of contributions to the provident fund. Further, the shareholders had also, in the same meeting, ratified the contributions made by the company to the employees' provident fund during the calendar years 1955, 1957 and 1958, In the circumstances, it could not be said that the contributions made by the assessee were ultra vires and that the same were rightly allowed as deduction by the ITO, while framing the original assessment orders for each of the three years.;