Case Details
Case: Principal Commissioner of Income Tax 5 Kolkata v. Syama Prasad Mookherjee Port Kolkata
Court: High Court at Calcutta, Special Jurisdiction (Income Tax), Original Side
Coram: Justice Rajarshi Bharadwaj and Justice Uday Kumar
Case No.: ITA 47 of 2026 with GA 2 of 2026
Neutral Citation: 2026:CHC-OS:358-DB
Assessment Year: 2020-21
Date of Judgment: 21 August 2026
Relevant Provisions: Sections 36(1)(iv) and 260A of the Income Tax Act, 1961; Rules 87 and 88 of the Income-tax Rules, 1962
Verdict: In favour of the assessee
Headnote
Income Tax—Approved superannuation fund—Rule 87 ceiling—Contribution made to meet actuarial deficit—The nature of a contribution is determined by its purpose and not by the number of years over which the shortfall is funded—Ad hoc contributions made to bridge an actuarially determined deficit are neither ordinary annual contributions under Rule 87 nor initial contributions under Rule 88—Deletion of disallowance of ₹564,49,19,729 upheld—Revenue’s appeal dismissed.
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The Calcutta High Court has held that contributions made to an approved superannuation fund for meeting an actuarially determined deficit cannot be treated as ordinary annual contributions merely because similar shortfall-funding payments were made over several years. Consequently, the ceiling prescribed under Rule 87 of the Income-tax Rules, 1962, was held to be inapplicable to such actuarially backed contributions.
The decision was delivered in Principal Commissioner of Income Tax 5 Kolkata v. Syama Prasad Mookherjee Port Kolkata, concerning Assessment Year 2020-21.
Background of the Case
Syama Prasad Mookherjee Port Kolkata, formerly known as Kolkata Port Trust, filed its return declaring a total income of ₹227,13,00,220. The assessment was subsequently completed under Section 143(3) read with Section 144B of the Income Tax Act, determining its total income at ₹780,81,75,188.
Among the additions made by the Assessing Officer was a disallowance of ₹564,49,19,729 relating to contributions made to the superannuation fund. The Assessing Officer treated the contribution as exceeding the 27 per cent ceiling prescribed under Rule 87 of the Income-tax Rules.
The assessee contended that the payment was necessitated by a substantial deficit disclosed through actuarial valuation. Due to funding constraints in the preceding years, the assessee had not been able to fully fund the required contribution. The amount was, therefore, contributed to bridge the shortfall between the assets of the fund and its actual actuarial liabilities.
The Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, deleted the disallowance. The ITAT Kolkata upheld this deletion by relying principally on the Calcutta High Court’s decisions in Principal Commissioner of Income Tax v. Exide Industries Ltd., reported in [2023] 146 taxmann.com 21 (Cal), and CIT v. Eastern Equipment & Sales Limited, reported in 71 taxmann.com 226 (Cal).
The Revenue thereafter filed an appeal before the Calcutta High Court under Section 260A of the Income Tax Act.
Issue Before the High Court
The principal issue was whether the contribution of ₹564,49,19,729 made to meet the actuarial shortfall in the approved superannuation fund was subject to the ceiling prescribed for ordinary annual contributions under Rule 87.
The Revenue argued that the decision in Exide Industries Ltd. was distinguishable because the assessee had been making payments to fund the shortfall over several years. According to the Revenue, the recurring nature of the payments demonstrated that they were regular contributions rather than exceptional one-time payments.
Findings of the High Court
The High Court rejected the Revenue’s contention and held that the legal character of a contribution is determined by its purpose rather than by the number of years required to address the deficit.
A persistent actuarial deficit arising from previous funding constraints could not convert ad hoc, gap-filling payments into ordinary annual contributions. The payments were specifically intended to bridge the difference between the assets of the fund and its actuarially determined liabilities.
The Court agreed with the CIT(A) and the ITAT that such payments were neither ordinary annual contributions governed by Rule 87 nor initial contributions covered by Rule 88.
It further observed that applying the Rule 87 ceiling to necessary contributions supported by actuarial valuation would compromise the solvency of the approved fund and would be inconsistent with the statutory scheme of Section 36(1)(iv) of the Income Tax Act.
The Court also rejected the allegation that the ITAT’s order was perverse or arbitrary. The Tribunal had relied upon binding precedents of the jurisdictional High Court and had passed a reasoned order based on existing judicial interpretations.
Final Decision
All three substantial questions of law were answered in the negative, against the Revenue and in favour of the assessee. The deletion of the disallowance of ₹564,49,19,729 was upheld.
The Revenue’s appeal against the ITAT order dated 18 November 2024 was dismissed as being devoid of merit. There was no order as to costs.
Key Takeaway
An actuarially backed contribution made to an approved superannuation fund for addressing a fund deficit does not become an ordinary annual contribution merely because the shortfall is funded over more than one year. The purpose and character of the payment remain decisive in determining whether the ceiling under Rule 87 applies.
The complete judgment is attached below for reference. Readers may consult the attached PDF for the detailed facts, substantial questions of law and judicial reasoning.