The Calcutta High Court has delivered an important ruling on the tax treatment of actuarial contributions to approved superannuation and gratuity funds, while also clarifying when employees’ PF/ESI contributions can be disallowed under Section 36(1)(va) of the Income-tax Act.
In a significant judgment dated 21 August 2026, the Calcutta High Court dismissed the Revenue’s appeal against the order of the Income Tax Appellate Tribunal (ITAT), Kolkata, thereby upholding tax relief exceeding ₹752 crore granted to Syama Prasad Mookherjee Port, Kolkata, formerly known as Kolkata Port Trust.
The Division Bench comprising Justice Rajarshi Bharadwaj and Justice Uday Kumar held that contributions made to approved superannuation and gratuity funds to cover actuarial shortfalls cannot automatically be treated as routine annual contributions merely because similar payments were made in earlier years.
Background of the Case
The dispute arose during scrutiny assessment proceedings in which the Assessing Officer determined the total income of Syama Prasad Mookherjee Port at approximately ₹876.17 crore.
The assessment included three significant disallowances:
- ₹710.68 crore relating to contributions to the Superannuation Fund;
- ₹33.11 crore relating to contributions to the Gratuity Fund; and
- ₹8.38 crore relating to employees’ Provident Fund and ESI contributions.
The Commissioner of Income Tax (Appeals) deleted these additions. The ITAT, Kolkata subsequently upheld the relief, relying substantially on earlier decisions of the Calcutta High Court.
The Revenue challenged the ITAT order before the High Court.
Actuarial Shortfall Does Not Become Routine Contribution
One of the principal issues concerned the enormous contribution made to the approved Superannuation Fund.
The Revenue argued that the contribution exceeded the ceiling prescribed under Rule 87 and therefore should not be allowed as a deduction. It also contended that because similar contributions had been made over several years, they could not be regarded as exceptional payments.
The High Court rejected this approach.
According to the Court, the character of the contribution must be determined primarily by its purpose and the circumstances in which it was made. Where an additional contribution is required to meet an actuarial deficit in an approved fund, the mere fact that actuarial deficiencies have arisen repeatedly does not transform such payments into ordinary annual contributions.
In other words, a continuing actuarial shortfall does not, by itself, make a deficit-funding contribution subject to the same treatment as a regular annual contribution.
₹33.11 Crore Gratuity Contribution Also Allowed
The Court also upheld the deduction for the ₹33.11 crore contribution to the approved Gratuity Fund.
The contribution was made to bridge the difference between the actuarially determined gratuity liability and the funds available in the approved gratuity fund.
Importantly, the High Court observed that Section 36(1)(v), dealing with deductions for contributions to approved gratuity funds, does not itself prescribe an 8.33% ceiling.
The Revenue had sought to rely on Rule 103 to restrict the deduction. However, the Court held that once the gratuity fund has received the requisite approval, the Assessing Officer cannot effectively reopen or question the basis of that approval and independently impose a limitation not contained in the substantive deduction provision.
PF/ESI Disallowance: No Statutory Due Date, No Delay
The third major issue involved the ₹8.38 crore disallowance of employees’ PF and ESI contributions.
The Revenue argued that the contributions were deposited after the due date and therefore attracted disallowance under Section 36(1)(va).
The High Court, however, examined the specific regulatory framework applicable to the Port Trust. It noted that the Kolkata Port Trust (Non-contributory Provident Fund) Regulations, 1988, which governed the assessee, did not prescribe a statutory due date for depositing the employees’ share.
The Court further noted that the 15th day of the following month appearing in the Tax Audit Report was essentially an e-filing software-generated date.
A software-generated date, the Court held, cannot create a statutory due date where the governing regulations do not prescribe one. Consequently, in the absence of a legally prescribed due date, there could be no statutory delay capable of triggering Section 36(1)(va).
The Court also took note of the fact that the actual deposits had been made only a few days after the artificial date reflected in the software.
Key Takeaways for Taxpayers
The judgment provides several important principles concerning deductions for employee benefit funds:
- Actuarial deficit contributions are distinguishable from routine annual contributions.
- Repeated actuarial contributions do not automatically become ordinary contributions subject to prescribed annual ceilings.
- Contributions to an approved gratuity fund cannot be restricted merely by importing a percentage limitation not contained in Section 36(1)(v).
- For Section 36(1)(va), there must be a legally identifiable due date under the applicable statutory or regulatory framework.
- A date generated by tax-filing software cannot substitute for a statutory due date.
Conclusion
The Calcutta High Court’s decision in Principal Commissioner of Income Tax-5, Kolkata v. Syama Prasad Mookherjee Port, Kolkata, ITA No. 49 of 2026, is significant for taxpayers, statutory authorities and organisations maintaining approved employee benefit funds.
By dismissing the Revenue’s appeal, the Court has reinforced the principle that the substance and statutory character of a contribution must be examined rather than mechanically applying percentage limits or software-generated deadlines.
The ruling is particularly relevant to large employers, statutory bodies, public-sector organisations and other entities maintaining approved superannuation, gratuity and provident fund arrangements where actuarial valuations may require substantial additional funding.