2002 (7) TMI 26 - HC - Income Tax

Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 25,875 paid as gratuity to Shri G.P. Periwal, former sales manager of the assessee, was not admissible as business expenditure? Considering the finding of facts of the Tribunal that there is no practice of making payment of gratuity nor there is any statute under which gratuity is payable to the employee nor salary was low for the purpose of payment of gratuity, therefore, there is no expectation of the employee for the payment of gratuity. There is no material on record to show that the amount of gratuity has been paid to any other employee. In view of the above facts, no case is made out for making payment of gratuity to the employee. In the result, we answer the question in favour of the Revenue and against the assessee.

Summary

The High Court of Rajasthan rejected the claim for deduction of gratuity paid to a former sales manager as business expenditure, as there was no practice, law, or justification for the payment based on the company's memorandum and articles of association. The Tribunal found no evidence supporting the payment, leading to a ruling in favor of the Revenue and against the assessee.