2009 (4) TMI 97 - HC - Income Tax

The Assessing Officer while completing the assessment found that the assessee had paid contribution to gratuity fund amounting to Rs. 7, 83, 495 beyond the accounting period. The Assessing Officer held that the extended due date as per the proviso to section 43B of the Act was not applicable to gratuity and superannuation fund. He therefore disallowed the claim for deduction under section 43B of the Act - Admittedly it could be seen from the records that the assessee has paid the gratuity before the due date for filing of the return. Hence the decision in the case of Nexus Computer P. Ltd squarely covers the issue in favour of the assessee and against the Revenue

Summary

Issues:
- Interpretation of section 43B of the Income Tax Act regarding the deduction for payment towards gratuity fund made beyond due dates.
- Applicability of the first proviso to section 43B for payments of gratuity fund.
- Conflict between Division Bench judgments of the High Court and the decision of the Supreme Court in a similar case.

Analysis:
1. Interpretation of Section 43B:
The case involved a dispute over the deduction under section 43B of the Income Tax Act for the payment towards a gratuity fund made beyond the due dates. The Assessing Officer disallowed the claim for deduction, stating that the extended due date did not apply to gratuity and superannuation funds. However, the Commissioner of Income-tax (Appeals) upheld the claim, directing the deduction. The Income-tax Appellate Tribunal ruled in favor of the assessee, allowing the claim based on the first proviso to section 43B. The Tribunal referred to a decision of the Calcutta High Court to support its decision.

2. Applicability of First Proviso to Section 43B:
The central issue was whether the deduction for payment towards the gratuity fund made beyond the due dates could be disallowed under section 43B of the Act. The Tribunal held that since the payment was made before the due date for filing the return of income, the assessee was entitled to the benefit under the first proviso to section 43B. This interpretation was crucial in determining the eligibility of the assessee for the deduction.

3. Conflict Between Judgments:
The Revenue cited a Division Bench judgment of the High Court in a different case to support its argument. However, the assessee referred to a subsequent Division Bench judgment and a decision of the Gauhati High Court, which had a contrary view. The Gauhati High Court decision was taken to the Supreme Court, where it was affirmed, leading to a conflict between the High Court judgments and the Supreme Court decision. The High Court, considering the binding nature of the Supreme Court order, ruled in favor of the assessee based on the precedent set by the apex court.

In conclusion, the High Court dismissed the appeal, upholding the decision in favor of the assessee based on the interpretation of section 43B and the applicability of the first proviso. The conflict between the Division Bench judgments and the Supreme Court decision played a crucial role in shaping the outcome of the case, with the High Court following the binding nature of the apex court's order.