1982 (10) TMI 84 - AT - Income Tax

Summary

Issues:
1. Approval of non-contributory group gratuity-cum-life assurance scheme.
2. Disallowance of deduction for contribution to the fund.
3. Interpretation of section 40A(7)(a) and section 36(1)(v) of the Income-tax Act, 1961.

Analysis:
1. The judgment revolved around the approval of a non-contributory group gratuity-cum-life assurance scheme established by the assessee for the benefit of employees. The trust deed and rules of the fund were submitted for approval to the Commissioner, who granted approval effective from a specified date. The scheme involved assurances on employees' lives with the Life Insurance Corporation of India, and contributions were made to the fund for gratuity benefits.

2. The Income Tax Officer (ITO) initially disallowed the deduction claimed by the assessee for the contribution to the fund, stating that no fund had been created and the amount was paid directly to the LIC on an ad hoc basis. The Commissioner (Appeals) partially allowed the claim, emphasizing substantial compliance with the provisions of section 40A(7). The Tribunal considered evidence showing the payment made to the trustees of the fund, who then transferred the amount to the LIC, concluding that the payment was made to the fund and not directly to the LIC.

3. The Tribunal analyzed the applicability of section 40A(7)(a), which prohibits deductions for provisions made for gratuity payments, and section 36(1)(v), allowing deductions for contributions to approved gratuity funds. It was determined that the assessee's case fell under section 36(1)(v) as the fund was created for the exclusive benefit of employees under an irrevocable trust, meeting the conditions of the provision. The Tribunal upheld the Commissioner (Appeals)' decision to allow the deduction claimed by the assessee, dismissing the appeal by the revenue.

In conclusion, the judgment clarified the approval process and eligibility for deductions concerning a non-contributory group gratuity-cum-life assurance scheme, emphasizing compliance with relevant provisions of the Income-tax Act, 1961.