9911796707
TMI Blog1983 (2) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... did not grant allowance for the payment of gratuity on the ground that the assessee had not complied in full with the conditions laid down under section 40A(7)(b)(ii)(3) of the Act. Later, at the instance of the assessee by its letter, dated 10-4-1977, the ITO passed an order under section 155(13) of the Act dated 23-5-1977 allowing deduction in respect of provision for gratuity of Rs. 1,65,354. Again, later there was a reassessment under section 147(b) of the Act for withdrawing depreciation allowed on trade marks. The assessment was made on 15-12-1977. In an order dated 21-4-1981 the ITO, after referring to his order under section 155(13) dated 23-5-1977 allowing provision for gratuity of Rs. 1,65,354 and the reassessment and a further r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is the finding of the Commissioner (Appeals), which is not disputed, that the assessee has transferred as much as Rs. 38,951 to the approved gratuity fund before 31-3-1976, and Rs. 90,775 before 31-3-1977. According to the Commissioner (Appeals), it is enough if the assessee transfers 50 per cent of Rs. 29,748, the liability relating to the concerned previous year on or before 31-3-1976 and the remaining 50 per cent on or before 31-3-1977. In view of the payment noticed by him, as stated above, he considered that the assessee has fulfilled the conditions to be entitled to the deduction of Rs. 29,748 in respect of the assessment year 1973-74. He, however, disallowed the balance of the claim and aggrieved by his order, the assessee is in fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 29,748 on the ground that the provision in respect of that amount alone fulfilled the conditions. 4. The learned departmental representative supported the order of the departmental authorities. He contended that the conditions prescribed under section 40A(7)(b)(ii) apply to the entire amount of provision made by the assessee in respect of gratuity and as undisputedly the assessee has not made payment of 50 per cent of the total liability by 31-3-1976 and the remaining 50 per cent by 31-3-1977, the assessee was not entitled to deduction and the ITO was, therefore, justified in withdrawing the allowance. At any rate, it is submitted that the assessee is not entitled to the deduction of the provision relatable to earlier years in rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t would appear that not only sub-clause (ii) of section 40A(7)(b), but also sub-clause (i) thereof would have retrospective effect from 1-4-1973. The liability to payment of gratuity was statutorily created in respect of the assessees governed by the said provisions by the Payment of Gratuity Act, 1972, and, therefore, the first year in which the liability under the Act was imposed on the assessee is the assessment year 1973-74. Section 40A(7) provides for the purpose of allowance of any provision relating to the assessment years 1973-74 to 1975-76, for the creation of an approved gratuity fund, for the exclusive benefit of his employees and, application for approval thereof to be made on or before 1-1-1976. It also provides for payment to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s already in existence before 1-4-1973, as contended by the learned departmental representative. Indeed that it cannot refer to a fund already in existence would be obvious because the section itself was brought into the statute only by the Finance Act, 1975, and the question of allowance of provision made for the purpose of payment by way of contribution to an approved gratuity fund was not covered by any of the provisions of section 36 of the Act. Section 36(1)(v) by allowing deduction in respect of gratuity contemplates actual payment of any sum to an approved gratuity fund and not any provision for the purpose of such payment. The distinction between sub-clause (i) and sub-clause (ii) of section 40A(7)(b) appears to us to be that the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to such accrued liability ascertained on actuarial valuation as at the beginning of the previous year relevant to the assessment year 1973-74, it is reasonably a possible interpretation to say that the conditions required in sub-clause (ii) will not apply and sub-clause (i) will govern the liability thereof. 6. From the foregoing discussion, it will be seen that it is not possible to hold that the deduction allowed by the ITO earlier, of the entire amount of liability provided, is an obvious and apparent mistake capable of rectification under section 154 as it is a highly debatable question on which more than one view is possible. We, therefore, hold that there is no justification for the ITO to seek to rectify the earlier order. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
