9911796707
TMI Blog1984 (8) TMI 168X X X X Extracts X X X X X X X X Extracts X X X X ..... e above disallowance were the following: 1. The provision for gratuity related to varying number of workers from the calendar years 1972 to 1979 on the basis of 7 days' wages. 2. The bye-laws of the society prohibited a member from being an employee. 3. The profits are to be declared by the Registrar of Cooperative Societies under s. 61 of the Madras Co-operative Societies Act, 1961. 4. Since the Cooperative Department did not approve the accounts the assessee had to make a provision for gratuity in the above sum. 5. The income for the purpose of s. 28 of the IT Act, 1961, would be the profit of the business as certified by the Registrar of Cooperative Societies. 6. Secs. 36(1)(v) and 40A(7) would not apply to the assessee's case wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty fund as under: "As per the provision of the Gratuity Act, retired worker-members are paid gratuity at the rate of seven days wages for each season and amount of gratuity so paid are met from the General Funds from the year 1972. So far no gratuity fund has been created to meet this liability. The gratuity liability as on 31st Dec., 1979 is worked out to Rs. 1,82,169.75 as may be seen from the statement enclosed. As the amount is heavy and cannot be provided in one year, we request the Registrar of Cooperative Societies, Madras to be kind enough to accord permission to create gratuity fund at the rate of Rs. 45,542,44 per annum within a period of 4 years commencing from the audit year 1979 (Calendar year)." This was followed by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further submitted that under s. 61 of the Co-operative Societies Act, "no part of the funds of the registered society, expert net profits as declared by the Registrar for the purposes of this Act, shall be divided by way of bonus or dividend or otherwise among its member. Sec. 62 provides for the disposal of the net profits as declared by the Registrar. The assessee submits that the District Co-operative Audit Officer, Tuticorin issued an Audit certificate dt. 30th Dec., 1980 referring to net profit of Rs. 58,498 for the year 1979 (present appeal) which profit has been arrived at after debiting the impugned provision of Rs. 1,82,170. It is urged that since the net profit thus arrived at has been "declared" by the Registrar, it has necessar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s plea that the worker-members should not be treated as "employees", for application of s. 36(1)(v)/40A(7). The assessee's further contention that the Registrar having declared the net profit as shown by the assessee such income is final for income-tax assessment purposes is not acceptable. The total income of every assessee liable to tax under the IT Act has to be computed in the manner laid down in the Act (as defined in s. 2(45). The further question that arises is the effect of s. 36(1)(v) r/w s. 40A(7). Under s. 40A(7) which is effective from 1st April, 1973 no deduction shall be allowed in respect of any prevision by the assessee for the payment of gratuity to its employees on the retirement or termination of service, the exception un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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