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TMI Blog2015 (10) TMI 253X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction under Section 37(1) of the Act as held by the Delhi High Court in Sony India P. Limited's case (2006 (6) TMI 76 - DELHI High Court ). In so far as actual payment made to the pensioners is concerned, the same has been held to be admissible to the assessee on the principle that where an expenditure which is wholly and exclusively expended for the purposes of the business or profession of the assessee is permissible to be deducted from the income under Section 37 of the Act. There was no error in the approach of the Tribunal in allowing the aforesaid expenditure as deduction under Section 37 of the Act. No substantial question of law - Decided against revenue. - ITA No. 370 of 2014 - - - Dated:- 10-8-2015 - MR. AJAY KUMAR MITTAL AND MR. RAMENDRA JAIN, JJ. For The Appellant : Mr.Tejinder K.Joshi, Advocate For The Respondent : Ms. Radhika Suri, Sr. Advocate with Ms.Rinku Dahiya, Advocate Ajay Kumar Mittal,J. 1. This order shall dispose of ITA Nos.51 of 2015, 370 and 399 of 2014 as learned counsel for the parties are agreed that the issue involved in all these appeals is identical. However, the facts are being extracted from 2. ITA No.370 of 2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the PF scheme, the issue was required to be examined afresh. In the second round also, the Assessing officer disallowed the deduction claimed by the assessee on account of contribution to unrecognized pension fund and passed assessment order dated 30.12.2009, Annexure A.1. It was held that the case of the assessee was covered by judgment of the Delhi High Court in the case of Sony India P. Limited vs. Commissioner of Income Tax (2006) 285 ITR 213 (Del.). The assessee filed appeal before the CIT(A). The CIT (A) held that contribution to unrecognized pension funds was not allowable in view of provisions of Section 36(1)(iv) and (v) of the Act and dismissed the appeal vide order dated 16.5.2011, Annexure A.II. The assessee filed appeal before the Tribunal. The Tribunal vide order dated 27.3.2014, Annexure A.III held that the expenditure incurred on payment basis in the hands of the assessee was revenue expenditure amounting to ₹ 22,89,137/- which was actually disbursed to the pensioners in assessment year 2002-03 out of total contribution to the pension fund of ₹ 1.22 crores. Similarly, for the assessment year 2003-04, the total contribution to the pension fund wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the fund; (v) any sum paid by the assessee as an employer by way of contribution towards an approved gratuity fund created by him for the exclusive benefit of his employees under an irrevocable trust . An analysis of the provisions of section 36(1)(iv) of the Act shows that any sum which is paid by the assessee as an employer to a recognised provident fund or an approved superannuation fund is admissible as deduction thereunder. Under Clause (v) of Section 36(1) of the Act, deduction is allowed in respect of any sum paid by the assessee as an employer as contribution to an approved gratuity fund created by the employer for the exclusive benefit of the employees under an irrevocable trust. 8. Admittedly, in the present case, the contributions were towards the unrecognised pension/superannuation fund and gratuity fund. Thus, the assessee was not entitled to any deduction in respect of the said amounts either under Section 36(1)(iv) or Section 36(1)(v) of the Act. Therefore, the said amount also could not be allowed as deduction under Section 37(1) of the Act as held by the Delhi High Court in Sony India P. Limited's case (supra). 9. Now another issue that aris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and can not be the subject matter of deduction even under the mercantile system of accounting. Expenditure which was deductible for income tax purposes is towards a liability actually existing at the time but setting apart money which might become expenditure on the happening of an event is not expenditure. (See in this connection the observations of this Court in Indian molasses Co. (P) Ltd., v. Commissioner of Income-tax, West Bengal ) , 37 I.T.R. 66 at pages 76 80. A distinction is often made between an actual liability in praesenti and a liability de futuro, which for the time being is only contingent. The former is deductible but not the latter. 11. Similarly in W.T.Suren and Co. Limited vs. Commissioner of Income Tax , (1998) 230 ITR 643 (SC), it was held thus:- xxxxxxxx Gratuity is, thus, payable on the termination of employment of the employee on any account except dismissal and calculated on the basis of number of years of service and at the rate prescribed in the scheme. In the present case, the amount of gratuity which was paid to Rallis India Ltd. on behalf of the employees was not on account of transfer of the distribution unit to the assessee but on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the payment of gratuity amount was not on account of closing the business of the assessee but for the purpose of business of the assessee and, thus, entitled to deduction under clause (xv) of sub-section (2) of Section 10 of 1922 Act corresponding to Section 37(1) of the 1961 Act. We, therefore, hold that the assessee, the appellant herein, is entitled to the payment of gratuity amount of ₹ 4,08,622/- made to Rallis India Ltd. as an allowable deduction. 12. In Commissioner of Income Tax, Bombay City III vs. Herbertsons P.Limited, (1980) 124 ITR 613 (Bombay), it was observed:- xxxxxxxx It appears to be some benefit provided to an employee who was expecting such benefit. It was certainly for his long and faithful services to the company. But that would not by itself disentitle the payment being allowed as a deduction in the year under consideration. There was an earlier instance of such pension benefit being provided to another employee, and the other employees who were in the regular service of the company in 1957 would be thenceforward covered by the gratuity scheme adopted in that year. It would appear that the facts are not at all similar to the facts considere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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