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TMI Blog2017 (2) TMI 1296X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome and that being so, addition made by AO of amount of grant and upheld by Commissioner and Tribunal is not in accordance with law. Both these Questions are answered in favour of Assessee. Payment made to L.I.C. under Gratuity Insurance Scheme by referring to Section 40(A)(vii) - disallowance observing that fund was not recognized by Department - Held that:- A similar question was considered in CIT Vs. Textool Co. Ltd. (2009 (9) TMI 66 - SUPREME COURT) where also payment was made to L.I.C. towards group life assurance scheme and this was held to be an approved Scheme and there was no violation of Section 36(1)(v) of Act, 1961. Court held that a narrow interpretation straining language of Sub-Clause (v) so as to deny deduction to Assessee should not be followed since the objective of fund was achieved. - Decided in favour of assessee. - Income Tax Appeal No. - 1 of 2015 And Income Tax Appeal No. - 2 of 2015 - - - Dated:- 15-2-2017 - Mr. Sudhir Agarwal And Mr. Anant Kumar JJ. For the Appellant : Pradeep Agrawal For the Respondent : Manish Mishra 1. Heard Sri Pradeep Agrawal, Advocate, for appellant and Sri Manish Misra, Advocate, for respondent-Revenue. 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was justified in not considering the fact that a bare reading of Section 36(1)(v) of the Act, 1961 clearly shows that real intention behind the provision is that employer should not have any control over the funds of irrevocable trust crated exclusively for the benefit of the employees and thus the condition is satisfied and the deduction is allowable. (vii) Whether Tribunal was justified in not considering the decision of Apex Court in Commissioner of Income Tax Vs. Textools Col. Ltd. (2013) 216 Taxman 327 wherein Apex Court has considered its earlier decision in the case of Shree Sajjan Mills Ltd. Vs. CIT, wherein it has been held that the condition of Section 36(1)(v) of Act, 1961 stands satisfied if the employer does not have any control over the funds of the irrevocable trust created exclusively for the benefit of employees. 4. In Income Tax Appeal No. 2 of 2015, Questions- (iii), (iv), (v), (vi) and (vii) are involved and only difference is with regard to amount of disallowance under Question-(iii). Questions-(i) and (ii) are not involved in I.T.A. No. 2 of 2015. 5. Before adjudicating the aforesaid questions, brief factual matrix would be appropriate to underst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government of India remitted grant out of National Renewal Fund for implementation of VRS. Payment was made by Assessee to employees towards VRS out of the said grant. AO considered amount of grant as income of Assessee. The aforesaid amount received from Government of India was 1,14,89,040/-. The actual expenditure on VRS was ₹ 1,35,47,324/-. AO has given following reasons to treat the aforesaid grant as income of Assessee and not allowing expenditure incurred by Assessee on VRS i.e. ₹ 13547324/-. The expenditure was disallowed and allowed to be written off in five equal installments as per Section 35DDA. Thus actual deduction was allowed to the extent of ₹ 27,09,464/- and entire amount received as grant from Government of India was added as income of Assessee. Therefore Questions-(i) and (ii) will depend on the fact whether grant received by Assessee from Government of India can be treated to be income or not. 9. The term income is defined in Section 2(24) and total income in Section 2(25) of Act,1961. It cannot be treated to be Income at all. Hence question treating it to be part of total income would not arise. The definition of income is inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment in Commissioner of Income Tax Vs. Shaw Wallace and Company (supra) was referred to and followed in Senairam Doongarmall vs. Commissioner of Income Tax, Assam 1961 (42) ITR 392 (SC) wherein compensation received was not held income observing that source has been sterilized. The observations in Commissioner of Income Tax Vs. Shaw Wallace and Company (supra) were also reiterated in Divecha Vs. CIT 1963 (48) ITR 222 . 18. An accidental or casual receipt was not held income by Madras High Court in CIT Vs. Ramalakshmi Reddy 1981 (131) ITR 415 (Mad) . 19. In another judgment, Madras High Court in CIT Vs. Rajalakshmi Venkatakrishnan 1995 (215) ITR 596 (Mad) observed that gratuitous payment of annuity received by widow of ex-employee is not income since the same is not contractual but only discretionary. 20. In Padmaraje R. Kadambande Vs. CIT 1992 (195) ITR 877 (SC) , a discretionary payment received by Assessee under Bombay Merged Territories Miscellaneous Alienation Act, 1955 on compassionate ground was held to be capital in nature and not taxable. 21. In Commissioner of Income Tax, Patiala Vs. Groz-beckert Saboo Ltd. 1979 (116) ITR 125 (SC) a volunt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection, yet a strict construction of a provision does not rule out the application of the principles of reasonable construction to give effect to the purpose and intention of any particular provision of the Act. (See : Shree Sajjan Mills Ltd. v. CIT [1985] 156 ITR 585/23 Taxman 37 (SC). From a bare reading of Section 36(1)(v) of the Act, it is manifest that the real intention behind the provision is that the employer should not have any control over the funds of the irrevocable trust created exclusively for the benefit of the employees. In the instant case, it is evident from the findings recorded by the Commissioner and affirmed by the Tribunal that the assessee had absolutely no control over the fund created by the LIC for the benefit of the employees of the assessee and further all the contribution made by the assessee in the said fund ultimately came back to the Textool Employees Gratuity Fund, approved by the Commissioner with effect from the following previous year. Thus, the conditions stipulated in Section 36(1)(v) of the Act were satisfied. Having regard to the facts found by the Commissioner and affirmed by the Tribunal, no fault can be found with the opinion expres ..... X X X X Extracts X X X X X X X X Extracts X X X X
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