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TMI Blog2018 (9) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... he extent of 81/3 % of the employee's salary for each year of his past service with the employer. The Assessing Officer and the appellate authorities seem to have laboured under the misapprehension that the words 'employed with the employer' would take in only the benefits accrued under a particular employer. The entire contributions paid by the appellant/assessee to the LIC as premium for the policy obtained for indemnification of the gratuity liability towards the employees even for the prior years, when the employees were in the employment of the Company taken over would be eligible for deduction under Section 36(1)(v). We answer the question of law in favour of the assessee and against the Revenue. - I. T. A. No. 27 of 2011 - - - D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd formed a trust, for which approval was obtained from the Commissioner of Income Tax. The assessee company took out a policy from the Life Insurance Corporation of India to indemnify the gratuity payments of the retiring employees and a sum of ₹47, 75, 849/- was paid on 29. 03. 2005. The assessee claimed deduction under Section 36 (1) (v) of the Income Tax Act. The Assessing Officer applied Rule 104 of the Income Tax Rules and computed the initial contribution at ₹32, 90, 843/- and disallowed the excess claim of ₹14, 85, 006/-. This dis-allowance was made since the disallowed amounts were contributed for the prior years, when the employees were not employed under the present appellant/assessee. The First Appellate Author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer of the management. The State came out with an ordinance and then an enactment providing for gratuity to all employees at the time of severance of their employment by whatever means if they had continuous service of five years. The assessee then made provision for this amount which was disallowed by the ITO. The dis-allowance was inter alia on the grounds of the assessee having been the employer for only two years; the liability arising only on completion of 5 years and the entrustment being only as a lessee. The Court read Section 2(a) of the Kerala Industrial Employees Payment of Gratuity Act to find that any person having ultimate control over the affairs of the company has the liability in respect of the workmen under Section 4 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an employee admitted to the benefits of a fund shall not exceed 81/3 per cent of the employee's salary for each year of his past service with the employer . 7. Rule 104 comes in Part XIV of the Income Tax Rules, 1962 under the head Approved Gratuity Funds permitting any initial contribution made by an employer to a fund constituted even in respect of past services of an employee admitted to the benefits of a fund, to the extent of 81/3 % of the employee's salary for each year of his past service with the employer. The Assessing Officer and the appellate authorities seem to have laboured under the misapprehension that the words 'employed with the employer' would take in only the benefits accrued under a particula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was held so: Having considered the matter in the light of the background facts, we are of the opinion that there is no merit in the appeal . True that a fiscal statute is to be construed strictly and nothing should be added or subtracted to the language employed in the Section, 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 : Shri Sajjan Mills Ltd . vs . Commissioner of Income Tax, M . P . Anr . ( 1985) 156 ITR 585) . 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 empl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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