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TMI Blog1997 (12) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee-company in the holding company should be taken into account and after taking note of the entire service rendered by the employees in both the companies, the assessee made a contribution of Rs. 3,39,628 towards the approved gratuity fund. The assessee claimed the same as deduction in the determination of the computation of the income for the assessment year 1977-78. The Income-tax Officer rejected the claim of the assessee on the ground that the assessee-company was incorporated only on December 19, 1973, and as such the employees who have not put in continuous service of five years with the assessee-company did not have an enforceable legal right to claim gratuity and the provision debited in the profit and loss account was liable to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... challenged the order of the Appellate Tribunal and at the instance of the Revenue the following question of law has been referred for our consideration under section 256(1) of the Income-tax Act : "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in holding that the sum of Rs. 3,97,628 being contribution made by the assessee to the approved gratuity fund is an admissible deduction under section 36(1)(v) of the Act ?" Mr. C. V. Rajan, learned junior standing counsel for the Revenue, submitted that the Income-tax Officer disallowed the claim of the assessee on the ground that the employees have not put in five years of service and it is not permissible to take into account the services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndition being fulfilled by it. Section 36(1)(v) of the Act which provides for deduction by way of contribution to an approved gratuity fund and the same reads as under : "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 ;" The expressions "trust" and "trustee" are defined in clause (c) of rule 98 under Part XIV under the caption "approved gratuity funds" and the said expressions have been defined as follows : " 'trust' means the trust under which the fund is established and 'trustee' means a trustee thereof." Rule 103 of the Income-tax Rules reads as under : "103. Ordinary annual contributions.-- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The finding of the Tribunal is that all the conditions prescribed under section 36(1)(v) of the Act as well as the relevant rules have been complied with. Even that apart, when the agreement of transfer is taken into account, it is clear that the employees have rendered continuous service for more than five years. On the facts of the case, we are of the opinion that the Tribunal has come to the correct conclusion in holding that the sum of Rs. 3,97,628 being contribution made by the assessee-company to the approved gratuity fund is an admissible deduction under section 36(1)(v) of the Act. Accordingly, we answer the question referred to us in the affirmative and against the Revenue. However, in the circumstances of the case, there will b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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