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TMI Blog1993 (8) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... amily) in respect of the staff of G. N. Agrawal, Hindu undivided family, was an allowable deduction under the Income-tax Act ? (2) Whether, on the facts and in the circumstances of the case, the sum of Rs. 23,298 credited by the assessee to the accounts of the individual members of the staff was an allowable expenditure under the Income-tax Act ?" The relevant facts having a bearing on the subject-matter of this reference are as under: During the accounting year pertaining to the assessment year 1973-74, the assessee made a provision of Rs. 1,15,569 on account of staff retirement gratuity and debited the same to the profit and loss account. The said sum of Rs. 1,15,569 consists of a sum of Rs. 23,298 in respect of staff directly recru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not deductible in view of the bar created by section 40A(7) of the Act. During the course of its order dated December 19, 1977, the Income-tax Tribunal observed that the fact that the assessee had transferred the custody of the said amount to its associate concern, i.e., G. N. Agarwal, Hindu undivided family, did not make any difference to the applicability of section 40A(7) of the Act. Section 40A(7) of the Act has overriding effect over all other provisions of the subject wherever applicable. Learned counsel for the assessee has submitted that the assessee had incurred an expenditure in the sum of Rs. 92,271 referred to in question No. 1 for the purposes of carrying on its business and that the said amount was therefore an allowable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A(1) of the Act in terms provides that the provisions of section 40A shall have effect notwithstanding anything to the contrary contained in any other provision of the Act relating to the computation of income under the head "Profits and gains of business or profession". Thus, no general provision contained in the Income-tax Act, 1961, can be invoked when the special provision contained in section 40A(7) of the Act is attracted. After the introduction of section 40A(7) of the Act in the statute, the assessee can claim deduction on account of the provision made for gratuity only if the assessee has complied with all the conditions prescribed in sub-section (2) of section 40A of the Act. The abovereferred judgment of the High Court of Kerala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability to pay gratuity in future partly in respect of the employees directly recruited by the assessee and partly in respect of the employees recruited by the assessee through its sister concern as aforesaid. Clause (b)(i) of section 40A(7) reads as under : "(b) Nothing in clause (a) shall apply in relation to- (i) any provision made by the assessee for the purpose of payment of a sum by way of any contribution towards an approved gratuity fund, or for the purpose of payment of any gratuity, that has become payable during the previous year. " It is not the case of the employees that the assessee has made any contribution towards employees' gratuity fund as referred. If there is no approved gratuity fund or if there is no irrevoc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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