9911796707
TMI Blog1992 (12) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... of oxygen gas, acetylene gas, etc. In the relevant previous year ending on March 31, 1973, the assessee has actually paid Rs. 4,000 by way of gratuity to certain employees who had retired. A claim of Rs. 21,669 was also made by the assessee as payable for gratuity. This claim was not allowed by the Income-tax Officer on the ground that the conditions laid down in section 36(1)(v) and section 40A(7)(a) were not satisfied. Since this amount was not debited in the profit and loss account, no addition was made while disallowing the claim of the assessee. The assessee has preferred an appeal to the learned Appellate Assistant Commissioner of Income-tax, Central Range, Jaipur, where it was contended that the assessee is maintaining its accounts on the basis of the mercantile system of accounting. It was further contended that the Payment of Gratuity Act, 1972, came into effect from September 16, 1972, and the employers were made liable to pay gratuity to their outgoing employees as per the terms and conditions contained in the said Act. It was further submitted that since the assessee-firm is covered by the Payment of Gratuity Act, 1972, the payment of gratuity was a statutory liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f, since the real profits from the business could not be determined without taking into account the assessee's claim in this regard. It was also held that the deduction is not prohibited by section 40A(7)(a) since the assessee did not make any provision, in its books for this liability. It was further held that the deduction is admissible on ordinary commercial principles and hence it was allowed. The submission of learned counsel for the Revenue is that the Incometax Appellate Tribunal has erred in considering that the deduction is allowable under section 37 or under section 28 of the Income-tax Act, 1961, and that it is not hit by the provisions of section 40A(7). The Income-tax Appellate Tribunal has ignored the amendment made by section 6 of the Finance Act, 1975, with retrospective effect from April 1, 1973. It was further submitted that, when there is a specific provision, then the help of the general provisions cannot be taken. In order to examine the submissions of Shri Bapna the provisions of sections 28(1), 36(1)(v), 37 and 40A(7) have to be analysed. Section 28 of the Act provides : "The following income shall be chargeable to income-tax under the head 'Profits and g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason ; (2) the assessee creates an approved gratuity fund for the exclusive benefit of his employees under an irrevocable trust, the application for the approval of the fund having been made before the 1st day of January, 1976 ; and (3) a sum equal to at least fifty per cent. of the admissible amount, or where any amount has been utilised out of such provision for the purpose of payment of any gratuity before the creation of the approved gratuity fund, a sum equal to at least fifty per cent. of the admissible amount as reduced by the amount so utilised, is paid by the assessee by way of contribution to the approved gratuity fund before the 1st day of April, 1976, and the balance of the admissible amount or, as the case may be, the balance of the admissible amount as reduced by the amount so utilised, is paid by the assessee by way of such contribution before the 1st day of April, 1977. Explanation 1.-For the purposes of sub-clause (ii) of clause(b) of this sub-section, 'admissible amount' means the amount of the provision made by the assessee for the payment of gratuity to his employees on their retirement or on termination of their employment for any reason, to the extent suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was held by the apex court that the marginal note or heading is a relevant factor to be taken into consideration in construing the ambit of this section and accordingly the payments mentioned therein are not deductible according to the statute in certain circumstances. It was held that this is abundantly made clear by the non obstante expression used in sub-section (1) of section 40A. The provisions of section 40A shall have effect notwithstanding anything to the contrary contained in any other provision of the Act. The actual payments or provisions for payment could have been eligible for deduction or could have been deducted either under section 28 or under section 37 of the Act. But the use of the non obstante expression makes it clear that, if there is any legislative base dealing with the provisions for gratuity, then the same would be applicable in spite of and notwithstanding any other provision of the Act. It was held that the right to receive the payment accrued to the employees on their retirement or termination of their services and the liability to pay gratuity becomes an accrued liability of the assessee when the employees retire or their services are terminated. Unti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid by the assessee as an employer by way of contribution towards a recognised provident fund or an approved superannuation fund, subject to such limits as may be prescribed for the purpose of recognising the provident fund or approving the superannuation fund, as the case may be ; and subject to such conditions as the Board may think fit to specify in cases where the contributions are not in the nature of annual contributions of fixed amounts or annual contributions fixed on some definite basis by reference to the income chargeable under the head 'Salaries' or to the contributions or to the number of members of the fund". Sub-clause (v) also provides that : "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 assessee has neither paid any sum by way of contribution towards a recognised provident fund nor towards an approved gratuity fund created by him for the exclusive benefit of his employees under an irrevocable trust and, therefore, a deduction under section 36(1)(iv) or 36(1)(v) cannot be allowed. For the purpose of computing the profits ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
