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TMI Blog1992 (9) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 40A(7) of the Act?" " 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the conditions of section 40A(7) of the Income-tax Act, 1961, were satisfied and, therefore, the assessee was entitled to the claim of the allowance of Rs. 42,55,540 being provision for gratuity payable to the members of the staff ? " In order to answer the aforesaid questions, it is necessary for us to reproduce herein a few relevant facts : (i) The assessee is a public limited company manufacturing and selling medicines and fertilizers. It claimed deduction of an amount of Rs. 42,55,540 being the provision for gratuity payable to the staff members under the Payment of Gratuity Act, 1972. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of income under the head " Profits and gains of business or profession Section 40A(7), in so far as is material, is reproduced herein : " 40A. (7)(a) Subject to the provisions of clause (b), no deduction shall be allowed in respect of any provision (whether called as such or by any other name) made by the assessee for the payment of gratuity to his employees on their retirement or on termination of their employment for any reason. (b) Nothing in clause (a) shall apply in relation to - . (ii) any provision made by the assessee for the previous year relevant to any assessment year commencing on or after April 1, 1973, but before April 1, 1976, to the extent the amount of such provision does not exceed the admissible amount, if the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has created an approved gratuity fund for the exclusive benefit of its employees under an irrevocable trust and the application for approval of the fund was made by the assessee before January 1, 1976. The second requirement is that a sum equivalent to at least 50 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 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 April 1, 1976. In the case before us, such payment is made on March 27, 1976, and, therefore, this condition is also satisfied. It is further stipul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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