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TMI Blog1990 (1) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... ntributions made to group gratuity insurance scheme in excess of the statutory limit is an allowable deduction ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the assessee is entitled to the claim for export markets development allowance under section 35B of the Income-tax Act ? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in finding that the commission paid to the agents in India and administrative expenses incurred in India qualify for weighted deduction under section 35B of the Income-tax Act, 1961, and that the commission on foreign sales and foreign travel expenses are to be allowed in full ? I.T. R. No. 528 of 1985: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties to these two referred cases. We heard counsel for the Revenue, Mr. P. K. R. Menon, as also counsel for the respondent (assessee), Mr. P. Balachandran. The respondent (assessee) is a cashew dealer. For the year 1976-77, he made a provision of Rs. 1,75,996 for payment to the approved gratuity fund. Actually he paid Rs. 1,07,596 under the L. I. C. (Group Gratuity Scheme).The Income-tax Officer held that the assessee is entitled to 8 per cent. of the salary paid to the employees and holding that the salary paid was Rs. 11,87,074; the 8 per cent. portion was worked out at Rs. 98,923. In other words, the Income-tax Officer made a disallowance of Rs. 8,673. In the appeal, the Commissioner of Income-tax (Appeals) sustained this disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in both the assessment years. That question, by and large, relates to the weighted deduction the assessee is entitled to under section. 35B of the Act. The assessee claimed that he is entitled to weighted deduction for commission paid to agents in India and administrative expenses incurred in India under section 35B of the Income-tax Act. So also, the assessee claimed commission on foreign sales. The Tribunal has included foreign travel expenses also in question No. (3) for the assessment year 1976-77 and question No. (2) for the assessment year 1977-78. But it is seen that foreign travel expense is not one of the items which has been discussed as having been incurred or entitled to in the present case, under section 35B of the Act, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n seasonal industry. It is also noticed that the assesses has constituted gratuity fund which has been approved by the Commissioner of Income-tax and any contribution made in the approved manner should be allowed so long as the approval stands. Counsel for the Revenue contends that the assessee is not entitled to any provision made reckoning the " incremental liability " and so the Tribunal was in error in deleting the disallowance made by the Income-tax Officer in accordance with rule 103 of the Income-tax Rules. On the other hand, counsel for the assessee would contend that what has been done in the instant case is only a provision made in accordance with the statutory requirements and the assessee is bound to pay the amount to the gratui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be on the basis of what was " actually paid " as salary in a given month or months to the employee. These aspects should be considered by the Tribunal bearing in mind the provision made for payment to the approved gratuity fund, the provisions of the Gratuity Act, and rule 103 of the Income-tax Rules, as interpreted by us, concurring with the decision of the Andhra Pradesh High Court in Super Spinning Mills Ltd.'s case [1987] 166 ITR 518. It is only after coming to finding as to whether the provision made for payment to the gratuity fund is towards the " incremental liability " of the assessee for the year or otherwise that the question of deletion of the disallowance made by the Income-tax Officer will arise. Since the Tribunal has not app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent it was adopted or incorporated in the circular of the Central Board of Direct Taxes, dated December 28, 1981. In considering the above questions, the Appellate Tribunal shall confine the entitlement to weighted deduction on the commission paid under section 35B of the Act and to administrative expenses incurred in India since the entitlement to commission on " foreign sales " is covered by the decision in I. T. Rs. Nos. 133 and 134 of 1983 (CIT v. K. Ravindranathan Nair [1988] 170 ITR 411 (Ker)) (judgment dated March 13, 1987) and the question of foreign travel expenses does not arise at all on a perusal of paragraph 11 of the appellate order of the Tribunal dated December 17, 1982, about which we have adverted to earlier. The Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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