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TMI Blog1991 (6) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... an agreement was an allowable deduction under the first proviso to section 36(1)(ii) of the Income-tax Act, 1961 ? 2. Whether the Tribunal was correct in law in holding that the bonus paid in excess of the amount permissible under the provisions of the Payment of Bonus Act was an allowable deduction under the first proviso to section 36(1)(ii) of the Income-tax Act, 1961 ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the entire contribution of Rs. 9,99,500 to the gratuity fund would be allowable as a deduction under section 43B of the Income-tax Act, 1961 ? The first and second questions pertain to the same issue as to whether the bonus payment made exceeding 20 per ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration in Income-tax Reference No. 35 of 1983 in the case of CIT v. Shaw Wallace and Co. Ltd. [1991] 190 ITR 455 (Cal), where the judgment was delivered on August 22, 1989. A similar question also came up for consideration in Income-tax Reference No. 336 of 1987 in the case of CIT v. Holman Climax Manufacturing Ltd. [1992] 196 ITR 698 (Cal), where the judgment was delivered on February 5, 1991. Following the said decisions, we answer the first and second questions in the affirmative and in favour of the assessee. We now turn to the third question. The third question relates to allowability of contribution of Rs. 9,99,560 to the gratuity fund. The payment of Rs. 9,99,560 was made to the gratuity fund as contribution. The said payment inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee-company's liability towards the approved gratuity fund for the year under consideration would work out to Rs. 2,58,202 only and he allowed the same as deduction. The assessee-company, being aggrieved by the order of the Income-tax Officer, took the dispute before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) considered the assessee-company's claim and held that the Income-tax Officer erred in presuming that section 43B had no nexus with the computation of the assessee's business income and the same stood independent of sections 28 and 29 of the Act. He has also held that the Income-tax Officer erred in overlooking the importance and significance of section 43B. According to him, section 43B itse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrevocable trust. After the insertion of section 40A(7), for claiming deduction for gratuity payment, the assessee was required to fulfil the conditions laid down in section 40A(7) and, without fulfilling the conditions laid down therein, no assessee was entitled to deduction under section 36(1)(v). This has undergone a change after the insertion of section 43B for and from the assessment year 1984-85. The provisions of section 43B(b) are relevant and apposite in the context of the provisions of section 36(1)(v). Section 43B has overriding effect over the provisions of section 40A(7). Under the provisions of section 43B, a deduction in respect of any sum payable by the assessee as an employer by way of contribution, inter alia, to a gratuit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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