9911796707
TMI Blog1989 (11) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... year is the year ended on April 30, 1976. The assessee claimed admissible amount of gratuity of Rs. 5,25,247. The Income-tax Officer allowed only Rs. 3,36,495. Thus an amount of Rs. 1,88,752 was disallowed. This amount was disallowed since the Income-tax Officer disallowed incremental liability. The assessee filed an appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) followed the order of the income-tax Tribunal dated December 30, 1975, in 1. T. A. No. 369 (Cochin) of 1974-75 and confirmed the same. The assessee filed a further appeal before the Tribunal. The Tribunal followed its earlier order (I. T. A. No. 369 (Cochin) of 1974-75) and confirmed the order of the Commissioner of Income-tax (Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not envisage an incremental liability based on the element of future increase in salary. This decision in CIT v. Periya Karamalai Tea and Produce Co. Ltd. [1987] 167 ITR 32, has been followed by another Division Bench of this court in CIT v. Chembra Peak Estates Ltd. [1990] 185 ITR 556. The Supreme Court had occasion to consider the scope of sub-section(7) of section 40A of the Income-tax Act in Shree Sajjan Mills Ltd. v. CIT [1985] 156 ITR 585 and the Supreme Court observed that a plain construction of the section would indicate that whatever is provided for future use by the assessee out of the gross profits of the year of account for payment of gratuity to employees on their retirement or on the termination of their services would not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant provisions, as presently worded, do not secure the underlying objective and that a provision made by a taxpayer in his accounts in respect of estimated service gratuity payable to employees will be deductible in computing the taxable income in a case where the provision has been made on a scientific basis in the form of an actuarial valuation. In order to remove uncertainty in the matter, it is proposed to specifically provide in the law that no deduction will be allowed, in the computation of profits and gains of a business or profession, in respect of any reserve created or provision made for the payment of gratuity to the employees on retirement or on termination of employment for any reason. This-restriction will, however, not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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