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TMI Blog1989 (12) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... f services rendered by the employees to the vendor company ? (2) Whether, on the facts and in the circumstances of the case, did the assessee create an approved gratuity fund contemplated under section 40A(7) of the Income-tax Act to attract the provision ? (3) Whether, on the facts and in the circumstances of the case, the liability for gratuity for the service rendered by the employees to the vendor is a capital expenditure ?" The Tribunal referred the above questions of law as directed by this court in the judgments in Original Petition No. 6380 of 1982 dated November 21, 1984, and Original Petition No. 6382 of 1982 dated November 29, 1984. The reference relates to the assessment years 1974-75 and 1975-76. These assessment years relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tinued to be used for the benefit of the beneficiaries under the trust in the manner laid down in the trust deed and the regulations of the gratuity fund. This trust and the gratuity fund were approved by the Commissioner of Income-tax. The assessee claimed before the Income-tax Officer that the gratuity fund continued to be an approved gratuity fund even after the transfer of the business by the vendor to the assessee. The Income-tax Officer held that there had been no reconstitution of the approved gratuity fund as provided in clause 14 of the agreement. He also held that clause 10 which stipulated weightage for services rendered by the employees to the vendor sought to create a change in respect of such past employment on the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred for the decision of this court. We heard counsel on both sides. The Tribunal has found, we would say rightly, that even if there was no stipulation in the agreement regarding the gratuity entitlement of the employees of such going concern, the assessee would still be liable to make the contributions in accordance with the stipulation contained in the deed creating the trust. It has to be noted that the gratuity fund, as already constituted by the trust deed, has been approved by the Commissioner of Income-tax, Kerala. Though the agreement contemplated reconstitution of the fund, the real change that was intended by the particular provision in the agreement was to make such modification in the trust deed as would bring out the posi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to make contributions in accordance with sub-clause (i) of section 40A(7) (b) of the Income-tax Act. The agreement was entered into on March 29, 1973, and the assessee took over the business of the vendor as a going concern on April 19, 1973. We are concerned with the assessment years 1974-75 and 1975-76. The previous years for the above said two assessment years ended on March 31, 1974 and March 31, 1975. For these two previous years, the assessee can rightly make contributions to the approved gratuity fund and what the assessee has done is to make provision for payment of contributions for the said two previous years. This the assessee can do under section 40A(7)(b)(i) of the Income-tax Act. Counsel for the Revenue submitted before u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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