9911796707
TMI Blog1987 (3) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... ive benefit of employees under an irrevocable trust, the assessee is entitled to claim deduction of the provision for the liability towards gratuity payable to the employees ? 2. Whether, on the facts and in the circumstances of the case, the circular referred to and relied on by the Tribunal is binding on the Income-tax Officer ? 3. If the answer to the above question is in the affirmative, whether a circular that is not in force and not acted upon at the time of completing the assessment is binding on the Income-tax Officer ? 4. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in deleting the disallowances of Rs. 2,000 towards children allowance and Rs. 1,260 towards house rent under section 40(a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to as " children allowance " and " house rent " fall under section 17(3)(ii) or section 40(a)(v) of the Income-tax Act, 1961, as the sections stood at the relevant time. Without adverting to the correct classification of the amounts, the question whether the benefit granted under annexure-D circular is allowable in respect of the amounts in question cannot be answered. Accordingly, we decline to answer question No. 4. We shall now deal with the main question which is question No. 1. That relates to the claim for gratuity. The assessee's claim for deduction in respect of the years prior to 1971-72 was disallowed by the Income-tax Officer on the ground that he could not for the first time make a claim in respect of a liability which had a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal obligation on the assessee to incur this expenditure. It is obvious that in the assessee's case, the legal obligation has been recognised by the assessee company even in the past, when it had been making provision for such payment year after year. However, the assessee-company chose the method of claiming gratuity on actual payment basis since this was the mode of computation of income followed by the Income-tax Officer and accepted by the assessee. In the circumstances, no fresh claim for provision for gratuity will arise in the assessee's case ........" This finding of the officer was reversed by the Appellate Assistant Commissioner, and that decision was affirmed by the Tribunal, thereby accepting the assessee's contention that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years provided provision has been made in the accounting year in which the liability first arose." Referring to this principle, counsel for the assessee submits that provision had been made for each of the earlier years and, therefore, when the liability under the statute arose for the first time in the relevant accounting year, it was open to the assessee to claim deduction in respect of what was provided for the earlier years. That argument is not available here in view of the finding of fact by the officer. Although the assessee made provision and made a debit to his profit and loss account with a corresponding credit to the gratuity account, the entries were reversed each time the returns were filed. The assessee claimed in the return ..... X X X X Extracts X X X X X X X X Extracts X X X X
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