9911796707
TMI Blog1978 (7) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... nd accordingly levied additional income-tax at the prescribed rate of 37% on the distributable income of Rs. 3,69,661 as reduced by Rs. 5,470 distributed as dividend. Being aggrieved by the said order, the assessee preferred an appeal to the AAC. It was, inter alia, contended in the appeal that in the computation of the distributable surplus an amount of Rs. 3,63,633, being a reserve for gratuity, should have been excluded. The AAC found that the gratuity payable was only Rs. 37,323. Rejecting the contentions of the assessee, he dismissed the appeal. The assessee preferred a further appeal before the Income-tax Appellate Tribunal. The Tribunal held that in computing the distributable surplus, inter alia, the gross total income should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a question of law arising from the order of the Tribunal: " Whether, on the facts and in the circumstances of the case and on correct interpretation of section 104(1) of the Income-tax Act, 1961, the Tribunal misdirected itself in law in holding that for purposes of levying super-tax under the said section, the distributable income should be reduced by the provision for gratuity amounting to Rs. 32,517, the profit of Rs. 4,700 charged to tax under section 41(2) of the Income-tax Act, 1961, and the sum of Rs. 5,003 claimed by the assessee as bad debt ? " At the hearing no one appeared on behalf of the assessee. It appeared to us that some of the points involved were of some importance and, therefore, we invited Mr. R. N. Bajoria, lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a revenue expenditure but not allowed to be deducted as such and not resulting in the creation of an asset or enhancement in the value of an existing asset ......... . Mr. Bagchi contended that the section clearly indicated how the distributable income would be reduced and the Tribunal had erred in reducing such income by items which were not provided in the section. Mr. Bagchi submitted that the amount deducted on account of gratuity was only a provision and was not an amount paid. There was also no finding that the amount had been kept in an approved gratuity fund. The amount was in fact an asset in the hands of the assessee and was in the nature of a reserve. In respect of the item of bad debt, Mr. Bagchi contended that the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as bad debt had already been allowed in the assessment. This was, in any event, a factual dispute and cannot be raised at this stage. The Tribunal also appears to have found that this was a bad debt and this finding is also not challenged. The profits resulting from the sale of the car, according to Mr. Bajoria, was not deductible under s. 104. This item was no doubt a fictional or notional profit and would have to be considered to determine the reasonableness of the dividend declared. But that was not the question in the present reference. In the present reference, the only question before the court is whether this amount was deductible in the computation of the distributable income. In our view, Rs. 32,517 was a provision for a s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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