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TMI Blog1980 (6) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... the balance before the 1st April, 1977. However, the assessee actually paid to the approved gratuity fund only Rs. 5,02,231. Rs. 2,34,507 which represents the amount out of the provision made for gratuity not paid to the approved gratuity fund was disallowed by the ITO and a corresponding addition made to the income of the assessee. The addition made was confirmed by the CIT (A), The contention of the assessee is that this amount of Rs. 2,34,507 should be allowed in any case under ss. 28 and 29 of the IT Act. 3. Sub-s, (1) of s. 40A provides: "(1) The Provisions of this section shall have effect notwithstanding anything to the contrary contained in any other provision of this Act relating to the computation of income under the head "profits and gains of business or profession". Cl. (a) of sub. s. (7) of s. 40A provides as follows: "7(a) Subject to the provision of cl. (b) no deduction shall be allowed in respect of any provision (whether called as such or by any other name) made by the assessee for the payment of gratuity to his employees on their retirement or on termination of their employment for any reason." 4. It can, therefore, be seen that a deduction in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or after 1st April, 1973 but before 1st April, 1976. As the assessee had time for the fulfilment of the condition specified in para (3) upto 1st April, 1976 and 1st April, non-compliance with that condition cannot be ground for the disallowance of any part of the provision made for payment of gratuity during the previous year relevant to the A.Y. 1974-75. 5. We are supported in our view by the decision of the Allahabad High Court in Swadeshi Cotton Mills Co. Ltd vs. ITO 1976 CTR (All) 6: (1978) 112 ITR 1038 (All). That was also the case of an assessee who followed the mercantile system of accounting as in the present case. The assessee had in respect of the asst. yr. 1973-74 charged the accounts with actual payment of gratuity for the year provided for in the accounts, the accrued liability for gratuity for the year as for acturial valuation and further claimed the estimated liability of Rs. 1,34,42,000 for payment of gratuity under its own gratuity scheme as per acturial valuation. However, the assessee had made no provision for the same in the accounts. The ITO disallowed the estimated liability of Rs. 1,34,42,000. The High Court held, following its own decision in Madho Mah ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he following amount: . Rs. Remuneration 24,000 Commission. 92,009 Medical expenses. 250 Motor Car expenses. 1,800 (computed according to Rule 3) Personal Accident Insurance Premium 351 Telephone expenses. 2,082 Travelling expenses. (Holiday tour) 2,889 Companies contribution to recognised provident fund 1,920 Superannuation 2,000 Gratuity 480 Total 1,27,781 During the previous year relevant to the assessment year Shri Anilkumar Chinubhai was paid the following amounts: Remuneration 24,000 Commission 94,248 Medical expenses 279 Motor Car expenses 1,800 (Computed according to Rule 3) Personal accident insurance premium 351 Telephone expenses 2,686 Travelling expenses (holiday tour) Nil Companies contribution to recognised provident fund 1,920 Superannuation 2,000 Gratuity 496 Total 1,27,780 The ITO allowed only an amount of Rs. 72,000 (excluding contribution to prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cl. (a) of sub-s(5) of s. 40A will apply to the remuneration paid and the perquisites provided to the two managing directors of the assessee company in the present case, the question whether the commission is covered by cl. (c) of s.40 does not arise. Even otherwise, we are of the view that the expression "any expenditure which results directly or indirectly in the provision of any remuneration in cl (c) of s. 40A is wide enough to take in commission also. Our attention was drawn by the ld. counsel for the assessee to the express mention of "commission" in cl. (b) of s.40 and the absence of the expression on cl. (c) of that section. The omission of the expression "Commission" in cl.(c) would have resulted in a material difference only if the language of cl. (b) and cl.(c) was otherwise identical. We may also point out here that in assessee's own case for the asst. yr. 1973-74 (ITA No. 535/Ahd) this Bench had applied the provision contained in cl. (a) of sub-s (5) of s. 40A to the managing directors of the assessee company. 9. We are aware of the decision of the Gujarat High Court in Addl CIT vs. Tarun Commercial Mills 1977 CTR (Guj) 141 : (1978) 113 ITR 745 (Guj) which interpre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion referred in that letter. According to the ld. counsel for the assessee if the triple shift allowance is calculated in accordance with the provisions contained in part 1 of the Appendix I to the IT Rules, 1962 and the direction of the CBDT on the reference made by the CIT (Central), Calcutta referred to above the extent to which the claim of the assessee for triple shift depreciation is to be disallowed will be much less than Rs. 6,945. We restore this matter to the ITO who will dispose of the same in accordance with law after giving a reasonable opportunity to other assessee to put forth his argument and to place all relevant material before him. 14. The next ground taken by the assessee relates to the disallowance of development rebate on the value of the following machinery namely: Value 1. Air-conditioning machine Rs. 10,351 2. Ladder and lighting points Rs. 7,692 3. Electric Fans Rs. 2,347 Total Rs. 20,390 We find that these items have been installed in the cloth department. On the facts and circumstances of the present case these items cannot be taken as separate from the factory machinery ..... X X X X Extracts X X X X X X X X Extracts X X X X
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