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TMI Blog1984 (4) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... contribution of Rs. 4,14,000 to the gratuity fund created for the purpose and annual contribution of Rs. 71,000. The trust was recognised by the Commissioner with effect from 1-7-1977. Para 4(1) of the Commissioner's letter to the trustee of the fund permitted them to make the initial contribution to the fund in five annual instalments commencing from the year in which the fund came into effect. The ITO, therefore, allowed deduction only in respect of one-fifth of the initial contribution amounting to Rs. 82,400 in addition to the annual contribution of Rs. 71,000. The claim for the balance was rejected. 3. The assessee appealed before the Commissioner (Appeals). But having failed before him for the reasons mentioned by the Commissioner ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust with effect from 1-7-1977, the Commissioner by his letter dated 18-8-1978 permitted the assessee to pay the initial contribution in five annual instalments commencing from the year in which the fund had come into effect. The question is whether the assessee was eligible for deduction of the entire amount of the initial contribution in the determination of the total income of the assessee for the year under consideration. 6. Under the scheme of the Act, where the assessee claims any deduction for the purpose of payment of gratuity to the employees, if he has made actual payment to an approved gratuity fund set up for the purpose, he will be eligible for the deduction under section 36(1)(v). If he does not make the payment, but he merel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al payment or transfer of the amount was made and the assessee-company had merely opened a ledger account in the name of provident fund and the funds contributed by the company were transferred to this account. According to the ITO, this did not amount to an actual payment and did not entitle the assessee to a deduction. The Delhi High Court, however, held that under the relevant trust deed the assets of the trust including the contributions made to the fund by the members as well as the company, accumulations or accretions to the fund by way of interest or otherwise and any securities purchased with the accumulations or accretions, vested in the trustees of the members. The terms of the trust deed, read with the rules and regulations creat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the normal parlance provision denotes itself as something provided for. It is not uncommon that one usually asks another person whether he has made any provision for his daughter's marriage or for the son's education, etc. Therefore, the provision made does not refer to the provision made in the books of account. Normally, meaning of 'provision made' would cover for all the liabilities which remain undischarged at the close of the previous year. Even the expression 'accounts' is wider than the expression 'books of account'. It is not correct to state that it is the liability that gets a deduction, it is the expenditure which creates a liability, that gets deducted. The assessee had an accrued liability for the balance amount of initial cont ..... X X X X Extracts X X X X X X X X Extracts X X X X
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