Gujarat High Court
Commissioner Of Income-Tax vs Shreno Ltd. on 13 October, 1993
Equivalent citations: [1994]210ITR289(GUJ)
Author: M.B. Shah
Bench: J.M. Panchal, M.B. Shah
JUDGMENT M.B. Shah, J.
1. At the instance of the Revenue, the Income-tax Appellate Tribunal has referred the following two question for our opinion :
"1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in confirming the finding of the Appellate Assistant Commissioner that the conditions in section 40A(7)(b) were complied with and, consequently, the assessee was entitled to deduction in respect of the provision of Rs. 62,660 for payment of gratuity as claimed ?
2. Whether, on the facts and in circumstances of the case, the assessee is entitled to deduction of an amount of Rs. 62,660 being future liability for payment of gratuity under section 28 of the Income-tax Act, 1961, while computing the gains and profits of the business ?"
2. The aforesaid questions of law arise in background of the following facts :
The assessment of the assessee-company pertaining to the assessment year 1973-74 was completed by the Income-tax Officer as per his order dated December 31, 1974. In the order, he disallowed the deduction for gratuity provision on the ground that it was hit by the prohibition contained in section 40A(7)(b) of the Income-tax Act, 1961 ("the Act" for short). However, he observed that the said finding would be rectified under section 155(13) of the Act on fulfilment in time by the assessee of the conditions laid down in clause (b) of section 40A(7) of the Act. Before the Appellate Assistant Commissioner, with regard to the gratuity provision of a sum of Rs. 62,660, it was conceded that the Commissioner of Income-tax, Gujarat IV, Ahmedabad, had accorded recognition to the gratuity fund retrospectively with effect from December 31, 1975, vide his order dated March 3, 1976. A statement was produced showing the computation for provision made in the books for the calendar years 1972 and 1973, the payments actually made during the calendar years 1973, 1974 and 1975 and the amount payable to the trustees as on December 31, 1975. It was pointed out that 50 per cent. of the amount payable as on December 31, 1975, was actually paid to the trustees of the fund on March 15, 1975, and the remaining 50 per cent. was handed over to the trustees on February 3, 1977. In view of the aforesaid facts, the Appellate Assistant Commissioner held that all the conditions laid down in section 40A(7) of the Act had been duly satisfied and directed the Income-tax Officer to allow a deduction of Rs. 62,660.
3. The order of the Appellate Assistant Commissioner dated April 29, 1977, was challenged before the Income-tax Appellate Tribunal, Ahmedabad. The Tribunal arrived at the conclusion with regard to the gratuity provision that the facts in the present case are similar to those in the case of Gaskets and Radiators Pvt. Ltd., decided by the Tribunal on October 27, 1978, and no new arguments were advanced before it by the parties. Following the aforesaid decision, the Tribunal dismissed the appeal.
4. At the time of hearing of this reference, nothing was pointed out which would indicate that the conditions laid down in section 40A(7)(b) were not satisfied. It is to be noted that decision of the Tribunal in the case of CIT v. Gaskets and Radiators Pvt. Ltd. was confirmed by this court in its judgments in [1991] 192 ITR 509.
5. In this view of the matter, question No. 1 is answered in the affirmative, i.e., in favour of the assessee and against the Revenue. In view of the answer to question No. 1 question No. 2 is not required to be answered. Hence, question No. 2 is left unanswered.
6. In the result, the reference stands disposed of accordingly with no order as to costs.