Timely gratuity fund approval application can relate back, preserving deduction despite later retrospective approval

A timely application for approval of a gratuity fund satisfied the statutory condition for deduction of the provision for gratuity. The assessee applied within the prescribed time, and the Commissioner's later approval was granted with retrospective effect. On that basis, the approval related back to the relevant assessment year, and the assessee could not be denied deduction merely because formal approval was issued later. The deduction claim was therefore upheld because the departmental delay did not defeat compliance with the statutory application requirement.

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Issues: Whether the assessee was entitled to deduction of the provision for gratuity where the application for approval of the gratuity fund had been made within time but formal approval was granted later with retrospective effect.

Analysis: The relevant statutory condition required the creation of an approved gratuity fund and that the application for approval be made before the stipulated date. The assessee had made the application on 30 December 1975, within the prescribed time. The subsequent approval granted by the Commissioner was expressly given effect from 27 March 1976. Once the statutory application requirement had been complied with, the assessee could not be penalised for the departmental delay in granting approval. The approval, when granted, had to relate back to the assessment year concerned.

Conclusion: The assessee satisfied the statutory conditions and was entitled to the deduction.

Final Conclusion: The question referred was answered in favour of the assessee, and the deduction claim was upheld.

Ratio Decidendi: Where an assessee makes a timely application for approval of a gratuity fund in compliance with the statutory requirement, later departmental approval granted with retrospective effect relates back to the relevant assessment year and the assessee cannot be denied deduction merely because formal approval was accorded subsequently.

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