Gratuity fund deduction follows effective approval date where the fund already met statutory conditions under income-tax law.

Contribution to an employees' gratuity fund was deductible under section 36(1)(v) where the fund had already been created and satisfied the prescribed conditions, even though formal approval was granted later. The approval of a pre-existing trust was treated as relating back to the date the fund was set up, and the effective date could not be fixed arbitrarily when the approval itself recognised the date of application. Deduction could not be denied merely because the approval order was issued after the contribution. The alternative claim under section 37(1) failed because expenditure governed specifically by section 36 cannot be claimed under the general provision.

---

---

Issues: Whether contribution made to an employees' gratuity fund before the formal approval date could be allowed as a deduction under section 36(1)(v) of the Income-tax Act, 1961, when the approval was subsequently granted with effect from the date of application and the fund otherwise satisfied the statutory conditions.

Analysis: Section 36(1)(v) permits deduction only for contribution to an approved gratuity fund, and the relevant schedule provisions require the fund to satisfy the prescribed conditions for approval. The approval granted in the present case was effective from 7 April 2010, being the date of application, though the fund had been created and commenced operations on 1 January 2010. The effective date of approval cannot be fixed arbitrarily where the fund already existed in conformity with the prescribed conditions. Approval of a pre-existing trust is essentially post facto in nature and relates back to the date on which the fund was set up, unless a later date is justified by alteration in the fund's constitution or conditions. The statutory scheme does not support denial of deduction merely because the formal approval order was issued later, particularly when the approval itself recognised an earlier effective date. The alternate claim under section 37(1) was also untenable because expenditure specifically governed by section 36 cannot be claimed under section 37.

Conclusion: The contribution was allowable as a deduction under section 36(1)(v), and the approval had to be treated as effective from the date the fund was created.

---