1984 (12) TMI 105 - AT - Income Tax

Tribunal upholds Commissioner's decision on gratuity deduction, rejects department's appeal.

The Tribunal upheld the Commissioner (Appeals)'s decision, ruling against the department's appeal regarding the validity of reopening the assessment for ... Gratuity Fund, Original Assessment Issues:1. Validity of reopening the assessment2. Allowability of deduction for gratuity liabilityValidity of Reopening the Assessment:The case involved an appeal by the department regarding the assessment year 1975-76 for the deduction claimed by the assessee for gratuity liability. The original assessment disallowed a portion of the claimed amount, which was later confirmed by the Tribunal. Subsequently, the assessment was reopened by the ITO, leading to a dispute on the validity of the reopening. The Commissioner (Appeals) held that the reopening was invalid, emphasizing that the Tribunal's decision should be final. The ITO's basis for reopening was questioned, as it seemed to be a change of opinion rather than new information justifying reassessment. The Tribunal agreed with the Commissioner (Appeals) that the reopening was not legally sustainable, as no new information had emerged to support it.Allowability of Deduction for Gratuity Liability:The second issue revolved around the deduction of gratuity liability. The department contended that the deduction originally allowed was incorrect, citing rules related to contributions towards an approved gratuity fund. The assessee argued that post the introduction of section 40A, the deduction for gratuity provisions should be governed by this section, allowing contributions up to 8 1/3 per cent of the salary. The Tribunal sided with the assessee, stating that section 40A(7) should determine the admissible amount for deduction, not the earlier rules. The Tribunal also dismissed the department's reliance on a circular, stating it did not override the statutory provisions. Ultimately, the Tribunal confirmed that the deduction allowed in the original assessment was correct and not excessive, leading to the dismissal of the appeal by the department.In conclusion, the Tribunal upheld the Commissioner (Appeals)'s decision on both issues, ruling against the department's appeal and confirming the validity of the original deduction for gratuity liability.