Appeals allowed with exceptions under tax law for assessment years 1977-78 and 1978-79

The appeals were partially allowed, with disallowances under section 40A(5) for the assessment years 1977-78 and 1978-79 being upheld. However, the disallowance of excess contribution to Gratuity Funds was deleted for both years. The claim for a goodwill payment deduction was rejected due to the liability arising outside the accounting year. The disallowance of the cost of gold medals and other articles given to workmen was deleted, and an additional ground for a claimed amount in 1977-78 was allowed based on settlement terms related to an industrial dispute, deemed deductible under section 37 for commercial expediency.

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Issues:
1. Disallowance under section 40A(5) for assessment years 1977-78 and 1978-79.
2. Disallowance of excess contribution to Gratuity Funds.
3. Goodwill payment eligibility for deduction.
4. Disallowance of cost of gold medals and other articles given to workmen.
5. Additional ground for a claimed amount in assessment year 1977-78.

Issue 1: Disallowance under section 40A(5):
For the assessment year 1977-78, the Tribunal noted that the disallowance under section 40A(5) was covered by a previous decision in favor of the assessee for the assessment year 1975-76. The CIT (A) had referred the case back, allowing all points to be raised before the ITO. The ground was rejected. Similarly, for the assessment year 1978-79, the disallowance under section 40A(5) was upheld, following the decision for the previous year. The ground was rejected.

Issue 2: Disallowance of Excess Contribution to Gratuity Funds:
The Tribunal found no substance in the reasoning of the IT authorities regarding the disallowance of excess contribution to Gratuity Funds. It was established that the contribution was made to an approved gratuity fund, which is an admissible deduction under section 36 without any prescribed limitation. The Tribunal emphasized that the excess contribution did not lose its character as a contribution, as it was accepted and approved by the fund's authorities. The disallowance was deleted for both assessment years.

Issue 3: Goodwill Payment Eligibility for Deduction:
Regarding the claim for a goodwill payment, the Tribunal observed that the liability for payment arose outside the accounting year for both assessment years. As the liability accrued outside the relevant year, the claim was deemed inadmissible, and the ground was rejected.

Issue 4: Disallowance of Cost of Gold Medals and Other Articles:
The disallowance of the cost of gold medals and other articles given to workmen was challenged by the assessee, arguing that the expenditure was supported by commercial expediency and had no extra-commercial consideration. The Tribunal found the reasoning of the CIT (A) faulty and unsupported, leading to the deletion of the disallowance for both assessment years.

Issue 5: Additional Ground for a Claimed Amount:
An additional ground was raised for a claimed amount in the assessment year 1977-78, which was disallowed as falling outside the accounting year. The Tribunal overruled the objection to the admissibility of this ground, allowing it based on the terms of settlement related to a payment made to workers on account of settling an industrial dispute. The Tribunal considered the payment deductible under section 37 due to commercial expediency, and the claim was allowed as a deduction in the computation of total income for the relevant year.

In conclusion, the appeals were allowed in part, with various disallowances being deleted or upheld based on the specific issues and legal interpretations discussed in the judgment.

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