1983 (8) TMI 142

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....sed before the ITO. Ground rejected. 2. Disallowance of excess contribution to Gratuity Funds Rs. 28,465-We find no substance in the reasoning of the IT authorities. There is an approved gratuity fund. The assessee had made a provision of Rs. 1,41,310 as gratuity to employees. Sec. 36 provides that any sum paid by way of contribution towards an approved gratuity fund is an admissible deduction. There is no limitation prescribed in s. 36 for this expenditure. whatever is paid into the fund is an outgoing and hence an expenditure, because it goes out of the control and domain of the assessee. The assessee cannot get benefit of retention of these funds for his own use, which benefit the assessee gets in cases where mere provision is made in....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....art of gratuity contribution was to be disallowed, the CIT (Administration) having granted recognition to the gratuity fund. This gratuity fund is a staff welfare scheme. The assessee is not bound to create or operate a fund. Regular contribution to the fund is not a compulsory must. The assessee may commit default. There is no provision for recovery and payment into the fund. All these are voluntary activities optional with the assessee. Neither the default nor underpayment is visited with any penalty, except perhaps withdrawal of recognition. Therefore, it is to be noted that these payments are allowed as admissible deductions not on the basis of any statutory of contractual liability but only on the basis of actual payment. The defini....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ery by the CIT (A) that it was wrongly allowed by the ITO. The articles were given to the employees. So the expenditure is well supported by commercial expediency. There is no extra commercial consideration. The reasoning the CIT (A) is nothing but faulty, and not acceptable to us. So the disallowance is deleted. ITA NO. 990/MDS/82-ASST. YR. 1978-79: 1. Disallowance under s. 40A(5)-Rs. 30,090-Same decision as in asst. yr. 1977-78. Ground rejected. 2. Rs. 3,86,515 (Goodwill payment)-Ground rejected as liability accrued only outside the accounting year as in asst. yr. 1977-78. 3. Rs. 99,625: Excess contribution towards gratuity-The claim is allowed for the same reasons as in asst. yr. 1977-78. 4. Additional ground : Rs. 3,12,74....