1972 (10) TMI 21

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.... disallowed the deduction claimed. For the assessment year 1967-68, even in the original assessment, the Agricultural Income-tax Officer did not allow the deduction claimed towards the gratuity amount paid. The reason given by the Income-tax Officer for not allowing the deduction of the amount paid as gratuity to a retired employee is that those payments had no nexus with the future conduct of the business of the assessee, and that, therefore, it could not be claimed as a deduction under section 5(e) of the Madras Agricultural Income-tax Act. This disallowance was upheld by the appellate authority. There was a further appeal to the Tribunal. The Tribunal has, however, found that the amounts paid are not ex gratia, but payments made in purs....

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....ntum of salary or whether there was an expectation by the employees of getting a gratuity or whether the sum of money was paid on the ground of commercial expediency or whether the payment had been in order indirectly to facilitate the carrying on of the business. While holding that the payment of gratuity in that case was not an allowable deduction under section 10(2)(xv), it has been observed that if the payment is made in pursuance of the general practice adopted by the assessee, then the payment would an allowable deduction. The learned counsel for the revenue places reliance on the decision of the Kerala High Court in Teekoy Rubbers (India) Ltd. v. State of Kerala. That was a case where a deduction was claimed in respect of the amount....