TaxTMI 
TaxTMI 
2017 (2) TMI 1296
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....1 of 2015 has raised following seven substantial questions of law: (i) Whether Tribunal was justified in adding to the income, the grant from the Government of India out of National Renewable Fund for implementation of Voluntary Retirement Scheme amounting to Rs. 1,14,89,040/-. (ii) Whether the Tribunal was justified on facts or in law in allowing 1/5th of VRS payment of Rs. 1,35,47,324/- i.e. Rs. 27,09,465/- in view of the provision of Section 35DDA of Act, 1961 as against the amount of Rs. 4,11,657 as determined by Appellant and on the other hand the VRS expenses debited by the Appellant in the profit and loss account at Rs. 1,14,89,040/- were added back to the income of Appellant. (iii) Whether Tribunal was justified in overlooking the provisions of Section 43B relating to disallowance of Rs. 1,40,57,860/- on account of payment of gratuity paid under the scheme of LIC but disallowed the said amount by invoking the provisions of Section 40A(7) of the Act, 1961. (iv) Whether Tribunal was justified in not considering the fact that premium paid by Appellant to LIC was under a scheme known as 'Group Gratuity Scheme' formed by LIC and the insurance premium paid unde....
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....turn several times. On 31.10.2003 original Return of income was revised showing income of Rs. 2,38,52,387/- wherein deduction under Section 80O at Rs. 12,73,085/- was claimed. Computation of income was revised on 21.08.2004 wherein the excess provision written back at Rs. 47,05,659/- and deduction under Section 80O (20 percent) on Rs. 63,65,425/- was claimed. Income was revised to Rs. 1,91,46,728/-. Again computation was revised on 05.11.2004 and income was revised to Rs. 1,44,34,799/-. Assessment order ultimately was passed on 24.01.2005 computing total income of Assessee as Rs. 2,26,11,021/-. Though AO made additions in different heads but we are concerned for the purpose of this appeal with the expenditure of Voluntary Retirement Scheme (hereinafter referred to as "VRS")in respect whereto AO considered deduction under Section 35DDA. Another aspect is gratuity amount of Rs. 1,40,57,860/- which was disallowed. 7. In ITA No. 2 of 2015, the basic question relates to disallowance towards payment of gratuity. On the question of expenditure on account of VRS and payment of gratuity, Assessee lost the matter in Appeal before Commissioner who confirmed Assessment Order on the aforesai....
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....ts and gains of business or profession; (iv) capital gains; and (v) income from other sources. 13. Obviously, heads salary, property, business or profession and capital gains would not cover the amount of "grant" which is also termed as "subsidy" received out of a fund created for implementing VRS scheme to help Public Enterprises who have become sick and are in the process of revival. 14. The question, then would be whether it can be placed in the residuary category, i.e., "other sources". This word "source" came up for consideration before Privy Council in Rhodesia Metals Ltd. Vs. Commrs of Taxes 1941 (9) ITR Supp. 45 (PC). It was observed that the word "source" indicates a thing from which something originates or from which something rises. Source thus is an originating cause. Source is not, in the context under discussion, a legal concept, but is something which a particular man would regard as a real source of income to be ascertained as hard matter of fact. 15. In Commissioner of Income Tax Vs. Shaw Wallace and Company AIR 1932 PC 138 Privy Council observed that "income" connotes a periodical monetary return "coming in" with some kind of regularity, or expected regularity,....
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....t of India could not have been treated as "income" and that being so, addition made by AO of amount of grant and upheld by Commissioner and Tribunal is not in accordance with law. Both these Questions are answered in favour of Assessee. 25. Now coming to Questions- (iii), (iv), (v), (vi) and (vii), learned counsels for parties, at the outset, could not dispute that these questions stand covered by Supreme Court's judgment in CIT Vs. Textool Co. Ltd. 2013 (216) Taxman 327 in favour of Assessee. Tribunal had disallowed payment made to L.I.C. under Gratuity Insurance Scheme by referring to Section 40(A)(vii) observing that fund was not recognized by Department. A similar question was considered in CIT Vs. Textool Co. Ltd. (supra) where also payment was made to L.I.C. towards group life assurance scheme and this was held to be an approved Scheme and there was no violation of Section 36(1)(v) of Act, 1961. Court held that a narrow interpretation straining language of Sub-Clause (v) so as to deny deduction to Assessee should not be followed since the objective of fund was achieved. Para-8 of judgment is reproduced as under: "8. Having considered the matter in the light of the back....