2002 (7) TMI 66

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.... holding that the assessee-company is eligible for deduction of gratuity of Rs. 3,41,202 as admissible under section 36(1)(v) of the Income-tax Act, 1961? 2. Whether, on the facts and in the circumstances of the case and having regard to provisions of rule 103 of the Income-tax Rules, 1962, the Appellate Tribunal's interpretation that the last drawn salary could also be construed to be salary during the year is sustainable in law?" The short point that arises for consideration is whether the assessee is entitled to the deduction of gratuity amount of Rs. 3,41,203 paid to an approved gratuity fund as a contribution made to the fund. The Income-tax Officer applied rule 103 of the Income-tax Rules, 1962, and held that the assessee would ....

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..... Ramanujam, learned senior standing counsel for the Revenue, and Mr. Srinath Sridevan, learned counsel for the assessee. The submission of Mr. T.C.A. Ramanujam is that for the purpose of determining the ceiling limit prescribed under rule 103 of the Income-tax Rules, the salary drawn by an employee during the entire year should be taken into account and it is not permissible to take into account the salary paid at the end of the year as increments might have been sanctioned during the year and, therefore, the calculation should be made on the salary paid during the entire year. Mr. T.C.A. Ramanujam also submitted that section 40A(7) of the Act would apply and the Tribunal has not considered the applicability of section 40A(7) of the Act an....

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....expenditure in the year in which the payment was made. There is no dispute that the assessee had contributed a sum of Rs. 3,41,203 to the approved gratuity fund and we are of the view that if the entire amount is not allowable under section 36(1)(v), the balance amount would necessarily have to be allowed as a business expenditure under section 37 of the Income-tax Act, 1961, as the money has gone out of the hands of the assessee and it was a business expenditure incurred by the assessee wholly and exclusively for its business purpose. This court in Triplicane Permanent Fund Ltd. v. CIT [1989] 179 ITR 492 which was followed in CIT v. Rayalaseema Passenger and Goods Transports Pvt. Ltd. [1998] 230 ITR 332 (Mad), has taken the view that such ....