TaxTMI 
TaxTMI 
2001 (7) TMI 30
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....bunal is not against the provisions of the Industrial Disputes Act and the Payment of Gratuity Act? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was further justified in law in holding that the assessee was not entitled to claim foreign tour expenses of Shri V. P. Mehta and whether the above finding of the Tribunal to the effect that the assessee has not established requisite nexus is not against the evidence on record and the said finding is not reasonable?" The assessment year is 1978-79 and the relevant previous year is the year ended March 31, 1978. During the course of assessment proceedings, the assessee-applicant claimed deduction of gratuity amounting to Rs.55,680 as well as Rs.31,843 being foreign ....
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....e was not required in the office on and from March 28, 1978, up to and including March 31, 1978. However, it was further stated in the said notice that in spite of such absence the workmen will be paid salary as usual for the said period. Then, on April 1, 1978, and April 16, 1978, similar notices were issued and the workmen were advised not to report for duty with effect from April 1, 1978, up to and including April 17, 1978, subject to the same stipulation of the salary being paid to them for the said period. On April 18, 1978, a further notice was issued by the assessee-company reiterating what was stated in its earlier notice dated March 18, 1978, and then giving the statutory notice of one month for the purpose of closure. An extract ....
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.... period. In support of this proposition reliance was placed on the provisions of section 40A(7)(b)(i) of the Income-tax Act, 1961, as was applicable for the year under consideration. The relevant portion of the said section as is material for our purpose is as under: "(7) (b). Nothing in clause (a) shall apply in relation to-- (i) any provision made by the assessee for the purpose of payment of a sum by way of any contribution towards an approved gratuity fund, or for -the purpose of payment of any gratuity, that has become payable during the previous year;" It was submitted that clause (a) of sub-section (7) of section 40A of the Act laid down a general embargo on allowance of deduction in relation to any provision made for the paymen....
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....ting regularly employed, viz., the mercantile system of accounting. Elaborating this submission it was contended that vide notice dated March 18, 1978, only an intention of closure was expressed, that the statutory notice for closure was issued on April 18, 1978, and in fact as can be seen from the wording of the said notice dated April 18, 1978, the closure was effected with effect from closing hours of business on May 19, 1978, and therefore, no liability had arisen in the hands of the assesseecompany which would entitle the assessee to claim deduction either as per the system of accounting or under any of the provisions of the Act. We have heard both counsel and after taking into consideration the decision cited at the Bar we find no r....
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....y 19, 1978. Therefore, even if a provision has been made by the assessee-company on the basis of its decision to close down the establishment, legally and in fact the establishment can be said to have been closed down only with effect from May 19, 1978, and the said date falls beyond the accounting period, i.e., March 31, 1978. Thus, in the absence of any termination of services of the workmen there was no occasion for any liability to arise within the meaning of the provisions of the Payment of Gratuity Act. The Tribunal was, in our opinion, justified in holding that the actual termination took place long after the close of the accounting period and that even under the mercantile system of accounting there was no accrual as the event of....