1997 (12) TMI 49

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....uity, the services rendered by the employees of the assessee-company in the holding company should be taken into account and after taking note of the entire service rendered by the employees in both the companies, the assessee made a contribution of Rs. 3,39,628 towards the approved gratuity fund. The assessee claimed the same as deduction in the determination of the computation of the income for the assessment year 1977-78. The Income-tax Officer rejected the claim of the assessee on the ground that the assessee-company was incorporated only on December 19, 1973, and as such the employees who have not put in continuous service of five years with the assessee-company did not have an enforceable legal right to claim gratuity and the provisio....

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....evocable trust was an admissible deduction. The Revenue challenged the order of the Appellate Tribunal and at the instance of the Revenue the following question of law has been referred for our consideration under section 256(1) of the Income-tax Act : "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in holding that the sum of Rs. 3,97,628 being contribution made by the assessee to the approved gratuity fund is an admissible deduction under section 36(1)(v) of the Act ?" Mr. C. V. Rajan, learned junior standing counsel for the Revenue, submitted that the Income-tax Officer disallowed the claim of the assessee on the ground that the employees have not put in five years of service an....

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....ct without any further restriction being applied to it or condition being fulfilled by it. Section 36(1)(v) of the Act which provides for deduction by way of contribution to an approved gratuity fund and the same reads as under : "any sum paid by the assessee as an employer by way of contribution towards an approved gratuity fund created by him for the exclusive benefit of his employees under an irrevocable trust ;" The expressions "trust" and "trustee" are defined in clause (c) of rule 98 under Part XIV under the caption "approved gratuity funds" and the said expressions have been defined as follows : " 'trust' means the trust under which the fund is established and 'trustee' means a trustee thereof." Rule 103 of the Income-tax....