2014 (12) TMI 1356

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ome Tax (Appeals) erred in deleting the disallowance of provision for gratuity made under section 43B of the Act. 2. The Assessing Officer while completing the assessment found that assessee made provision for gratuity of Rs. 32,54,120/- and this was not added back while computing taxable income in its computation. The Assessing Officer required the assessee to explain as to why this provision made for gratuity should not be disallowed. The assessee contended that during the previous year relevant to the assessment year 2007-08, it made provision towards gratuity with LIC of India which was approved by the Commissioner of Income Tax . The assessee submitted that the said amount is allowable as deduction as per provisions of section 40A(7....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... Act and such provision for gratuity is not hit by the provisions of section 43B of the Act:- i) CIT Vs. Bechtel India (P) Ltd. (2 DTR (Del) 145) ii) CIT Vs. Common Wealth Trust (P) Ltd & Anr (269 ITR 290)(Ker) iii) CIT Vs. Easwaran & Sons Engineers Ltd.[Tax Appeal No.596 of 2005 dated 26.09.2011(Madras) iv) Mewar Suga Mills Ltd. Vs.DCIT (Third Member) (65 ITD 163)(Jaipur Bench) 5. Heard both sides. Perused orders of lower authorities and the decisions relied on. The assessee during the relevant assessment year 2007-08 created provision of Rs. 32,54,120/- towards gratuity with LIC of India. This fund was approved by the Commissioner of Income Tax. The Assessing Officer disallowed the said provision for....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ance Act, 1983, with effect from April 1, 1984. Section 40A says that the provisions of this section shall have effect notwithstanding anything to the contrary contained in any other provision of the Act relating to the computation of income under the head "Profits and gains of business or profession". Similarly, section 43B opens with a non obstante clause. Section 40A(7) provides that in cases covered by the provisions of clause (a) no deduction shall be allowed in respect of any provision whether called as such or by any other name made by the assessee for the payment of gratuity of his employees on their retirement or on termination of their employment for any reason. However, clause (b) of section 40A(7) clearly provides that to any pr....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ual payment and that deduction cannot be allowed on the basis of any provision. The only exception to the above rule is with regard to the provision for payment to an approved gratuity fund. It cannot be interpreted that the later pro vision in section 43B by introducing the non obstante clause would abrogate the special provision with regard to the provision made for payment to an approved gratuity fund contained in section 40A(7)(b)(i). This is all the more so since no patent conflict or inconsistency can be spelt out. Both the provisions can co-exist . A harmonious construction of the two provisions would clearly indicate that the Legislature never intended to take away the benefit conferred under clause (b) of section 40A(7) by the prov....