1987 (1) TMI 68

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....hat the gratuity payable at Rs. 33,059 to employees of the assessee in the electricity undertaking of Mount Abu Electric Supply Co. being compulsorily taken over by the Rajasthan Government under the Compulsory Acquisition Act (Vesting Act) was not an allowable deduction and was hit by section 40A(7) of the Income-tax Act, 1961 ? (2) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that even if section 40A(7) was applicable, the case is not covered by section 40A(7)(b)(i) of the Income-tax Act, 1961 ? " The material facts giving rise to this reference, briefly, are as follows: The assessee is a registered firm. Daring the assessment year 1975-76, the assesse....

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....f the Act were applicable, the case of the assessee was not covered by the provisions of sub-clause (i) of subsection (7)(b) of section 40A of the Act. Aggrieved by the order passed by the Tribunal, the assessee sought a reference and it is at the instance of the assessee that the aforesaid questions have been referred to this court for its opinion. This court had occasion to consider the scope of the provisions of section 40A(1) of the Act in CIT v. Shree Sajjan Mills Ltd. [1984] 147 ITR 185. The view taken by this court that since sub-section (7) of section 40A of the Act refers to deductions on account of payment of gratuity to employees of an assessee, section 37 of the Act which is a residuary section would not be applicable, has be....