1983 (12) TMI 15

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....March 31, 1976, amounting to Rs. 3,77,344. However, the assessee claimed before the ITO that even though no provision has been made in the accounts for the assessment year 1976-77, it was entitled to a deduction of the said amount as it was an accrued liability. The ITO took the view that since s. 36(1)(v) of the I.T. Act allowed only a deduction of a sum paid by way of contribution towards an approved gratuity fund and since the amount had not been paid in the previous year, the deduction claimed was not to be allowed. The assessee took the matter in appeal to the Commissioner of Income-tax (Appeals) who held that the word " paid " occurring in s. 36(1)(v) of the Act would also include a liability incurred in accordance with the method of ....

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.... Tribunal and the Tribunal having rejected the application on the ground that the decision of the Tribunal rested on the findings of fact, the present petition has been filed under s. 256(2) of the Act seeking a direction to the Tribunal to refer the following question of law for the opinion of this court : " Whether the Tribunal was right in holding that the provision for gratuity is not allowable in the relevant assessment year 1976-77 ?" We are, however, of the view that the Tribunal has rightly rejected the assessee's claim for deduction under s. 36(1)(v) of the Act. In this case, admittedly, in the accounts of the previous year ended March 31, 1976, relevant to the assessment year 1976-77, the assessee did not make any provision for ....

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....he omission to make a book entry when in fact the liability had accrued, would make no difference to the claim of the assessee. We are in entire agreement with the Tribunal that the decision of the Commissioner of Income-tax (Appeals) overlooks the provision in s. 40(A)(7) according to which no provision for payment of, any gratuity could be allowed as a deduction except a provision for contribution to an approved gratuity fund, and since the amount claimed as a deduction was not a provision in the accounts of the assessee, the claim was not saved from the ban imposed by s. 40(A)(7). According to the Tribunal, s. 40(A)(7) was enacted only to see that no assessee obtains a deduction of a liability to pay gratuity without parting with the fun....