Law:

Section:

Section 36(1)(v) of the Income-tax Act, 1961, read with rule 103 of the Income-tax Rules, 1962 - Gratuity fund, contribution to an approved fund - Assessment year 1974-75 - Whether actual payment made to an approved gratuity fund is allowable as deduction under section 36(1)(v) - Held, yes - Whether if entire amount is not allowed under section 36(1)(v), balance amount would be allowable as business expenditure under section 37(1) - Held, yes Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability as - Assessment year 1974-75 - Whether if entire amount of payment made to an approved gratuity fund is not allowed under section 36(1)(v), balance amount would be allowable as business expenditure - Held, yes FACTS The assessee-company paid Rs. 3,41,202 to an approved gratuity fund as a contribution and claimed deduction under section 36(1)(v). The ITO applied rule 103 of the Rules, and held that the assessee would be entitled to claim a deduction of Rs. 2,27,037, and disallowed the balance on the ground that the amount was not covered under rule 103. The Commissioner (Appeals) allowed the assessee's appeal and held that the assessee would be entitled to deduction of the whole amount. On the revenue's appeal before the Tribunal, the only point raised was that under rule 103, the salary paid to an employee at the end of the year should not be taken into consideration for the purpose of allowability of expenditure under rule 103 but salary paid during the entire year should be taken into consideration. The Tribunal dismissed the revenue's appeal. On reference : HELD To decide the issue under consideration it was not necessary to go into the question whether the ceiling limit prescribed under rule 103 should be calculated on the basis of the last drawn salary of the employee or the entire salary drawn by the employee during the entire year. The assessee had made contribution to an approved gratuity fund and that would necessarily constitute the expenditure incurred by the assessee for the purpose of the business and was allowable as expenditure in the year in which the payment was made. There was no dispute that the assessee had contributed Rs.…

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