Law:

Section:

Section 40A(7) of the Income-tax Act, 1961 – Business disallowance - Gratuity – Assessment year 1971-72 – Assessee had scheme of gratuity from 1957 – It had not made any provision as such for gratuity liability nor claimed any such provision as allowable deduction in earlier years – Assessee had claimed amounts actually paid in earlier years and such amounts had been allowed – In relevant assessment year, assessee got actuarial valuation of total gratuity liability as on 31-3-1970 and 31-3-1971 and claimed deduction of same – Whether it was not permissible for assessee to aggregate such expenditure which might have been claimed in earlier years and to claim same in lump sum in year of assessment under consideration - Held, yes Circulars and notifications: CBDT Circular dated 21-9-1970 FACTS The assessee had a scheme of gratuity payment from 1957. In respect of the assessment for the years prior to the relevant assessment year, the assessee had claimed the amounts actually paid out in each of the years as deductions and such amount had been allowed in those assessments. It had not made any provision as such for gratuity liability nor claimed any such provision as allowable deduction in the earlier years. Apparently, in the light of certain observations made by the Supreme Court in the case of Metal Box Co. of India Ltd.v. Their Workmen [1969] 73 ITR 53 and a circular issued by the CBDT, the assessee got an actuarial valuation of its total gratuity liability as on 31-3-1970, and 31-3-1971, and on the basis of the actuarial valuation, it claimed a deduction of a certain amount as a liability towards gratuity payment in the return for the relevant assessment year. The ITO held that what was allowable was the liability relating to the previous year relevant to the assessment year in question and from the figures of the actuarial valuation furnished by the assessee, the liability attributable to the previous year worked out being the difference between the actuarial valuation of this liability as on 31-3-1970, and that as on 31-3-1971.The AAC and the Tribunal disallowed the assessee's appeals. On reference: HELD The ITO as well as the Tribunal proceeded on the basis…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492