Law: Income Tax Act, 1922

Section: 10

Law: West Pakistan Industrial and Commercial Employment (Standing Orders) Ordinance (VI of 1968)

Section: 12(6)

Income tax Act (XI of 1922)--S. 10 read with West Pakistan Industrial and Commercial Employment (Standing Orders) Ordinance (VI of 1968), S. O. 12(6)¬Gratuity Admissible allowance Ordinance VI of 1968 Does not demand creation of a fund for payment of gratuity to employees-Amount of gratuity not possible of calculation unless one of events mentioned in S. O. 12(6) took place Possible also for no necessity arising for payment of gratuity Provision for allocating an amount to be paid as gratuity At best a provision for unknown contingency--Fund for payment of gratuity being not created under any law, no right in such fund vested in employees nor does employer lose control over amount thus credited Employer free to deal with amount credited to employee's account exactly as he pleased Word paid in subsection (2) of S. 10 Means actually paid or incurred according to method of accounting upon basis of which profits or gins computed under S. 10 Assessee, held, may have been prudent in creating a reserve for future contingency but he could not claim such amount as admissible expenditure under S. 10 and law having not required assessee to create such a reserve expenditure could not be said to have been incurred. M. M. S. M. (p.) Ltd. v. C. I T. (1973) 92 I T R 503 and M. B. C. of India Ltd. v. Their Workman (1969) 931 T R 53 distinguished. I. T. A. No. 560 and 561/KB of 1975 76 held not correctly decided. I. T. A. No. 3743/PB of 1973 74 rel. ORDER M. KARIM (MEMBER). These appeals at the instance of the Department, are against the order of the A. A. C. A Range, Ky. As more or less common grounds of objection have been taken we shall dispose them of by a consolidated order. The most important issue involved concerns the provision of gratuity, disallowed by the I: T. O. in each year, but allowed by the A. A. C. This ground we. shall take up last. For 1972 73 the excess perquisite calculated by the A. A. C. at Rs. 4,800 appears to be correct. As the Director's remuneration was only Rs. 500 per month. We maintain the A. A. C. order on this point. The next objection was against deletion made of the amount added back under 10(4)(e). No rules have yet been framed prescribing the…

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