Law:

Section:

SECTION 40A(7), READ WITH SECTION 37(1), OF THE INCOME-TAX ACT, 1961 - BUSINESS DISALLOWANCE - GRATUITY - DURING ACCOUNTING YEAR 1972-73, ASSESSEE-COMPANY MADE PROVISION OF RS. 20 LAKHS IN ITS BOOKS OF ACCOUNT FOR PAYMENT OF GRATUITY TO ITS EMPLOYEES - WITH COMING INTO FORCE OF PAYMENT OF GRATUITY ACT, 1972, WITH EFFECT FROM 16-9-1972, ASSESSEE ARRANGED FOR ACTUARIAL DETERMINATION OF ITS LIABILITY FOR GRATUITY TO ITS EMPLOYEES - REPORT OF ACTUARY WAS RECEIVED AFTER BALANCE SHEET WAS DRAWN UP - ASSESSEE CLAIMED DEDUCTION OF ENTIRE LIABILITY OF RS. 48,59,431 AS DETERMINED ACTUARIALLY - ITO DISALLOWED CLAIM FOR NON-COMPLIANCE WITH REQUIREMENTS OF SECTION 40A(7) - TRIBUNAL DID NOT ALLOW DEDUCTIONS FOR AMOUNT FOR WHICH ASSESSEE HAD MADE PROVISION IN ITS BOOKS OF ACCOUNT WITHOUT COMPLYING WITH REQUIREMENTS OF SECTION 40A(7) BUT ALLOWED DEDUCTION FOR BALANCE FOR WHICH NO PROVISION WAS MADE IN BOOKS OF ACCOUNT UNDER SECTION 37(1) - WHETHER IN VIEW OF NON-OBSTANTE CLAUSE IN SECTION 40A, NO DEDUCTION WAS PERMISSIBLE UNDER SECTION 37(1) FOR ASSESSEE'S LIABILITY WITHOUT COMPLYING WITH PROVISIONS OF SECTION 40A(7) AND, ACCORDINGLY, TRIBUNAL WAS NOT JUSTIFIED - HELD, YES Facts The assessee-company made a provision in its books of account for payment of gratuity to its employees to the extent of Rs. 20 lakhs during the accounting year 1972-73. After the coming into force of the Payment of Gratuity Act, 1972, with effect from 16-9-1972, the assessee arranged for actuarial determination of its liability for gratuity to its employees as per the provisions of the said Act. The report of the actuary was received only after the balance sheet of the company was drawn up. At the time of filing of the return for the relevant assessment year, the assessee added back the provision for gratuity actually created amounting to Rs. 20 lakhs and claimed the total liability of Rs. 48,59,431 which was the actuarial determination of liability arising under the Payment of Gratuity Act in the relevant accounting year. The ITO disallowed the claim on the ground that there was non-compliance with the requirements of section 40A(7) but allowed deduction of actual payment made towards gratuity to its…

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