Law:

Section:

I. Section 40A(7) of the Income-tax Act, 1961 - Business disallowance - Gratuity - Assessment year 1974-75 - Whether where assessee had neither made any provision for contribution to approved gratuity fund in its accounts nor an actual payment had been made towards gratuity liability for year in question, deduction claimed had rightly been disallowed by Tribunal - Held, yes FACTS The Assessing Officer disallowed a sum being provision for gratuity on ground that the conditions laid down in section 40A(7) were not satisfied, by the assessee. On appeal, the AAC and the Tribunal upheld the disallowance. On reference : HELD The provision for gratuity cannot be allowed as deduction, unless the assessee complies with the conditions laid down in section 40A(7)(b ). Admittedly, the assessee in instant case had not complied with the provisions of section 40A(7)(b) The assessee has not made any provision for contribution to the approved gratuity fund in its accounts. Since neither an actual payment had been made nor had a provision been made towards the gratuity liability for the year in question, the deduction claimed had rightly been disallowed by the Tribunal. II. Section 43(1), read with section 32 of the Income-tax Act, 1961 - Actual cost - Assessment year 1974-75 - Whether jeeps were only motor cars for purpose of depreciation - Held, yes - Whether, therefore, excess cost of jeeps over Rs. 25,000 was to be disallowed - Held, yes FACTS The Assessing Officer disallowed a sum of Rs. 4,493 being excess cost of jeeps over Rs. 25,000. On appeal, the AAC upheld the disallowance. On further appeal, the Tribunal held that a jeep was a motor car for the purpose of depreciation and upheld the disallowance. On reference : HELD Merely because the jeep has four-wheel propulsion and is used through jungles and hilly terrains, it would not make it different from a motor car particularly when the motor car and the jeep have the following common features. (a) both the vehicles are mounted on wheels upon which they run over the surface of the land. (b) both the vehicles are guided and controlled by a person riding upon or in them. (c) both are designed and intended to carry one or…

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