Law: Income Tax Ordinance, 1979

Section: 2(4),24(g),24(h),Sixth SchedulePart-III

(a) Income Tax Ordinance (XXXI of 1979)--- ----Ss. 2(4), 24(g) & Sixth Sched., Part-III---Deduction on account of gratuity, claim for---Scope---Establishment of approved gratuity fund would be essential for making such claim---Principles. If the law requires that an approved gratuity fund is to be created and any sum paid to such approved gratuity fund is to be allowed and if no such approved gratuity fund exists, then the person claiming the benefit is required to act in accordance with law and cannot be allowed to put a premium on circumvention of or non-compliance with the requirements of law. Where no fund has been created formally, the provision created to which the gratuity accrued, but no actually paid is transferred and on the basis thereof claim for gratuity is preferred itself amounts to creation of gratuity fund. The reason being that the expression "fund" in the common parlance means accumulation of money for some specific purpose. The expression "fund" used in section 24(g) is to be taken as an ordinary expression and not as a term of art. The rules relating to approved gratuity fund are contained in Part-III of Sixth Schedule to the Income Tax Ordinance, 1979. The term gratuity fund has not been defined in these rules. However, the term "approved gratuity fund" has been defined in section 2(4) of Income Tax Ordinance, 1979, to mean a gratuity fund, which has been and continues to be, approved by the Commissioner in accordance with the rules contained in Part-III of the Sixth Schedule. The expression "approved gratuity fund" has been defined in the Income Tax Ordinance, 1979, but the expression "gratuity fund" has not been defined in the Ordinance or the Rules framed thereunder. The result is that the expression shall not be treated as term of art and is to be given ordinary meaning as is understood in the common parlance. Messrs S.J.G. Fazal Ellahi Limited v. Commissioner of Income-tax, Karachi 1989 PTD 579 and Commissioner of Income-tax Central Zone, Karachi v. Pakistan Security Printing Press Corporation, 1985 PTD 413 ref. Duncan Brothers & Co. Ltd. v. C.I.T. (1978) 111 ITR 885 and Duncan Brothers & Co. Ltd. v. C.I.T. (1981) 128 ITR…

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