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Addl. Commissioner of Income-tax Vs. Madho Mahesh Sugar Mills - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 513 of 1974
Judge
Reported in[1978]114ITR432(All)
ActsIncome Tax Act, 1961 - Sections 28 and 36(1)
AppellantAddl. Commissioner of Income-tax
RespondentMadho Mahesh Sugar Mills
Appellant AdvocateAshok Gupta, Adv.
Respondent AdvocateV.P. Misra, Adv.
Excerpt:
- .....the assessee is entitled to claim deduction in respect of contribution made by it to its own gratuity fund, which admittedly was not one of the approved gratuity funds spoken of under section 36(1)(v) of the income-tax act, 1961 ?2. the tribunal held that the assessee was entitled to claim deduction. this question is no longer res integra. this court in madho mahesh sugar mills v. commissioner of income-tax [1973] 92 itr 503 has held that contribution towards gratuity fund was a permissible business expenditure. for the department it was contended that the payment of gratuity is provided for in clause (v) of sub-section (1) of section 36 of the income-tax act, 1961, and it can only be allowed in accordance with that provision. this contention was answered by holding that the said.....
Judgment:

Satish Chandra, J.

1. The question of law on which the Tribunal has solicited our opinion is whether the assessee is entitled to claim deduction in respect of contribution made by it to its own gratuity fund, which admittedly was not one of the approved gratuity funds spoken of under Section 36(1)(v) of the Income-tax Act, 1961 ?

2. The Tribunal held that the assessee was entitled to claim deduction. This question is no longer res integra. This court in Madho Mahesh Sugar Mills v. Commissioner of Income-tax [1973] 92 ITR 503 has held that contribution towards gratuity fund was a permissible business expenditure. For the department it was contended that the payment of gratuity is provided for in Clause (v) of Sub-section (1) of Section 36 of the Income-tax Act, 1961, and it can only be allowed in accordance with that provision. This contention was answered by holding that the said case was not covered by Section 36(1)(v) which permits deduction out of the gross profits of any contribution made by an employer towards gratuity fund created under a trust. In the present case the amount is deductible in the computation of the gross profit itself. In other words, the amount was already deductible under Section 28 while computing the gross profits, even if it may not be a permissible deduction under Section 36(1)(v) of the Act. The same view has been taken by the Bombay High Court in Tata Iron & Steel Company Ltd. v. D.V. Bapat, Income-tax Officer : [1975]101ITR292(Bom) , in which reference has been made to an earlier decision of the Delhi High Court in Delhi Flour Mills Co. Ltd. v. Commissioner of Income-tax : [1974]95ITR151(Delhi) .

3. We have heard learned counsel, but we are not disposed to take adifferent view. In this view, the questions referred to us are answered infavour of the assessee and against the department. The assessee will beentitled to costs which we assess at Rs. 200.


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