Satish Chandra, J. - The question of law on which the Tribunal has solicited our opinion is whether the assessee is entitled to claim deduction in respect of contributions made by it to its own gratuity fund which admittedly was not one of the approved gratuity funds spoken of under S. 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 loner res-integra. This Court in M. M. Sugar Mills vs. Commissioner of Income-tax 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-S. (1) of S. 36 of the Income-tax Act 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 S. 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 and Steel Company Ltd. vs. Income-Tax Officer in which reference has been made to an earlier decision of the Delhi High Court in Delhi Flour Mills vs. Income-tax Officer.
3. We have heard learned counsel, but we are not disposed to take a different view. In this view, the questions referred to us are answered in favour of the assessee and against the Department. The assessee will be entitled to costs which we assess at Rs. 200/-.