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Commissioner of Income-tax Vs. Khandelwal Brothers Pvt. Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 442 of 1977
Judge
Reported in(1986)57CTR(Cal)78,[1986]158ITR207(Cal)
ActsWest Bengal Employees Payment of Compulsory Gratuity Act, 1971
AppellantCommissioner of Income-tax
RespondentKhandelwal Brothers Pvt. Ltd.
Appellant AdvocateA.N. Bhattacharjee, Adv.
Respondent AdvocateR.N. Bajoria, Adv.
Excerpt:
- dipak kumar sen, j. 1. khandelwal bros. pvt. ltd., the assessee, was assessed to income-tax for the assessment year 1971-72, the corresponding accounting year ending on october 29, 1970. in its return, the assessee sought to provide for a sum of rs. 80,000 on account of gratuity. the income-tax officer disallowed the claim for deduction of the said amount on the ground that it was only a contingent liability. on appeal, the appellate assistant commissioner upheld the decision of the income-tax officer.2. on a further appeal by the assessee, the tribunal accepted the asses-see's contentions and allowed the deduction claimed.3. on an application by the revenue under section 256(1) of the income-tax act, 1961, the following question stated to be a question of law, has been referred to this.....
Judgment:

Dipak Kumar Sen, J.

1. Khandelwal Bros. Pvt. Ltd., the assessee, was assessed to income-tax for the assessment year 1971-72, the corresponding accounting year ending on October 29, 1970. In its return, the assessee sought to provide for a sum of Rs. 80,000 on account of gratuity. The Income-tax Officer disallowed the claim for deduction of the said amount on the ground that it was only a contingent liability. On appeal, the Appellate Assistant Commissioner upheld the decision of the Income-tax Officer.

2. On a further appeal by the assessee, the Tribunal accepted the asses-see's contentions and allowed the deduction claimed.

3. On an application by the Revenue under Section 256(1) of the Income-tax Act, 1961, the following question stated to be a question of law, has been referred to this court for its opinion :

'Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the sum of Rs. 80,000 representing a provision for gratuity was an allowable deduction in computing the profits and gains of the assessee's business ?'

4. It appears and has been noted in the order of the Tribunal that the West Bengal Employees' Payment of Compulsory Gratuity Act, 1971, came into force from June, 1971. As such, there was no statutory liability of the assessee to make any provision for gratuity in the year involved. On this ground, the decision of the Income-tax Officer and the Appellate Assistant Commissioner was sought to be justified before the Tribunal. The Tribunal has not specifically dealt with this contention. Where the liability on account of gratuity is statutory, a provision for the same can be claimed and allowed as a deduction. This has been decided by this court in CIT v. Eastern Spinning, Mills Ltd. : [1980]126ITR686(Cal) . But the said decision will apply in an assessment year when the statute is in force. This is not the case before us.

5. For the above reasons, we answer the question in the negative and in favour of the Revenue holding that the said amount of Rs. 80,000 was not an allowable deduction in the assessment year involved but may be allowed as a deduction in the assessment year in which the statute came into force.

6. There will be no order as to costs.

G.N. Ray, J.

7. I agree.


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