- (1.) Income Tax Appellate Tribunal, Allahabad Bench, Allahabad has referred the following question of law under Section 256(1) of the Income-tax Act, 1961, hereinafter referred to as "the Act", for opinion to this Court. Whether on the facts and in the circumstances of the case the Tribunal was correct in law in holding that the sum of Rs. 32,39,929/- being provision made for retirement gratuity written back in the year under consideration relating to assessment year 1972-73 where it already stood allowed, cannot be taxed by invoking the provisions of section 41(1) of the I.T. Act, 1961? Briefly stated the facts giving rise to the present Reference are as follows: The Reference relates to the Assessment Year 1976-77. The respondent-assessee had filed its return declaring loss of Rs. 73,90,600/- The assessment was, however, completed on the net loss of Rs. 28,54,873/-. While computing the loss the Assessing Officer had made an addition of Rs. 32,39,929/- under Section 41(1) of the Act. It was noticed that the assessee had written back all the gratuity provided in its accounts for the earlier years to the credit of profit and loss appropriation account. Total amount thus credited to profit and loss appropriation account was to the tune of Rs. 81,20,209/--This amount included the amount of Rs. 32,99,929/ - relating to the provision of retirement gratuity made in the Assessment Year 1972-73. This amount was claimed by the assessee before the Income-tax Officer during Assessment Year 1972-73. The Income-tax Officer did not allow the same but on appeal this amount was allowed by the Commissioner of Income-tax (Appeals). Provisions made for subsequent years were not allowed by the Assessing Officer. Thus, the Assessing Officer had noted that out of the provision written back by the assessee in this year only an amount of Rs. 32,39,929/- relating to the Assessment Year 1972-73 stands allowed so far. Therefore, it was held by him that this amount alone satisfies the condition laid down under Section 41(1) of the Act. Feeing aggrieved the assessee preferred an appeal before the Commissioner of Income-tax (Appeals), who vide order dated 22nd December, 1983 had held that Section 41(1) of the Act empowers the Assessing Authority to bring to tax the amount only when deduction is allowed in the past, with respect to some liability which ceases to exist or with respect to which there has been some remission as a result of which the assessee has derived some benefit. In the circumstances of case he held that there was no cessation or remission of the liability and by writing back the amount, no benefit has been derived by the assessee. He, therefore, held that the addition by invoking the provisions of Section 41(1) of the Act cannot be sustained and, therefore, the addition of Rs. 32,99,929/- was deleted. The Revenue feeling aggrieved preferred an appeal before the Tribunal, which confirmed the order of the Commissioner of Income-tax (Appeals).
(2.) We have heard the learned counsel for the parties.
(3.) Learned counsel for the Revenue submitted that as the assessee has written back the amount of gratuity of Rs. 32,39,929/- during the previous year relevant to the assessment year in question, which amount was allowed in the Assessment Year 1972-73, therefore, the Assessing Officer has rightly invoked the provisions of Section 41(1) of the Act by adding back the said amount. Reliance has been placed on a decision of the Apex Court in the case of Polyflex (India) (P.) Ltd. v. CIT, 2002 257 ITR 343 .;