- (1.) The Income-tax Appellate Tribunal, New Delhi, 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 facts and in the circumstances of the case, the learned Income-tax Appellate Tribunal was legally correct in upholding the provisions of Section 40A(7) applicable in the assessee's case even though the assessee has claimed unascertained liability being provision only not actually paid ?
(2.) The present reference relates to the assessment years 1984-85, 1985-86, 1986-87 and 1988-89.
(3.) Briefly stated the facts giving rise to the present reference are as follows: In respect of the aforementioned assessment years the respondent-assessee claimed deduction in respect of the amount paid to the Life Insurance Corporation of India under the Group Gratuity-cum-Life Insurance Scheme on the terms settled between the Life Insurance Corporation and the respondent-assessee for gratuity payable to the employees on their retirement, death or their leaving the service. The Assessing Officer in view of the provisions of Section 40A(7) of the Act disallowed the contribution on the ground that the funds were not paid to a recognised gratuity fund. However, in appeal the appellate authority has allowed the deduction on the ground that the contribution made by the respondent-assessee was not towards gratuity but as premium paid to the Life Insurance Corporation for insurance of life which order has been upheld by the Tribunal.;