Ajit K.Sengupta, J. - (1.) In this reference under Section 256(1) of the Income-tax Act, 1961, for the assessment years 1977-78 to 1979-80, the following question of law has been referred to this court : " Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in holding that there was no scope for the application of Rule 103 of the Income-tax Rules, 1962, in disallowing the contribution to the gratuity fund in excess of 8 1/3 per cent. of the salary of the employees"
(2.) Shortly stated the facts are that in the assessment years 1977-78 to 1979-80, the Income-tax Officer disallowed the amounts of Rs. 10,389, Rs. 21,902 and Rs. 13,819, respectively, being contribution paid to the gratuity fund in excess of 8 1/3 per cent. of the salary of the employees. On appeal, the Appellate Assistant Commissioner was of the opinion that Rule 103 of the Income-tax Rules was not applicable and the entire amount was allowable under Section 40A(7)(b)(i) of the Act. As such, he deleted the disallowance for all the three years. On further appeal by the Department, the Tribunal held that Section 40A(7) of the Act does not apply to the instant case. Regarding the application of Rule 103, the Tribunal made the following observations : " We, however, agree with the Commissioner of Income-tax (Appeals) that there is no scope for the application of Rule 103 of the Income-tax Rules because the provisions of Section 36(1)(v) lays down the condition that the sum must be paid (a) by way of contribution, (b) towards an approved gratuity fund, (c) created by the employer, (d) for the exclusive benefit of his employees under an irrevocable trust. There was no dispute raised by the Department that these conditions were fulfilled by the assessee. The only grievance of the Income-tax Officer was that the contribution paid was in excess of 8 1/3 per cent. of the salary of the employees. But we do not find that the provision of Section 36(1)(v) lay down this extra condition that the contribution cannot exceed 8 1/3 per cent. of the salary of the employees or that it must not exceed a certain percentage of their salaries. When the provision did not envisage any such restriction, We do not think that the Income-tax Officer was entitled to impose any such restriction."
(3.) The Tribunal, therefore, upheld the order of the Commissioner of Income-tax (Appeals).;