SENGUPTA, J. - (1.) IN this reference under S. 256 (2) of the IT Act, 1961 ('the Act') for the asst. yr. 1976-77 the following question of law has been referred to this Court: "Whether, on the facts and in the circumstances of the case, the Tribunal was right in not allowing as a deduction the provision for gratuity of Rs. 12,43,059 made by the assessee for contribution to its approved gratuity fund during the previous year relevant to the asst. yr. 1976-77?"
(2.) SHORTLY stated, the facts are that during the year under reference, the assessee claimed the provision for gratuity of Rs.12,43,059. The ITO indicated that the provision made by the assessee was not allowable under S. 40A (7) of the Act. The assessee filed a reply vide letter dt. 19th May, 1978 and stated that if the same is not allowed in 1976-77., the same should be allowed in 1977- 78. The ITO indicated that no finding can be given for the asst. yr. 1977-78 but it was not allowable under S. 40A (7) . Consequently, he did not entertain the claim of the assessee. The ITO did not allow the actual payment made by the assessee to the asst. yr. 1977-78 on the ground that the assessee was following the mercantile system of accounting. The assessee came in appeal before the CIT (A) and urged that the application was filed by the appellant on 14th Nov., 1975 before the CIT. The accounting year of the assessee ended on 30th Sep., 1975. The approval of the CIT was received w.e.f. 14th Nov., 1975 and, therefore, the provision made by the assessee should be allowed. The CIT (A) did not accept the argument of the assessee and, consequently, he confirmed the disallowance. The assessee in the asst. yr. 1977-78 claimed that even the amount was allowable under S. 36 (1) (v) of the Act to which the CIT (A) did not agree. The counsel for the assessee reiterated the arguments made before the CIT (A) and relied on a decision of Chandigarh Bench of the Tribunal and urged that as the previous year of the assessee ended on 30th Sep., 1975 and the fund was approved by the CIT on 14th Nov., 1975,the claim of the assessee should be allowed in 1976-77. Alternatively, it was urged that the actual payment was made in the subsequent year and the fund was also approved by the CIT. Hence, the amount should be allowed in the asst. yr. 1977-78. The Departmental representative relied on Peoples Engg. & Motor Works Ltd. vs. CIT (1981) 130 ITR 174, a decision of the Calcutta High Court and urged that the amount was not allowable in the asst. yr. 1976-77. The assessee was following mercantile system of accounting and, therefore, rightly it was not allowed in the asst. yr. 1977-78.
(3.) AFTER going through the order and hearing both the sides, the Tribunal concluded the matter as under: "11. The previous year of the assessee no doubt ended on 30th Sep., 1975. But however, the fund was approved w.e.f. 14th Nov., 1975. The concession under S. 40A (7) was available only for the asst. yrs. 1973-74 to 1975-76. The assessee has relied on a decision of Chandigarh Bench (supra) . However, this issue has been covered by the decision of the Calcutta High Court in People Engg. and Motor Works Ltd. vs. CIT (1981) 130 ITR 174. Consequently, the claim of the assessee cannot be allowed in the asst. yr. 1976-77". ;