- (1.) ON an application filed under Section 256(1) of the Income-tax Act, 1961, the Tribunal has referred the following question : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 25,875 paid as gratuity to Shri G. P. Periwal, former sales manager of the assessee, was not admissible as business expenditure ?"
(2.) DURING the course of assessment, the Assessing Officer noticed that the assessee has paid Rs. 25,875 as gratuity to one Shri G. P. Periwal, sales manager of the assessee, and claimed deduction. The Assessing Officer, rejected the claim on the ground that there is no practice nor is there any law nor there is any justification for making payment of gratuity to Mr. Periwal. The view taken by the Assessing Officer has been affirmed by the Commissioner of Income-tax (Appeals) and the Tribunal has also affirmed the view taken by the Commissioner of Income-tax (Appeals). Heard learned counsel for the parties. Mr. Agarwal, learned counsel for the assessee, submits that in view of Clause (xxiii) of the memorandum and articles of association of the Rajasthan Central Stores Private Ltd., the payment made to the ex-employee of the assessee should be allowed. The relevant Clause (xxiii) reads as under : "To grant pensions, allowances, gratuities and bonuses to employees or ex-employees of the company or its predecessors in business or the dependents of such persons and to support or subscribe to any charitable or other institution, clubs, societies or funds." It is true that there is a provision in the memorandum and articles of association of the Rajasthan Central Stores Private Limited company to provide pension but there is no practice to pay pension to the employee nor there is any statute under which the pension has been paid. While considering the facts of the case in hand, the Tribunal has considered all aspects of the matter and also the relevant facts for the purpose of allowance of the gratuity amount. The relevant facts found by the Tribunal read as under : "There is no practice of making payment of gratuity to the retiring persons as it has never been paid to any of its employees who left the services of the company. There is no evidence on record to show that there was any expectation by the employee of getting a gratuity because of lesser quantum of salary was accepted earlier. There is nothing on record to show that such a gratuity was payable in accordance with the terms and conditions of service of Shri G. P. Periwal. It has also not been brought on record on behalf of the assessee that this gratuity was payable under any statute. The contention has been that the gratuity has been paid as a matter of commercial expediency because of meritorious and vast experience of Mr. Periwal. We have already said earlier that the employee could be rewarded for meritorious service by way of gratuity, if salary was paid to him at lower rate and the employee was in expectation of such a payment at retirement. No evidence has been brought on record so as to justify the payment."
(3.) CONSIDERING the above finding of facts of the Tribunal that there is no practice of making payment of gratuity nor there is any statute under which gratuity is payable to the employee nor salary was low for the purpose of payment of gratuity, therefore, there is no expectation of the employee for the payment of gratuity. There is no material on record to show that the amount of gratuity has been paid to any other employee. In view of the above facts, no case is made out for making payment of gratuity to the employee. In the result, we answer the question in favour of the Revenue and against the assessee. ;