- (1.) ON an application under S. 256(1) of the IT Act, 1961, the Tribunal has referred the following question for the opinion of this Court. "Whether, on the facts and in the circumstances of the case, the Tribunal was right in deleting the disallowance of Rs. 83,662 representing the gratuity claim of the assessee only to the extent of Rs. 38,688 ?"
(2.) THE assessee has declared an income of Rs. 72,990. The relevant assessment year is 1974-75. During the course of assessment, AO has noticed that assessee has made the provision on account of the gratuity liability and claimed deduction of Rs. 83,662. The AO further noticed that the assessee's liability for gratuity on the basis of actuarial valuation certificate as on 31st Dec., 1973, and 31st Dec., 1972, was Rs. 2,65,850 and Rs. 1,82,153 respectively. The difference of that amount comes to Rs. 83,662 that was the provision to be made in this year. The provision for gratuity liability up to the asst. yr. 1975-76 came out of Rs. 3,51,909,50 per cent of that amount he was supposed to deposit in the gratuity fund account by 31st March, 1976. But the assessee has paid only Rs. 46,000 in the said account by 31st March, 1976. Therefore, the payment in gratuity fund is only about 13 per cent of Rs. 83,622 i.e., Rs. 10,876 can be considered for allowing the deduction. The balance can be considered for maximum to the tune of 50 per cent of Rs. 83,662 i.e., Rs. 41,831 provided by the assessee and assessee was expected to pay 50 per cent of the amount of Rs. 3,51,909 i.e., Rs. 1,75,955. The AO has also noticed that the fund has not been recognised by the CIT, no deduction can be allowed. If the gratuity fund is recognised, Rs. 10,876 would be allowed under S. 154 and Rs. 41,831 also be allowed under S. 154 provided the assessee makes the payment amounting to Rs. 1,75,955 to the gratuity fund account by 31st March, 1977. As assessee has failed to satisfy the conditions laid down in S. 40A(7) of the IT Act, 1961, the assessee is not entitled to any deduction in regard to the provisions of gratuity. Thus, the AO has negatived the claim of the assessee regarding deduction on account of provision made for gratuity liability.
(3.) IN appeal before the CIT(A), CIT(A) has also concurred with the view taken by the ITO. In appeal before the Tribunal, the Tribunal has given the relief on the basis of surplus amount Rs. 19,344 which was found on the basis of contribution till 31st March, 1976, made by the assessee to the fund after giving the benefit of that amount, the Tribunal has deducted that allowed deduction of Rs. 38,688.;