- (1.) These three Income Tax References, in between the same parties, being interconnected and arising out of the one single assessment year 1973-74, are being decided by this common order for the sake of convenience.
(2.) The questions in all the three references No.24/1986, 8/2003 & 1/2005 are reproduced here as under:- Questions in DB ITR No.24/1986:- "(1)Whether the Tribunal was justified in holding that the AAC was competent to decide the appeal of the assessee against the original order of assessment dated 11.3.74 even after that order had been set-aside for being made afresh by the CIT's order u/s 263 dated 19.2.1975 ? (2)Whether the Tribunal was justified in holding that the assessee was entitled to deduction u/s 40A(7) of the I.T.Act in respect of provision for gratuity pertained to earlier years but was provided in the accounts in the year relevant to assessment year 1973-74." Questions in DB ITR No.8/2003:- "(1)Whether on the facts and circumstances of the case the Tribunal was justified in holding that the AAC was competent to decide the appeal of the assessee against the original order of assessment dated 11.3.1974, even though the same has been set aside under Sec. 263 of the I.T. Act, 1961 for making the fresh assessment ? (2)Whether on the facts and the circumstances of the case the Tribunal was justified in holding that the assessee was entitled to deduction under section 40A(7) of the Act in respect of the provisions for granting liability amounting to Rs.35,40,328/- which pertains to earlier years was provided in the accounts in the relevant years ? (3)Whether on the facts and the circumstances of the case the Tribunal was justified in holding that the assessee was entitled to deduction under Section 40A(7) of the I.T. Act 1961 in respect of the full amount of provision for gratuity liability amounting to Rs.51,18,074/- standing in the accounts of the assessee as on the last day of the relevant accounting year out of which an amount of Rs.48,17,760/- only had been provided during the relevant accounting year and had been claimed in the return of income, the balance having been provided in the preceding accounting year. ? (4)Whether on the facts and the circumstances of the case the Tribunal was justified in holding that the AAC was right in allowing the deduction of Rs.38,844/- representing the accrued gratuity liability in respect of temporary workers which had neither been provided in the accounts by way of provision nor claimed before the ITO ? (5)Whether on the facts and the circumstances of the case the Tribunal was justified in holding that the AAC was right in allowing the deduction for Rs.Rs. 12,843/- representing the gratuity actually paid during the year, which had not been disallowed by the ITO in the assessment year at all. " Questions in DB ITR No.1/2005:- "Whether on facts and in the circumstances of the case, the Tribunal was justified in upholding the order of the AAC allowing extra claim of Rs.1,28,622/- on account of gratuity liability in the year under consideration?"
(3.) Though by three references, the matter has been referred to this Court for answering the questions as aforesaid but in our view, the question revolves as to claim made by the assessee about an amount of Rs.48,19,425/- which was the liability for gratuity as the assessee maintains books of account on mercantile basis. It made provision in view of the "Payment of Gratuity Act, 1972" which came into force w.e.f. 15/09/1972 and during the course of disposal of the appeals, Section 40A(7) was brought in by the Finance Act, 1975 with retrospective effect from 01/04/1973. Out of Rs.48,19,425/- it was claimed by the assessee that Rs.12,77,432/- pertained to gratuity liability of the previous year relevant to the assessment year 1973-74 while the claim of liability to the extent of Rs.35,41,993/- was a provision made of the past liability as per Payment of Gratuity Act, 1972 and later on as per Section 40A(7) effective from 01/04/1973. The Assessing Officer (for short, 'AO') vide order dt. 11/03/1974 allowed an amount of Rs.12,77,432/- but disallowed and added back the amount of Rs.35,41,993/- by holding that since it was a provision only, relatable to earlier years and thus not allowable.;