Judgment:
ORDER
On-in application under section 256(1) of the Income Tax Act, 1961, the Tribunal has referred the following questions for the opinion of this court.
1. Common Question in RA Nos. : 420, 421 & 422/JP/1981 :
'Whether on the facts and in the circumstances of the case and the material on record, the assessee is entitled to the deduction of Rs. 1,71,307 (Assessment year 1974-75), Rs. 33,943 (assessment year 1975-76) and Rs. 34,027 (assessment year 1976-77) on account of death-cum-retirement gratuity under section 37 or any other provision of the Income Tax Act, 1961
2. Common in RA Nos. : 420 & 421/JP/1981 :
'Whether on the facts and in the circumstances of the case and the material on record, the assessee is entitled to the deduction of the amounts of Rs. 45,936 (assessment year 1974-75) and Rs. 5,208 (assessment year 1975-76) received from the Salt Department, Government of India as contribution and liability for the amount of pension payable to the retiring persons who were absorbed by the assessee-company as per their service conditions with the Salt Department, Government of India ?'
3. Common Question in RA Nos. : 421/JP/1981 :
'Whether on the facts and in the circumstances of the case the said contribution of Rs. 45,936 (assessment year 1974-75) and Rs. 5,208 (assessment year 1975-76) received by the assessee company from the Salt Department, Government of India, was hit by the provisions of section 40A(7) of the Act ?'
4. Common to RA Nos. 420, 421 & 422/JP/81 :
'Whether on the facts and in the circumstances of the case the assessee is entitled to the deduction as revenue expenditure on pension and interest on pension fund amounting to Rs. 40,283 (assessment year 1974-75), Rs. 42,798 (for assessment year 1975-76) and Rs. 68,496 (assessment year 1976-77) under the Income Tax Act, 1961 ?'
5. RA Nos. 420/JP/1981 :
'Whether on the facts and in the circumstances of the case, the assessee is entitled to the deduction as revenue expenditure of interest paid on gratuity fund amounting to Rs. 1648 under the Income Tax Act, 1961 ?'
6. RA No. 421/JP/1981 :
'Whether on the facts and in the circumstances of the case, the assessee is entitled to the deduction of Rs. 6418 being the amount pertaining to the Provident Fund under the Income Tax Act, 1961
7. RA No. 421/JP/1981 :
'Whether on the facts and in the circumstances of the case, the assessee is entitled to the deduction of the amount of Rs. 12,467 being the contribution payable by the assessee-company to the recognised Provident fund when the same was not paid to the Provident Fund Commissioner, but was kept in the Post Office under the Income Tax Act, 1961 ?'
The assessee M/s. Hindustan Salts Ltd., a company incorporated under the Companies Act. The assessment years involved are 1974-75, 1975-76 and 1976-77. The assessee company is a Public Limited Company and an enterprise of the Government of India prior to 1959. The assessee company was incorporated in the year 1958. It commenced its business with effect from 1-1-1959 with the transfer of the control of salt sources from the Salt Department, Government of India. The staff of the salt sources handed over was also transferred to the company. The assessee company created a Trust on 17-4-1976 w.e.f. 1-10-1975. The Trustees of the Hindustan Salts Limited, Non-pensionable Employees Group Gratuity Fund made an application dated 22-4-1976 to the Commissioner , and Commissioner has approved this fund with effect from 1-10-1975. The assessee has made provisions for gratuity amounting to Rs. 1,71,307 for assessment year 1974-75, Rs. 33,943 for assessment year 1975-76 and Rs. 34,027 for assessment year 1976-77 and claimed deduction on the basis of provisions made. The assessing officer has negatived the claim on the ground that the assessee has not fulfilled the condition laid down in section 40A(7)(b)(ii)(1) of the Act. The actual payment made against the gratuity liability has been allowed. In appeal before the Tribunal, the Tribunal has concluded its finding in Paras 6, 9 and 10 of its order, for ready reference reads as under :
'6. The facts found by the authorities below were not disputed by the learned counsel for the assessee at the time of argument. From the material on record, it is clear that the assessee only made provision for gratuity amounting to Rs. 1,71,307 (Rs. One lakh seventy-one thousand three hundred seven only). Such liability was not actuarially valued. There is no material on record to show that such provision was made towards an approved gratuity fund. There is also no material to show that such contribution towards an unapproved gratuity fund was held under a trust. Even the application for approval of gratuity fund was not given on or before 1-1-1976 as required under the law. On the facts of such facts, the assessee cannot successfully claim the deduction of Rs. 1,71,307.
9. The another alternative contention of the assessee that the claim may be allowed under general provision namely section 37 of the Act, 1961 also can hardly be accepted, for allowing such a claim specific provision has been given in the Act in section 40A(7) of the Act. If the assessee fulfills the conditions laid down in the said provision, then and only then such claim can be allowed. Under the circumstances, the assessee cannot take shelter under general provision namely section 37 of the Act, 1961. It is settled law by now that specific provision overrides the general provision.
10. Looking to the aforesaid facts, in our opinion, the finding of the learned Commissioner (Appeals) is quite correct and no interference is called for.'
The assessing officer has also noticed that during these years assessee has also claimed deduction on the basis of provision made for pension. The Tribunal has concluded in para 16 of its order which reads as under :
'16. ........... In our opinion, the finding of the learned Commissioner (Appeals) will have to be sustained. The learned Commissioner (Appeals) gave a finding holding that in respect of this amount only provision was made and no approved superannuation fund was created. This finding was not challenged before the Tribunal. The condition for approval of superannuation fund has been specified in Schedule 4 Part B. The said condition is available at Page 471 Volume 2 of the Kanga and Palkhiwala. According to section 4 of the said schedule application for approval of a superannuation fund should be given in writing by the trustees of the fund to the Income Tax Officer by whom the employer is assessable and it shall be accompanied by a copy of the assessment under which the fund is established. There is no evidence on record that such approved superannuation found was created in respect of this provision. There is also no material on record that in respect of this amount an irrevocable trust was created. Under the circumstances, it is clear that finding of the learned Commissioner (Appeals) on this point is correct.'
In respect of the pension also the finding of the Tribunal is that though the provision has been made but neither that amount has been contributed in the fund nor the superannuation fund has been created. The deduction has been allowed on the basis of actual payment against the pensionary or superannuation benefits to the employees that has been allowed. The disallowance also has been made to the tune of Rs. 6,418. Assessee has claimed that he has contributed this amount to the Provident Fund Commissioner but Tribunal found that the amount could not be paid to the Provident Fund Commissioner as there was a dispute as to whether Himachal Pradesh falls within the territorial jurisdiction of the Provident Fund Commissioner of Chandigarh or not and there was no Provident Fund Commissioner in the Himachal Pradesh. Therefore there is no question of allowing this amount as revenue expenditure. The assessee has also claimed deduction of Rs. 12,467 on account of contribution made by mandi office which was not paid to the Provident Fund Commissioner but the same was kept in the post office. The Tribunal had disallowed the claim on the ground that unless the amount is contributed to the approved Provident Fund or paid to the employees, that claim of the assessee hit by section 40A(7) of the Act.
Considering the finding of the Tribunal on facts and material on record, in our view finding is not perverse and we find no infirmity in the order of the Tribunal.
In the result we answer question No. 1 that assessee is not entitled for the deduction claimed on account of the provision made for gratuity liability i.e., in favor of the revenue and against the assessee. Similarly we answer question No. 2 in favour of the revenue and against the assessee. Question No. 3 is whether assessee is entitled for deduction of Rs. 45,936 for the assessment year 1974-75 and Rs. 5,208 in the assessment year 1975-76. As assessee has received this amount from the Salt Department, Government of India and that has not been paid either to the employees or not actually deposited in the fund, it cannot be allowed as deduction, it is an income of assessee. In our view there is no infirmity in the order of the Tribunal.
In question No. 4 also as no payment has been paid to the employees nor the superannuation fund has been created, again we answer that assessee is not entitled for the amount of rupees referred in question No. 4. So is the case in question Nos. 5 and 7 that neither the amount has been paid nor contributed in the fund. Assessee is not entitled for deduction of the amount claimed. We answer question Nos. 5 and 7 in favour of the revenue and against the assessee.
In question No. 8, the finding of the fact regarding amount of Rs. 12,467 by the Tribunal is that the amount has not been paid to the Provident Fund Commissioner, but was kept in the post office, assessee cannot claim deduction against the payment of gratuity fund or pension superannuating fund assessee is not entitled for deduction. W find no infirmity in the order of the Tribunal and answer this question in favour of the revenue and against the assessee.
The reference, so made, is disposed of accordingly.