Commissioner of Income-tax Vs. Textool Co. Ltd. - Court Judgment

SooperKanoon Citationsooperkanoon.com/832068
SubjectDirect Taxation
CourtChennai High Court
Decided OnFeb-04-2002
Case NumberTax Case No. 267 of 1989
JudgeV.S. Sirpurkar and ;K. Ravirajapandian, JJ.
Reported in[2002]257ITR39(Mad)
ActsIncome-tax Act, 1961 - Sections 36(1)
AppellantCommissioner of Income-tax
RespondentTextool Co. Ltd.
Appellant AdvocateChitra venkatraman, Adv.
Respondent AdvocateP.P.S. Janardhana Raja, Adv.
Excerpt:
- v.s. sirpurkar, j. 1. the question referred to us is as follows :'whether, on the facts and in the circumstances of the case, the appellate tribunal is right in allowing the deduction of rs. 55,84,754 being the payment made by the assessee-company directly to the lic towards group gratuity fund under section 36(1)(v) of the income-tax act, 1961 ?'2. it seems that the assessee-company had made this payment to the life insurance corporation of india (in short 'lic') as the said sum was insured by the lic. there is no denial that the textool company employees group gratuity fund is a duly approved gratuity fund created for the exclusive benefit of the employees of the said company and that it is also an irrevocable trust. it also could not be denied that the payments were made by the assessee-company directly to the lic instead of a contribution towards the approved gratuity fund. however, the lic had accepted the payment as on behalf of the group gratuity life assurance scheme which was meant for the exclusive benefit of the employees under the policy issued by the lic. even the original master policy was produced before the authority and after going through the said policy, the authority had recorded its suggestion that the initial contribution of rs. 50 lakhs as also the premium of rs. 5,57,943 was paid on behalf of the assessee and was credited to the group gratuity life assurance scheme on behalf of the assessee-company's group gratuity fund only.3. this is what the commissioner of income-tax (appeals) has recorded in his order.'in other words, the insurance policy had been taken in the name of the approved gratuity fund only and this fund is also shown as the payee in the policy. it is also confirmed by the appellant-company in its letter dated november 20, 1985, addressed to the inspecting assistant commissioner that in the subsequent assessment years, the company had contributed funds to the employees group gratuity fund and the trustees in turn had made payment to the lic in respect of the textool co. ltd. employees group gratuity assurance scheme under the master policy no. ggi 42365. only the initial payment and first annual premium had been made directly by the appellant-company to the lic towards the said policy.'4. from this, the commissioner of income-tax (appeals) came to the conclusion that this payment was well covered within the language of section 36(1)(v) and to hold that merely because the payment was made directly to the lic, the section was violated would be making violence to the language of the section and in the process losing the real intent on the part of the legislature. ultimately, the commissioner of income-tax (appeals) has specifically recorded as follows :'even the assessing officer does not appear to deny that the contribution in the instant case amounting to rs. 55,84,754 is positively towards the approved gratuity fund. on the facts the contribution cannot be linked to any other fund or scheme. even the lic has received the payment by way of premium for the policy issued under its group life assurance scheme for the benefit of the employees of the textool company ltd.'5. on these findings, ultimately, the commissioner of income-tax (appeals), relying on the supreme court judgment in cit v. j.h. gotla came to the conclusion that the credit had to be given to the assessee for the aforementioned amount. the appellate tribunal also went on to endorse this view.6. in our opinion, the commissioner of income-tax (appeals) as well as thetribunal have correctly held that merely because the payments were madedirectly to the lic, the company could not be denied the benefit under section 36(1)(v) and the amount had to be credited in favour of the assessee. both thecommissioner (appeals) as well as the tribunal have correctly read the lawand have correctly relied upon the aforementioned supreme court judgment.in our opinion, since the finding of fact is that all the payments made wereonly towards the group gratuity fund, there would be no question of findingotherwise. therefore, it will have to be answered that the tribunal was rightin allowing the deduction of rs. 55,84,754 being the payment made by theassessee-company directly to the lic towards the group gratuity fund under section 36(1)(v) of the income-tax act. the reference is answered accordinglyin favour of the assessee.
Judgment:

V.S. Sirpurkar, J.

1. The question referred to us is as follows :

'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in allowing the deduction of Rs. 55,84,754 being the payment made by the assessee-company directly to the LIC towards group gratuity fund under Section 36(1)(v) of the Income-tax Act, 1961 ?'

2. It seems that the assessee-company had made this payment to the Life Insurance Corporation of India (in short 'LIC') as the said sum was insured by the LIC. There is no denial that the Textool Company Employees Group Gratuity Fund is a duly approved gratuity fund created for the exclusive benefit of the employees of the said company and that it is also an irrevocable trust. It also could not be denied that the payments were made by the assessee-company directly to the LIC instead of a contribution towards the approved gratuity fund. However, the LIC had accepted the payment as on behalf of the Group Gratuity Life Assurance Scheme which was meant for the exclusive benefit of the employees under the policy issued by the LIC. Even the original master policy was produced before the authority and after going through the said policy, the authority had recorded its suggestion that the initial contribution of Rs. 50 lakhs as also the premium of Rs. 5,57,943 was paid on behalf of the assessee and was credited to the Group Gratuity Life Assurance Scheme on behalf of the assessee-company's group gratuity fund only.

3. This is what the Commissioner of Income-tax (Appeals) has recorded in his order.

'In other words, the insurance policy had been taken in the name of the approved gratuity fund only and this fund is also shown as the payee in the policy. It is also confirmed by the appellant-company in its letter dated November 20, 1985, addressed to the Inspecting Assistant Commissioner that in the subsequent assessment years, the company had contributed funds to the employees group gratuity fund and the trustees in turn had made payment to the LIC in respect of the Textool Co. Ltd. Employees Group Gratuity Assurance Scheme under the master policy No. GGI 42365. Only the initial payment and first annual premium had been made directly by the appellant-company to the LIC towards the said policy.'

4. From this, the Commissioner of Income-tax (Appeals) came to the conclusion that this payment was well covered within the language of Section 36(1)(v) and to hold that merely because the payment was made directly to the LIC, the section was violated would be making violence to the language of the section and in the process losing the real intent on the part of the Legislature. Ultimately, the Commissioner of Income-tax (Appeals) has specifically recorded as follows :

'Even the Assessing Officer does not appear to deny that the contribution in the instant case amounting to Rs. 55,84,754 is positively towards the approved gratuity fund. On the facts the contribution cannot be linked to any other fund or scheme. Even the LIC has received the payment by way of premium for the policy issued under its Group Life Assurance Scheme for the benefit of the employees of the Textool Company Ltd.'

5. On these findings, ultimately, the Commissioner of Income-tax (Appeals), relying on the Supreme Court judgment in CIT v. J.H. Gotla came to the conclusion that the credit had to be given to the assessee for the aforementioned amount. The Appellate Tribunal also went on to endorse this view.

6. In our opinion, the Commissioner of Income-tax (Appeals) as well as theTribunal have correctly held that merely because the payments were madedirectly to the LIC, the company could not be denied the benefit under Section 36(1)(v) and the amount had to be credited in favour of the assessee. Both theCommissioner (Appeals) as well as the Tribunal have correctly read the lawand have correctly relied upon the aforementioned Supreme Court judgment.In our opinion, since the finding of fact is that all the payments made wereonly towards the group gratuity fund, there would be no question of findingotherwise. Therefore, it will have to be answered that the Tribunal was rightin allowing the deduction of Rs. 55,84,754 being the payment made by theassessee-company directly to the LIC towards the group gratuity fund under Section 36(1)(v) of the Income-tax Act. The reference is answered accordinglyin favour of the assessee.