Chennai Court June 1985 Judgments

Fourth Income-tax Officer Vs. Canara Finances.

Court: Chennai

Reported in: [1986]17ITD18(Mad)

ORDERPer Shri T. Venkatappa, Judicial Member - The assessee made a provision of gratuity amounting to Rs. 10,115 and debited to the profit and loss account. It was claimed as a deduction. The ITO found that the amount is not due in respect of any retired employees and it has not become payable. It is only a provision made in respect of existing employees who retire later and are eligible for gratuity. Further, no particular gratuity fund as per rules has also been formed and credited this amount therein. Thus, he disallowed the claim of the assessee.2. On appeal, the Commissioner (Appeals) held that the sum of Rs. 10,115 provided for by the assessee is an allowable expenditure. Thus, he allowed the claim.3. Against the same the revenue has preferred his appeal. The leaned departmental representative strongly urged that no gratuity fund as per rules has been formed by the assessee. There is no actuarial valuation. There is no liability for payment of any gratuity this year. Thus, the cl...