TMI Blog1989 (2) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... 1976-77, the assessee made a provision of Rs. 5,666 towards gratuity which may be found payable in future to its employees and during the assessment, claimed deduction of the same. The Income-tax Officer did not allow deduction as there was no liability for the payment of gratuity during the accounting year, nor had an approved gratuity fund been created. The order was upheld by the Appellate Assi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 40A(7)(a) of the Act provides that no deduction shall be allowed in respect of any provision made by the assessee for the payment of gratuity to its employees on their retirement or on termination of their employment but this is subject to the provisions of clause (b). Clause (b) falls for our determination and the relevant portion of the same deserves to be reproduced: "(b) Nothing in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity created during the previous year so as to make a provision for payment of gratuity. Both the ingredients being absent in this case, deduction could not be allowed. The view we have taken finds support from a decision of the apex court in Shree Sajjan Mills Ltd. v. CIT [1985] 156 ITR 585 (SC). The relevant observations are as follows (headnote): "The embargo under clause (a) is on deduction o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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