TMI Blog1982 (8) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... atuity fund which was common for the assessee and some of its associate companies. At the time when the assessments were made, the claim for recognition was pending. Meanwhile, the assessee had entered into a contract with the Life Insurance Corporation (LIC) which had agreed to underwrite assessee's obligation to its employees. The same liability which the gratuity fund was obliged to subject itself under this scheme was undertaken by the LIC in consideration of the payment of premium for its Master Policy. This is the premium amount of Rs. 19,569 for the assessment year 1975-76, Rs. 12,366 for the assessment year 1976-77, Rs. 8,983 for the assessment year 1977-78 and Rs. 6,270 for the assessment year 1978-79, which are now in dispute. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ratuity so as to require the compliance under section 40A(7). He claimed that the premium paid will have to be allowed whether the fund created by the assessee is recognised or not. 5. The learned departmental representative claimed that section 40A(7) is a special section and that the requirements thereof will have to be satisfied in case of every payment or provision towards gratuity. In the absence of recognition, he claimed, it was not deductible. According to him, the insurance policy covered only a provision for payment. In this view recognition of the trust fund was necessary. He relied upon the decisions of the Madras High Court in the cases of CIT v. Andhra Prabha (P.) Ltd. [1980] 123 ITR 760 and CIT v. Carborundum Universal Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribution to the trust fund, section 40A(7) would have squarely applied ; in that event, the assessee would have had no case, because the Commissioner has not recognised the trust fund. We, therefore, find that the recognition of the trust fund need not be tied up with the assessee's claim. If the assessee's claim is allowable on merits in law, it will have to be allowed notwithstanding non-recognition of the trust fund. It is, therefore, not necessary for us to go into the question whether the authorities had taken the right view in rejecting the assessee's claim for recognition. In fact, we wonder, whether we have the jurisdiction to go into this question at all. At any rate, we are of the view that the insurance premium is a charge on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... word 'provision'. The Supreme Court had occasion to consider the meaning of the word 'provision' in contradistinction to the word 'reserve' in a surtax case in Vazir Sultan Tobacco Co. Ltd. v. CIT [1981] 132 ITR 559. In the absence of a definition in the statute, it held that the sense of the meaning should be the one that is attributed to it by men of business, trade and commerce. The question of making a provision arises where the payment has not been made. In the assessee's case there is an actual payment and hence, it cannot also be a provision at the same time. The payment, as seen earlier, is towards an obligation to the assessee's employees. It relates to the obligation of the year and, therefore, a rightful charge on the accounts o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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