TMI Blog1983 (8) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... tuity Funds Rs. 28,465 We find no substance in the reasoning of the IT authorities. There is an approved gratuity fund. The assessee had made a provision of Rs. 1,41,310 as gratuity to employees. Sec. 36 provides that any sum paid by way of contribution towards an approved gratuity fund is an admissible deduction. There is no limitation prescribed in s. 36 for this expenditure. whatever is paid into the fund is an outgoing and hence an expenditure, because it goes out of the control and domain of the assessee. The assessee cannot get benefit of retention of these funds for his own use, which benefit the assessee gets in cases where mere provision is made in accounts without the creation of any approved fund. Rule 103, which is pressed into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anted recognition to the gratuity fund. This gratuity fund is a staff welfare scheme. The assessee is not bound to create or operate a fund. Regular contribution to the fund is not a compulsory must. The assessee may commit default. There is no provision for recovery and payment into the fund. All these are voluntary activities optional with the assessee. Neither the default nor underpayment is visited with any penalty, except perhaps withdrawal of recognition. Therefore, it is to be noted that these payments are allowed as admissible deductions not on the basis of any statutory of contractual liability but only on the basis of actual payment. The definition paid means also payable in mercantile system, has no application here because, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e employees. So the expenditure is well supported by commercial expediency. There is no extra commercial consideration. The reasoning the CIT (A) is nothing but faulty, and not acceptable to us. So the disallowance is deleted. ITA NO. 990/MDS/82 ASST. YR. 1978-79: 1. Disallowance under s. 40A(5) Rs. 30,090 Same decision as in asst. yr. 1977-78. Ground rejected. 2. Rs. 3,86,515 (Goodwill payment) Ground rejected as liability accrued only outside the accounting year as in asst. yr. 1977-78. 3. Rs. 99,625: Excess contribution towards gratuity The claim is allowed for the same reasons as in asst. yr. 1977-78. 4. Additional ground : Rs. 3,12,745 claimed in asst. yr. 1977-78 and disallowed as it fell outside the accounting year to be al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... continue to maintain industrial peace and discipline. 4. It has been specifically agreed between the parties that this settlement shall not be quoted as precedent by the employees in making future claims and payment of bonus. Dated at Hindupur this 4th October, 1977. Signature of parties: Representing the management; Representing the workmen; 5. We fail to see what more is necessary (other than the reproduction of the terms of settlement) to carry conviction that it is not bonus deductible under s. 36 and that it is a forced payment extracted from out of management by trade union activities and, therefore, well supported by commercial expediency and eligible for deduction under s. 37. So we allow this amount as a deduction in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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