TMI Blog2013 (2) TMI 766X X X X Extracts X X X X X X X X Extracts X X X X ..... t these expenses were in respect of electricity and telephone bills for the last month of financial year 2005-06 and which have been paid in the financial year 2006-07 relevant to assessment year under consideration. The assessee is consistently following the system of debiting expenses at the time of crystallization. Neither incurring of expenditure nor the genuineness of expenditure was doubted nor the actual payment during the year under consideration. As the expenditure was crystallized during the year under consideration, we do not find any justification for disallowing expenditure of ₹ 75,616/-. 4. The assessee is also aggrieved for disallowance of contribution of ₹ 55 lakhs to LIC under the head Group Gratuity-cum Lif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing, the fact that gratuity fund established by the assessee was not recognized u/s 40A(7) of the Income-tax Act, 1961. In the decision, the Hon'ble Tribunal held that we have carefully considered the records as well as the arguments. The assessee pays premium on what is known as 'Master Policy' issued by the LIC undertaking to honor the obligations undertaken in the trust deed and the rules of the International Ore and Fertilizer (India) (P) Ltd., Secunderabad, Employees' Group Gratuity Life Assurance Scheme. Copies of the trust deed and the rules were mentioned in the preamble. This Master Policy covers only the employees of the assessee-company unlike the trust which was a common one. In other words, the payment re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in pursuance of the policy issue don the proposal made by the assessee. It is wholly and exclusively for purpose of business as is to safeguard the assessee company from any unexpected or large liability towards gratuity which it might be called upon to meet. Liability for gratuity, though certain, the quantification is a matter of accident. Only retirement on superannuation is predictable while death, incapability, voluntary retirement and resignation are not. It is, therefore, a matter of business expediency that the assessee had taken this policy. In fact, this is a standard policy which a number of employers had availed in order to ensure their ability to meet the obligation. The trust deed becomes part of the policy merely for the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that section 40A(7) is not applicable to the facts of the assessee's case, it is unnecessary to discuss the two authorities cited by the learned Departmental Representative in support of the view that every position has to satisfy the requirements of section 40A(7) it was put on the statute book. While we have no difficulty in accepting this proposition on behalf of the Revenue, we find that it does not help it as section 40A(7) is not attracted at all as the assessee has not made any provision and had only made a payment. Section 40A(7) was introduced with a view to avoid companies from availing the benefit of deduction merely on the basis of provision without any obligation on their part to safeguard their ultimate liability to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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