TMI Blog1996 (11) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... ules, 1962, read with section 36(1)(v) of the Income-tax Act, 1961, the Appellate Tribunal was right in holding that the sum of Rs. 65,499 representing the difference between the actual payment made to the approved gratuity fund towards initial contribution and the actuarial liability for the same should be allowed as a deduction while computing the income of the assessee for the assessment year 1973-74 ?" The assessee is a company in which the public are not substantially interested. At the time of completion of the original assessment of the assessee relating to the assessment year 1973-74, the assessee made a claim of Rs. 1,93,756 being the initial contribution to an approved gratuity fund, calculated at 15 days salary for each year of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to an approved fund, would have application only with reference to the approval to be given to the gratuity fund and that once approval is given to the fund, there is no need to restrict the claim in terms of rule 104 while allowing the same under section 36(1)(v) of the Act. Thereupon, the Department preferred an appeal to the Tribunal. The Tribunal held that its earlier understanding of the point in dispute, viz., that the claim of the assessee fell within the ambit of section 40A(7) of the Act was wrong. It further held that the initial contribution made by the assessee was found by the Commissioner of Income-tax (Appeals) to be within the limits prescribed under rule 104 of the Income-tax Rules and if the assessee bona fide set apar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein on similar facts, this court held that payment of gratuity actually made to the approved gratuity fund was the expenditure incurred for the purpose of business in the year in which the payment was made and allowable under section 37 of the Act. Even after the introduction of the provision of section 40A(7) in the Act in 1973, there is no change in the legal position so far as the actual payment of gratuity is concerned. Hence, the actual payment towards gratuity liability is allowable in the year in which it is paid. So also the payment on the basis of the actuarial valuation towards approved gratuity fund is allowable as a deduction under section 36(1)(v) of the Act. Accordingly, there is no infirmity in the order passed by the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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