9911796707
TMI Blog1987 (4) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... he company. The case of the petitioner as disclosed in the complaint is that accused Nos. 1 to 5 created an approved gratuity fund and named it as "Associated Traders and Engineers Employees' Gratuity Fund " and in compliance with the provisions of section 40A(7) of the Income-tax Act, opened an account with the Andhra Bank, Asaf Ali Road, New Delhi. Accused Nos. 1 to 6, however, never deposited the amount of the fund in the post office savings bank account or as prescribed under rule 67(1) and (2) of the Income-tax Rules. The accused thus knowingly and intentionally contravened the terms of the irrevocable trust. It is his further case that the gratuity amount deposited in the approved gratuity fund belongs to the employees of the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Furthermore, the gratuity fund amount shown in the balance-sheet only indicates the liability of the company towards its employees to that extent. It is not a circumstance to prove that the accused have either violated the provisions of the trust or the obligations arising under the Income-tax Rules. On these findings, the complaint was dismissed. It is against this order that the complainant has filed the present petition. The first and the foremost contention of learned counsel for the petitioner is that at the stage of consideration whether or not to issue process, the court below was required to see, as to whether the facts disclosed in the complaint as well as the evidence led in support of the same are sufficient to initiate proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that property or converted it to its own use ; or (b) used or disposed of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged; or (c) used or disposed of the property in violation of any legal contract (express or implied) which he has made touching on the discharge of such trust; or (d) wilfully suffered any other person so to do. 3. Such misappropriation or user or disposal must be dishonest or such sufferance must be wilful." In the absence of proof of entrustment of property or dominion over the property of another, this section will not apply. Similarly, in the absence of proof of dishonest intention, the rigour of this section will not be attracted. In this vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olling authority has to decide it. The Gratuity Act is a complete code by itself. The liability to pay the gratuity arises only after retirement or death and it is the responsibility of the employer to find the money and pay the same. The employer is within its right to create a fund or take out an insurance policy with a view to lessen its burden for arranging funds at the time the gratuity is to be paid to its employees. In this fund, if created, the money is contributed by the company only and no person has any right or interest in it : there is no entrustment at all. For claiming deductions of gratuity amount out of the income, the provisions of section 40A(7) of the Income-tax Act and rule 106 of the Income-tax Rules come into play ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of provident fund, the employees have also to contribute a certain amount every year in addition to what the employer contributes. In the case of gratuity, no amount is contributed by an employee, and it becomes payable only on retirement or death, etc. Gratuity can be forfeited in certain eventualities. No employee, however, has any right or interest in any account or fund whatsoever even if created. The question of protection of interest of any one under these circumstances does not arise and the provisions of section 418 are not attracted. There being no entrustment nor any evidence of the conversion of the fund by the company for its own use, or towards other purposes, the provisions of section 406 are also not attracted. Both these ..... X X X X Extracts X X X X X X X X Extracts X X X X
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