TMI Blog1980 (8) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... oreign company carrying on insurance business in India. It was taken over by the Govt. of India with all its assets and liabilities with effect from January 1, 1973. The assessment year involved is 1972-73, the corresponding accounting period having ended on December 31, 1971. The total income was computed at Rs.21,42,130 after disallowing Rs. 1,79,413 provided in the accounts by way of " pension provision ". The assessee felt aggrieved and submitted an appeal before the AAC, regarding the disallowance of a sum of Rs. 1,31,279 in computing its total income for the relevant assessment year. The amount of Rs. 1,31,279 was the sum determined on actuarial valuation as a liability for pension to the employees under a scheme drawn up by the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the earlier year are Rs. 8,67,968, Rs. 5,38,152 and Rs. 3,50,364 as reduced by Rs. 20,548, respectively, for discounted value of pensions to existing pensioners and the discounted value of prospective pensions to active staff and discounted value of annual contribution of 20% of expected future salaries. The difference between the two amounts of Rs. 9,99,247 and Rs. 8,67,968 has been claimed by the assessee for deduction during the relevant year. It is an admitted fact that there was no trust and the amount represented unfunded contribution." Thereafter, referring, to the relevant decisions, the Tribunal observed that, in the instant case before them, the amount provided during the year was the discounted value of pension to the exis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcessive and unreal and the provision made was a permissible deduction in computing the true profit of the assessee-company and, therefore, the Tribunal was justified in holding that the provision for gratuity was allowable in its entirety as a revenue deduction. Our attention was drawn to the decision of the Madras High Court in the case of CIT v. Andhra Prabha P. Ltd. [1980] 123 ITR 760. There it was held that if the provision for making payment of gratuity was based on legal and scientific basis the assessee was entitled to the deduction. In this case, as the persons in respect of which provision had been made had already retired, there was an existing liability under the terms of their employment agreed with them and if an existing li ..... X X X X Extracts X X X X X X X X Extracts X X X X
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