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TMI Blog2025 (3) TMI 1285X X X X Extracts X X X X X X X X Extracts X X X X ..... er the provisions of Section 40(A)(7)(b) of the Act. He was however of the view that though the narration in the schedules to the balance-sheet and profit and loss account stipulated that the amount was towards gratuity, it was only a provision. 3. Hence, the claim was hence hit by the provisions of Section 43B of the Act which requires certain claims to be allowed only on the basis of actual payment. The provision was thus disallowed and the amount of Rs.31,24,172/- added back to total income. 4. In appeal before the Commissioner of Income-Tax Appeals (CIT(A)), assailing the aforesaid disallowances amongst others, the assessee adopted the stand that the provisions of Section 40(A)(7)(b) would override all other provisions of the Act including Section 43B, being a specific provision. The CIT(A) allowed the appeal vide order dated 29.03.2012. In doing so, he takes note of the order of the CIT(A) in this assessee's case for the immediately preceding assessment year, AY 2007 - 08, where too the stand of the assessee had been accepted. 5. As against the above order, the Revenue filed an appeal before the Income Tax Appellate Tribunal ('Tribunal' / 'ITAT'). The specific ground raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent would defend the order of the Tribunal arguing that the claim was liable to be rejected as it is the provisions of Section 43B that would prevail. The specific argument advanced by the Departmental Representative (DR) before the Tribunal had been that there was no material on record to indicate that the assessee had effected payments to LIC either during the relevant previous year or before the due date for filing return of income. 10. Thus, according to the DR, the stipulations both under Sections 40A(7) as well as 43B were to be satisfied for the reason that, admittedly, the claim made by the assessee was only in relation to a provision, and there was nothing on record to establish that it had actually been paid. Learned Standing Counsel relies on the decision of the Patna High Court in Bihar State Warehousing Corporation Limited vs Commissioner of Income Tax 1 Patna [ 2016 (7) TMI 940]. 11. Before adverting to the relevant facts in the matter, particularly in relation to the contribution towards gratuity, we proceed to discuss the cases cited by the parties, advert first to the case cited by learned Standing Counsel and decide the legal issue. The facts arising in this ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the computation of income under the head "Profits and gains of business or profession". .... (7)(a) No Subject to the provisions of clause (b), no deduction shall be allowed in respect of any provision (whether called as such or by any other name') made by the assessee for the payment of gratuity to his employees on their retirement or on termination of their employment for any reason. (b) Nothing in clause (a) shall apply in relation to any provision made by the assessee for the purpose of payment of a sum by way of any contribution towards an approved gratuity fund, or for the purpose of payment of any gratuity, that has become payable during the previous year. . . . . " 18. Clause (a) of Section 40A(7) states that no deduction shall be allowed in respect of any provision made by the assessee for the payment of gratuity to their employees on their retirement or on termination. Clause (b) carves out an exception to the stipulation under clause (a), to the extent of a contribution made towards an approved gratuity fund or for the purpose of payment of any gratuity that has become payable during the previous year. 19. Section 43B too commences with a non obstante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al one). This means that where the literal meaning of the general enactment covers a situation for which specific provision is made by another enactment contained in an earlier Act, it is presumed that the situation was intended to continue to be dealt with by the specific provision rather than the later general one (Benion: Statutory Interpretation p. 433-34). 24. The Rule that a general provision should yield to specific provision springs from the common understanding that when two directions are given one encompassing a large number of matters in general and another to only some, the latter directions should prevail as being more specific in nature. Section 40A has been inserted by the Finance Act, 1968 with effect from 01.04.1968 whereas Section 43B has been inserted later vide Finance Act, 1983 with effect from 01.04.1984. 25. One of the parameters to determine priority of one legislation / provision over the other, is as to which was the later provision and the general understanding is that the later would prevail. However, in the present case, the provisions of Section 40(A)(7), particularly clause (b) are specific to a claim of deduction based on a provision for payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or our conclusion at paragraph 20 supra, in the observations of the Delhi Court above to the effect that a specific provision such as Section 40A(7)(b) will take precedence over 'a comparatively general provision like Section 43B'. 31. In fact, the issue has been more or less answered by the Supreme Court in the case of Shasun Chemicals (supra), where the interplay between Sections 43B and Section 40A(9) is noted. The provisions of Section 43B mandate that certain deductions would be allowed only on actual payments. 32. Section 40A(9) states that no deduction shall be allowed in respect of any sum paid by the assessee as an employer towards setting up, or its contribution to any fund/trust/company/AoP/ DOI/Society/Institution, except were the sum is paid in accordance with the relevant provisions of Section 36 or as required by, or under any other law for the time being in force. 33. The analogy drawn by the assessee is qua the observation of the Supreme Court in the context of Section 40A(9) by that assessee, pointing out that that provision, Section 40A(9), has been held to override the provisions of Section 43B by operation of the non-obstante clause in Section 40A(1). So too ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trust deed dated 1.3.1978 extending the scope of applicability of trust deed to 'the employees of any of its subsidiaries/associates' also. 40. With the above variation having been approved to take effect on 15.04.1988, the contributions of the assessee company also stand covered under the ambit of the approved gratuity fund. The aforesaid variation has been carried forward throughout deed of trust dated 01.03.1978, thus bringing the subsidiaries/associates of Chemicals and Plastics Limited also within the cover of approved gratuity fund dated 1.03.1978 with effect from 15.04.1988. 41. A letter from the LIC dated 01.03.2008 is produced setting out the actuarial valuation under Group Gratuity Scheme/ Master Policy bearing Number 40282. The actuarial value of past services is computed at a sum of Rs.18,24,96,153/-. This is in respect of the Group Companies as the letter has been addressed to the trustees of Chemplast Sanmar Limited. The break-up of the contribution qua the present assessee is set out at page 2 of typed-set dated 17.12.2024 in the following manner:- Liability as on 31.3.2008 of SSL as per LIC 1,98,90,145/- Opening Balance of liability 1,19,70,058/- Payment duri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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