MAHARANA MILLS LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS reference has been made at the instance of the assessee and the following question has been referred to this court under section 256(1) of the Income -tax Act, 1961 :

(2.) REALLY , the Tribunal ought to have made two separate reference as the question which has been referred to us arises in respect of two separate orders passed in two separate appeals in respect of the two assessment years 1973 -74 and 1974 -75. We, therefore, direct the office to treat Income -tax Reference No. 72 of 1980 as a reference arising out of order passed in Income -tax Appeal No. 272 of 1978 -79 and Income -tax Reference No. 72A of the 1980 as a reference arising out of the order passed in Income -tax Appeal No. 273 of 1978 -79.

(3.) THE assessee debited a sum of Rs. 22,35,637 in its account books as provision for gratuity and the said amount was shown under the head 'Current liabilities and provisions' on the liabilities side of the balance -sheet. As the assessee had not made any specific claim in that behalf, the Income -tax Officer called upon the assessee to show cause why its claim for provision for gratuity should not be disallowed, since it was not made by way of contribution to a recognised gratuity fund created under an irrevocable trust, as required by section 36(1)(v) of the Act. The contention raised on behalf of the assessee was that it had decided to create a gratuity trust but it could not do so because of losses for the years 1974 and 1975. The Income -tax Officer disallowed the assessee's claim for provision of gratuity while computing the total amount on the ground that the conditions prescribed by section 40A(7)(b)(ii) were not fulfilled and, therefore, the said claim could not be allowed. For the same reasons, the claim of the assessee for the subsequent assessment years was also disallowed. The assessee then preferred two separate appeals to the Appellate Assistant commissioner. The Appellate Assistant Commissioner also found that the provisions of section 36(1)(v) were not complied with by the assessee and the conditions laid down by section 40A(7)(b)(ii) were also not fulfilled and, therefore, the Income -tax Officer was justified in disallowing the claim of the assessee. Taking this view, he dismissed the appeal. The Tribunal also agreed with the findings recorded by the Income -tax Officer and the Appellate Assistant Commissioner and held that the claim of the assessee was rightly disallowed. The appeals filed by the assessee were, therefore, dismissed.