COMMISSIONER OF INCOME TAX Vs. BITONI LAMPS LTD.

JUDGEMENT

(1.) AT the instance of Revenue, Income -tax Appellate Tribunal, Delhi Bench 'B', Delhi (for short the 'Tribunal'), has referred this Court : "Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the amount of gratuity paid to the gratuity trust is an allowable deduction in the absence of approval of gratuity fund -

(2.) THE assessee is a resident limited company and its method of accounting is mercantile. The accounting period for the assessee's claim for deduction of Rs. 10,428 on account of gratuity was rejected with the following observations : "The assessee -company has claimed a sum of Rs. 10,428 as deduction under s. 40A(7)(b)(i) on account of contribution gratuity fund created by the assessee -company had not been approved during the relevant previous year when it made a provision for making contribution towards the fund. Thus, the conditions laid under s. 40A(7) are not fulfilled by the assessee -company. The claim of the assessee -company is, therefore, rejected."

(3.) THE assessee preferred an appeal before the CIT(A) who deleted the disallowance on the ground that similar disallowances had been deleted in earlier years. The matter was thereafter taken by the Revenue before the Tribunal. The appeal was dismissed with the following observations : "The arguments have been heard and considered and record carefully perused. The learned ITO made the addition on the understanding that conditions under s. 40A(7) of the Act, were not satisfied. The said provision requires that the gratuity fund should have been approved or the payment had been actually made. In the case before us, it is seen that the payment of the gratuity fund was made by the assessee during the relevant accounting period. This factual position appears to be clear beyond doubt from the balance sheet of the company and the receipts in the gratuity fund. It was, therefore, not a mere provision as was understood by the learned ITO. In the present case, the payment had been made to the fund. The assessee appears to have applied for the approval of the gratuity fund some time during 1975 and such actually been made, the absence of approval is not materially relevant. It is also seen that during other years in the similar circumstances, the disallowance was either not made by the learned ITO nor such disallowance was deleted by the first appellate authority and such actions are said to have been accepted by the Revenue. In the given circumstances, we are of the opinion that the learned ITO was not justified to disallow the assessee's claim and the learned CIT(A) rightly vacated a wrong finding. For such a conclusion, we find support from the Tribunal's order supra. The impugned order, in our view, warrants no interference and is, therefore, confirmed.