The Short Question To Be Considered In This Appeal Is Asfollows v. Cit Reported In (1985) {156 Itr585 (Sc)}”

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON TUESDAY, THE 12TH DAY OF DECEMBER 2017/21ST AGRAHAYANA, 1939 ITA.No. 271 of 2015 () ----------------------- AGAINST THE ORDER/JUDGMENT IN ITA 190/COCH/2014 ofI.T.A.TRIBUNAL,COCHIN BENCH, COCHIN DATED 07-05-2015 APPELLANT(S)/RESPONDENT/RESPONDENT/REVENUE: ------------------------------------------ THE PRINCIPAL COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM BY ADVS.SRI.CHRISTOPHER ABRAHAM, INCOME TAX DEP SRI.K.M.V.PANDALAI, INCOME TAX DEPARTMENT RESPONDENT(S):/APPELLANT/APPELLANT/ASSESSEE -------------- M/S.ENGLISH INDIAN CLAYS LTD., VELI, THIRUVANANTHAPURAM. R1 BY ADV. SRI.A.KUMAR R1 BY ADV. SMT.G.MINI(1748) THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 12-12-2017,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA 271/15 APPENDIX APPELLANT'S ANNEXURES ANNEXURE-A :COPY OF ORDER UNDER SECTION 143(3) OF the INCOMETAX ACT, 1961 OF the ASSESSING OFFICER DATED 25.3.2013. ANNEXURE-B :COPY OF ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS), TRIVANDRUM DATED 28.3.2014. ANNEXURE-C :COPY OF ORDER OF THE ITAT IN ITA NO.190/COCH/2014FOR THE ASSESSMENT YEAR 2010-11 DATED 7.5.2015. //TRUE COPY// jg-16/12 PA TO JUDGE. K.VINOD CHANDRAN & ASHOK MENON, JJ. ------------------------------------------- ITA No.271 of 2015 ------------------------------------------- Dated this the 12[th] day of December, 2017 J U D G M E N T Vinod Chandran, J. The short question to be considered in this appeal is asfollows:- “Whether on the facts and in the circumstances ofthe case, is the ITAT correct in holding that thecontribution to gratuity fund before it was dulyapproved by the CIT could be construed as duecompliance with the provisions of section 40A(7)of the Act so as to allow the same as deduction u/s37(1) in view of the judgment in the case of ShreeSajjan Mills Ltd. v. CIT reported in (1985) {156 ITR585 (SC)}” 2.The assessee, a Company engaged in the business ofmanufacture and sale of clay, had created a fund for providing gratuity to its employees. Gratuity is an allowable deduction underthe Income Tax Act, 1961 and provision for the same is also allowedas a deduction subject to the condition that it should be anapproved gratuity fund as provided under Section 40A(7) read with Part-C of Schedule-IV of the Income Tax Act. 3.On facts, suffice it to notice that the assessment year is2010-11 and the assessee had made an application under Part-C ofSchedule-IV on 2.3.2010 prior to the closure of the previous year.The application was considered and allowed on 12.11.2010. Theissue was as to whether prior to the gratuity fund being approved,the assessee could make a provision and claim deduction on thebasis of provision made towards gratuity. The assessee relies onthe decisions of the Calcutta High Court in Commissioner of-IncomeTax vs. Shalimar Wire And Industries Ltd.[1991 188 ITR-814 Cal] and Commissioner of IncomeTax vs. ContinentalCommercial Co. Ltd., [1991 192 ITR 66 Cal.] and the Departmentrelies on the decision of the Supreme Court in Shree Sajjan MillsLtd. vs. Commissioner of Income Tax[1985 (156) ITR 585 (SC)]. 4.Learned Senior counsel for the Department relying onthe decision in Shree Sajjan Mill’s case (supra) would contend thattaxing statutes have to be construed strictly and there cannot be areasonable measure employed to relax the rigour of the provision. 4.Learned Senior counsel for the Department relying onthe decision in Shree Sajjan Mill’s case (supra) would contend thattaxing statutes have to be construed strictly and there cannot be areasonable measure employed to relax the rigour of the provision. Specific reference is made to Section 40A(7)(a) to emphasise that nodeduction shall be allowed in respect of any provision made by theassessee unless the condition under sub-Clause (b) of sub-Section(7) is satisfied. Sub-clause (b) specifically speaks about the rigourof sub-Clause (a) not being applicable insofar as the provisionhaving been made towards an approved gratuity fund. Theassessee could have applied sufficiently early and then there couldhave been provision made in the previous year of the assessmentyear itself, is the contention.5.We have to notice that sub-Clause (2) of Clause 2 ofPart-C specifically empowers the Commissioner, who considers theapproval of the gratuity fund to grant the approval and specify thedate on which it takes effect. In the present case, there is no suchdate specified and in such circumstances, we are inclined to holdthat it should relate from the date of application itself, which is2.3.2010. In fact, it is to be noticed that though the application wasfiled on 2.3.2010, the same was put up to the Commissioner on8.3.2010. The provision is said to have been made on 31.03.2010, ITA 271/15 at the closure of the previous year. The Commissioner, considering his workload, though justified in the delay occassioned, the assessee cannot be denied the benefitmerely for reason of the delay at the hands of the Commissioner. Itis also to be noticed that the conditions of approval as seen fromClause 3 of Part-C of Schedule IV have been satisfied by the fund asconstituted by the assessee; found by the Commissioner himself. Insuch circumstances, we respectfully follow the decisions of theCalcutta High Court cited above and reject the appeal answering thequestion in favour of the assessee and against the Revenue. Partiesto suffer their costs. K.V INOD CHANDRAN Judge ASHOK MENON Judge jg xxx