Commissioner of Income Tax vs G.T.N. Textiles Ltd.

The matter arises under the Income Tax Act, 1961. The Revenue is the appellant. The respondent-assessee is a company deriving income mainly from the business of running a textile mill. The assessment of the respondent for the year 1992-93 was completed on a total income of Rs. 67,09,434 as against Rs. 61,36,906 disclosed in the return. This difference in the income assessed is on account of the disallowance of the claim for deduction of the contribution to the employees'' gratuity fund not paid by the assessee within the due date for making such payment under law. The assessee did not file any appeal against the disallowance of this amount. However, in the appeal before the Tribunal, the assessee has taken this issue as an additional ground which reads as follows :

"In respect of the assessment year 1991-92, the appellant had claimed gratuity paid on July 3, 1991, amounting to Rs. 4,29,000 as allowable in the assessment year 1991-92. The hon''ble Tribunal has held in the order in I. T. A. No. 748/Coch. of 1994 dated October 29, 1998, that since the payment is made after the end of the previous year relevant to the assessment year 1991-92 (i.e., March 31, 1991), the deduction is not allowable in that year. The hon''ble Tribunal has held in page 6 of the said order that the deduction is allowable only when the payment is made during the relevant previous year. Since the payment of gratuity made on July 3, 1991, is within the previous year relevant to the assessment year 1992-93, the deduction may be allowed in that assessment year, i.e., assessment year 1992-93."

The Tribunal, without any discussion in the matter, allowed the claim of the assessee relying on an earlier decision of the Tribunal dated October 29, 1998, on actual payment basis.

Shri P. K. R. Menon, learned standing counsel for the Revenue, appearing for the appellant, submits that the question raised in this case is covered by the decision of this court in Commissioner of Income Tax Vs. South India Corporation Ltd., . Shri P. Balachandran, learned counsel appearing for the respondent, on the other hand, submits that the said decision is not applicable to a case of payment of the employer''s contribution as the Explanation to Section 36(1)(va) read with Section 2(24)(x) of the Act refers only with regard to the employee''s contribution to the employee''s account in the relevant fund and not to the employer''s contribution. We have perused the judgment in Commissioner of Income Tax Vs. South India Corporation Ltd., . We find that this court has considered the issue with reference to the provisions of Section 43B of the Explanation thereto and the provisions of Section 36(1)(va) in the Explanation and held as follows (page 118) :

"The expression ''due date'' means the time stipulated for payment. As per the Explanation to clause (va) for the purpose of the clause, ''due date'' means the date by which the assessee is required as an employer to credit an employee''s contribution to the employee''s account in the relevant fund. The amount is deductible only if the assessee credits the amount to the employee''s account in the relevant fund on or before the date by which he is legally or contractually required to do so. The right to deduction would be lost even if the sum is credited after the due date. It cannot be an indefinite date left to the choice of the assessee. It is to be noted that under the main provision of Section 43B of the Act, the payments made during the currency of the financial year relevant to the assessment year qualify for deduction in certain cases. But in the case of payments relating to provident fund, etc., stress has been made on payment within the ''due date''. Therefore, it cannot be said that payment made beyond the due date also qualifies for deduction, in view of the prescription in the main provision itself. Had that been the legislative intent, there was no necessity to enact the proviso. The Legislature in its wisdom has incorporated the proviso and it cannot be said to be without a purpose. There is nothing repugnant between the main provision and the proviso. They operate in different situations. The view of the Tribunal that payment having been made before the close of the financial year, qualifies for deduction is indefensible."

According to us, this decision squarely applies to the case on hand without any distinction. The decision of the Tribunal cannot be sustained. The questions of law on which notice is ordered are answered in the negative, i.e., against the assessee.

In view of the aforesaid decision, we set aside the order of the Tribunal on the aforesaid question and restore the order of the assessing authority.

This appeal is allowed as above.