Commissioner of Income Tax, Kerala vs M/s. Uma Trading Co., Quilion, Kerala

These appeals arc directed against the decision of the High Court in references made u/s 256(1) of the Income Tax Act 1961 to answer the following questions:

Whether, on the facts and in the circum stances of the case, the assessee is entitled to the deduction of Rs. 52.531/- for the provision made by the assessee for gratuity payable to its employees under the Kerala Industrial Employees Payment of Gratuity Act. 1970.

Whether on the facts and in the circum stances of the case, the income tax Appellate Tribunal is justified in taking into consideration for the quantification of the liability for the assessment year 1971-72 under the Kerala Industrial Employees' Payment of Gratuity Act. 1970, the completed years of services of the employees prior to the beginning of the accounting year

Whether on the facts and in the circumstances of the case, the Tribunal is right in holding that in computing the quantum of the amount to be allowed as a deduction for gratuity payable under the Kerala Industrial Employees' Payment of Gratuity Act. 1970. which law came into force only in the accounting year relevant to the concerned assessment year 1970-71, the assessee is entitled to take into consideration the period of past service of the employees rendered up to the commencement of the relevant accounting year.

Whether on the facts and in the circumstances of the case, the Tribunal is right in holding that in computing the quantum of the amount to be allowed as a deduction for gratuity payable under the Kerala Industrial Employees Payment of Gratuity Act 1970. which law came into force only in the accounting year 1971-72, the assessee is entitled to take into consideration the period of past service of the employees rendered up to the commencement of the relevant accounting year.

The High Court answered the above questions in the affirmative in favour of the assessee and against the revenue.

The High Court placed reliance on the decision of the Kerala High Court in Commissioner of Income Tax Vs. High Land Produce Co. Ltd., which has been affirmed by this Court in Commissioner of Income Tax, Kerala Vs. High Land Produce Co. Ltd., wherein reliance was placed on the decision in Commissioner of Income Tax, Madras Vs. Andhra Prabha P. Ltd., . It may be mentioned that in taking this view this Court applied the principles laid down in an earlier decision in Shree Sajjan Mills Ltd. Vs. Commissioner of Income Tax, M.P., Bhopal and Another,

These appeals therefore fail.

We may however make it clear that the exact amount of which deduction is to be given has to be determined before the deduction is actually made.

The appeals are dismissed accordingly. No costs.