Fenner (India) Ltd. vs Commissioner of Income Tax

Janarthanam, J.—The question, at the instance of the assessee, referred u/s 256(1) of the Income Tax Act, 1961 (Act No. 43 of 1961)(for short "the IT. Act"); for the opinion of this Court, reflects as below:

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the gratuity paid to the employees, in excess of the amount exempt u/s 10(1)(iii) is to be included in the remuneration for the purpose of applying the ceiling limit u/s 40-A(5) of the Income Tax Act ?"

The question under reference is relatable to the assessment year 1977-78. It is not, as if such a question never arose for consideration before the superior Courts of jurisdiction and the plain fact is that such a question did come up for consideration before the Bombay High Court in the case of C.I. T. v. Century Spinning and Manufacturing Co. Ltd., 1974 210 ITR 783, wherein their Lordships of the said High Court held that the Tribunal was justified in holding that the amount of gratuity exempt u/s 10(10) of the Income Tax Act should be excluded and the excess of gratuity alone should be taken for the purpose of disallowance u/s 40-A(5) of the Income Tax Act.

We respectfully agree with the view so taken by their Lordships of the Bombay High Court. We, therefore, hold that the Appellate Tribunal was right in holding that the gratuity paid to the employees, in excess of the amount exempt u/s 10(10)(iii) is to be included in the remuneration for the purpose of applying the ceiling limit u/s 40-A(5) of the Income Tax Act, and we answer this question accordingly.

This tax case (reference) is thus disposed of. No costs.