New Jehangir Vakil Mills Co. Ltd. vs Commissioner of Income Tax

G.T. Nanavati, J.—The following two questions have been referred to this Court by the Tribunal, Ahmedabad under s. 256(1) of the IT Act, 1961 :

"(1) Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the appellant was not entitled to deduction of Rs. 17,92,552 being incremental liability for gratuity for its employees ?

(2) Whether on the facts and circumstances of the case, the Tribunal was right in holding that the surtax liability would not be deductible from the total income ?"

In Shree Sajjan Mills Ltd. Vs. Commissioner of Income Tax, M.P., Bhopal and Another, the Supreme Court has decided the point which arises for consideration in this reference. In view of that decision, we are of the opinion that the Tribunal was right in holding that the applicant was not entitled to deduction of Rs. 17,92,552 being incremental liability for gratuity for its employees.

This Court in SLM Maneklal Industries Ltd. vs. CIT (1988) 172 ITR has held that surtax liability would not be deductible from the total income of the assessee. In view of that decision, we hold that the Tribunal was right in holding that surtax liability was not deductible from the total income of the assessee. Both the questions are, therefore, answered in the affirmative, that is, against the assessee and in favour of the Revenue. Reference is accordingly disposed of with no order as to costs.