Mrinalini Biri Manufacturing Co. v. DCIT

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The Tax Publishers2020 TaxPub(DT) 4497 (Kol-Trib)

INCOME TAX ACT, 1961

Section 36(1)(v) Section 37(1)

When contribution was made by assessee-company for gratuity fund amount of employees even when there was no recognised fund in existence, it would be justifiable on the ground of commercial expediency, so as to keep their workers satisfied and to see to it that the workers get the benefit of provident fund, and hence, this was a payment made for the purpose of earning business profits by the assessee or in the course of earning profits of business by assessee and, accordingly, same was deductible under section 37(1).

Business deduction under section 36(1)(v) - Allowability - Contribution to unapproved gratuity fund -

Assessee claimed deduction under section 37(1) of contribution made to Group gratuity contribution scheme by the name of 'Mrinalini Biri Mgf. Co. (P) Ltd. Employees' Gratuity Fund'. AO disallowed deduction on the ground that payment made to the concerned gratuity fund was not yet approved by the IT Department. Held: When contribution was made by assessee-company for gratuity fund amount of employees even when there was no recognised fund in existence, it would be justifiable on the ground of commercial expediency, so as to keep their workers satisfied and to see to it that the workers get the benefit of provident fund, and hence, this was a payment made for the purpose of earning business profits by the assessee or in the course of earning profits of business by assessee and, accordingly, same was deductible under section 37(1).

Followed:Shri Sajjan Mills Ltd. v. CIT (1985) 23 Taxman 37 (SC) : 1985 TaxPub(DT) 1362 (SC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2012-13

INCOME TAX ACT, 1961

Section 40(a)(ia)