JUDGMENT
Janarthanam, J.
1. The assessee, Coimbatore Premier Corporation (P.) Ltd., Coimbatore, for the assessment year 1977-78 claimed deduction for gratuity to the extent of Rs. 57,889 under “engineering works section” and to the extent of Rs. 10,000 under “head office”. Out of the former claim, the Income-tax Officer allowed relief of Rs. 31,609 as gratuity paid by the assessee to its employees, who retired from service. The balance sum of Rs. 26,280 under “engineering works section” and the sum of Rs. 10,000 under “head office” represented premium paid to the life insurance corporation under the group gratuity scheme.
2. The Income-tax Officer disallowed the aforesaid items on the ground that the assessee had not set up an approved gratuity fund for the exclusive benefit of its employees.
3. When the matter came up before the Commissioner of Income-tax (Appeals), he following his own order dated January 19, 1979, relating to the earlier years, deleted the disallowance relating to the premium paid to the Life Insurance Corporation.
4. As against that order, the Department went on appeal to the Appellate Tribunal.
5. The Tribunal following its earlier order in the assessee’s own case for the assessment year 1976-77 (I.T.A. No. 2215/Mds. of 1979), held that such gratuity payment is an expenditure laid out for the purpose of business and that, therefore, it is allowable under Section 37 of the Income-tax Act, 1961.
6. From the foregoing facts, the following question is referred to this court for its opinion under Section 256(2) of the Income-tax Act, 1961 :
“Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the premium of Rs. 26,280 paid to the Life Insurance Corporation of India, under the Group Gratuity Scheme, is an allowable deduction under Section 37 of the Income-tax Act, 1961 ?”
7. Arguments of Mr. R. Sivaraman, learned counsel representing Mr. C.V. Rajan, learned junior standing counsel, representing the Revenue, and of Mrs. Aparna Nandakumar, learned counsel representing Mr. R. Venkata: raman, learned counsel appearing for the assessee, were heard.
8. During the course of arguments, our attention had been drawn to a catena of decisions of superior courts of jurisdiction–the apex court and other High Courts. We rather feel that it is unnecessary to refer to all the precedents relied upon by either side, except the one decision emerging
from the apex court in the case of Shree Sajjan Mills Ltd. v. CIT [1985] 156 ITR 585, inasmuch as the issue involved in the question under reference had been categorically settled by the said decision. The apex court held therein that for gratuity to be deductible, the conditions laid down in Section 40A(7) had to be fulfilled. The deduction could not be allowed on general principles under any other section of the Act, because Sub-section (1) of Section 40A made it clear that the provisions of the said section had effect notwithstanding anything to the contrary contained in any other provision of the Act relating to the computation of income under the head “Profits and gains of business or profession”. In other words, Section 40A had effect notwithstanding anything contained in sections 30 to 39 of the Act.
9. In the instant case, what is sought to be deducted is the insurance premium paid by the assessee to the Life Insurance Corporation of India under the group gratuity scheme for the relevant assessment year, viz., 1977-78 under Section 37 of the Act. In view of the decision in Shree Sajjan Mills Ltd.’s case the deduction sought to be claimed in the case on hand, as stated above, is impermissible.
10. For the reasons as stated above, there is no other go for us except to answer the question in the negative as against the assessee and in favour of the Department and the same is answered accordingly.
11. This tax case is thus disposed of. No costs.