JUDGMENT
Janarthanam, J.
1. These tax cases (references) are at the instance of the Revenue.
2. The common question of law, as below is submitted by the Tribunal under Section 256(2) of the Income-tax Act, 1961 (for short “the Act”), for this court’s opinion ;
“Whether, on the facts and in the circumstances of the case, the Appellate Tribunal’s view that the amounts paid to the Life Insurance Corporation of India under the group gratuity scheme should be allowed as a deduction under Section 37 of the Income-tax Act, 1961, is sustainable in law ?”
3. The respondent, Gnanambigai Mills, Coimbatore, is an assessee to income-tax. The matter relates to the assessment years 1974-75 and 1975-76. The assessee provided for gratuity for the assessment years 1974-75 and 1975-76. The assessee, it is said, paid a quantified sum by way of a premium to the Life Insurance Corporation of India under the group gratuity scheme for the said assessment years.
4.
When the Income-tax Act was amended retrospectively by the introduction of Section 40A(7) in the Income-tax Act, 1961, the assessee took out a policy with the Life Insurance Corporation on June 19, 1974, meeting the liability with effect from November 15, 1973, and arranged to pay a sum of Rs. 11,78,758 in instalments over a period of years.
5. The Appellate Tribunal found that since there was no provision in the accounts and since no fund was created by the assessee, the provisions of Section 40A(7) were inapplicable. The Appellate Tribunal also found that the insurance policy to cover a liability which the assessee had under the Payment of Gratuity Act only resulted in an expenditure laid out for the purpose of business allowable as a deduction under Section 37 itself, since it was only a liability to pay the premium under the policy and not a liability to pay any gratuity. The Appellate Tribunal, therefore, directed the Income-tax Officer to verify the actual payments of the premium paid during the relevant previous years and allow the deduction therefor.
6. Thereafter, as already adverted to, at the instance of the Revenue, the common question of law formulated hereinabove, was referred to this court for decision.
7. Arguments of Mr. S. V. Subramanian, learned senior counsel representing Mr. C. V. Rajan, learned junior standing counsel, appearing for the Revenue, and Mr. R. Venkataraman, learned counsel appearing for the assessee were heard.
8. During the course of argument, our attention had been drawn to the 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 o.f 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 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 Section s 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 years 1974-75 and 1975-76 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 staled above is impermissible. For the reason as abovestated, there is no other go for us except to answer the question in the negative as against the assesses and in favour of the Department and the same is answered accordingly. These tax cases are thus disposed of.
10. No costs.
