ORDER
Kania, A.C.J.
1. This is a reference on a case stated under s. 256(1) of the IT Act, 1961. The question referred to us is as follows :
“Whether, on the facts and in the circumstances of the case, the cash payment of Rs. 10,000 by way of gratuity to the Director was disallowable in law by reason of the provisions of s. 40(a)(v) of the Act, even though such payment was made for commercial expediency ?”
2. The facts found by the Tribunal show that the amount of Rs. 10,000 referred to in the question was paid by the assessee in cash exgratia to one Jethanand Udhavdas who was in service of the assessee as a Director for 14 years when he retired. He was drawing a salary of Rs. 18,595 per annum and also drew a commission of Rs. 6,743 during the relevant previous year. In the relevant previous year ending 31-3-1971, the assessee company paid the said Director Rs. 10,000 as gratuity as per the resolution of that date and claimed the same as a reduction. The claim was disallowed by the ITO but was allowed by the AAC as well as the ITAT. The Tribunal has found it as a matter of fact that the payment was made for consideration of commercial expediency and that it was a payment in cash. The Tribunal took the view that the scope of s. 40(a)(v) of the IT Act, 1961 as it stood at the relevant time did not include any cash payment to the employee. It is from this decision of the Tribunal that the aforesaid question has been referred to us.
3. The plain reading of the question makes it clear that the controversy referred to us is the one as to whether a cash payment would fall within the scope of s. 40(a)(v) of the IT Act as it stood at the relevant time. It is conceded by Mr. Jetly that in view of the decision of this Court in CIT, Bombay City-II v. Indokem Pvt. Ltd. reported in (1981) 132 ITR 125 (Bom), it must be held that cash payments are not covered by the provisions of s. 40(c)(iii) which was omitted by Finance Act, 1968 w.e.f. 1-4-1969. It was the same Act which inserted cl. (a)(v) in s. 40.
4. In the result, the question is answered in the negative and in favour of the assessee.
5. No order as to costs.
