JUDGMENT
SOMASUNDARAM J. – At the instance of the assessee, the following questions of law have been referred to this court for its opinion, under section 256(1) of the Income-tax Act, 1961, hereinafter called the Act :
“1. Whether, on the facts and in the circumstances of the case, the assessee was not entitled to claim deduction of Rs. 3,07,238 which represented the incremental liability for gratuity pertaining to the accounting year relevant to the assessment year 1974-75 ?
2. Whether, on the facts and in the circumstances of the case, jeeps are only motor cars for the purpose of depreciation ?”
The assessee is a limited company. In making the assessment for the assessment year 1974-75, the Income-tax Officer disallowed a sum of Rs. 3,07,238 being provision for gratuity on the ground that the conditions laid down in section 40A(7) of the Act are not satisfied. The Income-tax Officer also disallowed a sum of Rs. 4,493 being the excess cost of jeeps over Rs. 25,000. On appeal, the Appellate Assistant Commissioner upheld both the disallowances. As against the order of the Appellate Assistant Commissioner, the assessee filed a further appeal before the Tribunal. With regard to the question of disallowance of gratuity, the Tribunal held against the assessee on the ground that the assessee had not complied with the conditions prescribed in section 40A(7) of the Act. The Tribunal further found that a jeep is a motor car for the purpose of depreciation and upheld the disallowance of a sum of Rs. 4,493 being the excess cost of jeeps over Rs. 25,000. Consequently, the Tribunal dismissed the appeal. The assessee, not satisfied with the order of the Tribunal, obtained the reference under section 256(1) of the Act to this court on the two questions of law referred to above.
With regard to the first question, viz., the assessees claim to deduct provision for gratuity, learned counsel for the assessee would contend that, inasmuch as it is an accrued liability, the provision for gratuity should be allowed as a deduction. We are unable to accept the above contention of learned counsel for the assessee. Admittedly, the assessee has no gratuity fund and it had not made any provision for the same in the accounts for the assessment year 1974-75. Sub-section (7) of section 40A which was inserted by the Finance Act, 1975, with retrospective effect from the assessment year 1973-74 supersedes the general principle as regards liability for gratuity. The effect of sub-section (7) of section 40A is that gratuity is deductible only in the following three cases :
(a) where it is paid or has become payable during the accounting year;
(b) where a contribution is made towards an approved gratuity fund or a provision is made for such contribution; and,
(c) where a contribution is made towards an unapproved gratuity fund held under a trust.
In view of the specific prohibition under section 40A(7)(a) of the Act, the provision for gratuity cannot be allowed as deduction, unless the assessee complies with the above-mentioned three conditions laid down in section 40A(7)(b) of the Act. Admittedly, the assessee in this case has not complied with the provisions of section 40A(7)(b) of the Act. As pointed out by a Division Bench of this court in Coimbatore Cotton Mills Ltd. v. CIT [1985] 154 ITR 240, in view of section 40A(7), no provision for payment of any gratuity could be allowed as a deduction except a provision for contribution to an approved gratuity fund. As already stated, admittedly, the assessee has no made any provision for contribution to the approved gratuity fund in its accounts. In view of the admitted position in this case that neither an actual payment has been made nor has a provision been made towards the gratuity liability for the year in question, the deduction claimed has rightly been disallowed by the Tribunal. We, therefore, answer the first question in the affirmative and against the assessee.
Now, let us examine the second question referred to us, viz., whether jeeps are only motor cars for the purpose of depreciation. In this context it is relevant to note the proviso to section 43(1) of the Act which runs as follows :
“Provided that where the actual cost of an asset, being a motor car, which is acquired by the assessee after the 31st day of March, 1967, but before the first day of March, 1975, and is used otherwise than in a business of running it one hire for tourists, exceeds twenty-five thousand rupees, the excess of the actual cost cover such amount shall be ignored, and the actual cost thereof shall be taken to be twenty-five thousand rupees”.
Under the proviso to section 43(1) of the Act, the cost of a motor car acquired after March 31, 1967, and before March 1, 1975 should be restricted to Rs. 25,000. Learned counsel for the assessee would contend that the expression jeep should be understood in the same way in which it is understood in ordinary parlance by the people who normally deal with it and, in common parlance, a jeep is not considered as a motor car. Learned counsel for the assessee further contended that jeeps are not motor cars for the purpose of the proviso to section 43(1) of the Act, because jeeps are transport vehicles which are used in construction works and for survey and inspection work through jungles and hilly terrains for which purpose a motor car cannot be used and, considering the nature of the vehicles and the use to which jeeps are put, they cannot be considered as motor cars and, therefore, the cost of the jeeps cannot be restricted to Rs. 25,000. We are quite unable to accept the above contention of learned counsel for the assessee. In Words and Phrases Judicially Defined by Roland Burrows, motor car is defined as follows :
“The term motor car….. suggests to the mind of anyone the idea of a vehicle that is mounted on wheels upon which it runs over the surface of land – a vehicle which is guided and controlled by a person riding upon or in it; is designed and intended to carry one or more persons, and is propelled by power, not supplied from any source external to itself, but which is for the time being stored or generated within it. It is a self-moving vehicle. Its French name, automobile, denotes this quality. The terms motor wagon and motor lorry connote vehicles of much the same character, save that both are specially designed, intended, and fashioned for the carriage of goods, the latter for the carriage of very heavy goods, and the former for that of goods of a lighter description; each of the three having this charcteristic, that it is designed and intended to carry as a load something in addition to its own equipment.” (Falkiner v. Whitton [1917] AC 106 (PC) per cur, at page 110).
In the Consise Oxford Dictionary, “jeep” is defined as a small utility motor vehicle. In Websters New Twentieth Century Dictionary, “jeep” is defined as follows :
“1. a small, rugged automotive vehicle with a 1/4 ton capacity and a four wheel drive, capable of carrying four men or three men and a machine gun; first used by U. S. armed forces in World War II also called Peep.
2. a similar vehicle for civilian use.”
In Commr. of Agrl. I. T. v. Good Hope Plantation [1988] 170 ITR 173, a Division Bench of the Kerala High Court had occasion to consider the question whether the expression “motor car” in entry III-B(i) of the statement under rule 9 of the Kerala Agricultural Income-tax Rules, 1951, includes a jeep. The Division Bench of the Kerala High Court, while answering the question in the affirmative, held as follows (at p. 174) :
“The Tribunal, not surprisingly and in our view rightly, held that the expression motor car includes a jeep. In common parlance, a jeep is understood as a sturdy motor car. That is in fact the dictionary meaning : the Concise Oxford Dictionary. That meaning is in harmony with the definition of motor car under the Motor Vehicles Act : see section 2(16). In the circumstances, the Tribunal, in our view, rightly found that motor car includes a jeep for the purpose of deduction under section 5 of the Agricultural Income-tax Act read with rule 9 of the Agricultural Income-tax Rules.”
Merely because the jeep has four-wheel propulsion and is used through jungles and hilly terrains, it would not make it different from a motor car particularly when the motor car and the jeep have the following common features;
(a) both the vehicles are amounted on wheels upon which they run over the surface of the land;
(b) both the vehicles are guided and controlled by a person riding upon or in them;
(c) both the designed and intended to carry one or more persons; and
(d) both the propelled by power not supplied from any source external to themselves but which is for the time being stored and generated within themselves and both are self-moving vehicles.
In these circumstances, the Tribunal rightly held that jeeps are only motor cars for the purpose of depreciation and disallowed a sum of Rs. 4,493 being the excess cost of jeeps over Rs. 25,000. We, therefore, answer the second question referred to us in the affirmative and against the assessee.
In the result, we answer both the question referred to us in the affirmative and against the assessee. The Revenue will be entitled to the costs of this reference. Counsels fee is Rs. 500.