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IN THE HIGH COURT OF JUDICATURE AT MADRAS
DR.JUSTICE ANITA SUMANTH, MR.JUSTICE G.ARUL MURUGAN, JJ
Sanmar Speciality Chemicals Limited – Appellant
Versus
Assistant Commissioner Of Income-tax Company Circle – Respondent
JUDGMENT :
ANITA SUMANTH, J
This Tax Case (Appeal) relates to Assessment Year (AY) 2008 – 09. The appellant/assessee is engaged in the business of manufacturing and sale of specialty Chemicals and Biotechnology products. In respect of AY 2008 – 09, returns were filed under the Income-Tax Act, 1961 (Act) and an intimation under Section 143(1) was issued on 09.03.2010. The assessment was taken up for finalization and completed vide an order dated 27.12.2010.
2. One of the issues picked up for assessment relates to a provision made towards gratuity fund with the Life Insurance Corporation of India (LIC). The assessing officer notes that the claim had been made as per the provisions of Section 40(A)(7)(b) of the Act. He was however of the view that though the narration in the schedules to the balance-sheet and profit and loss account stipulated that the amount was towards gratuity, it was only a provision.
3. Hence, the claim was hence hit by the provisions of Section 43B of the Act which requires certain claims to be allowed only on the basis of actual payment. The provision was thus disallowed and the amount of Rs.31,24,172/- added back to total income.
4. In appeal before the Commissione
Section 40(A)(7)(b) allows deductions for approved gratuity fund contributions, overriding Section 43B's requirement for actual payment.
Assessee not penalized for departmental delay in gratuity fund approval; deduction u/s 40A(7) allowed.
Employer's failure to issue Section 7(2) notice renders limitation inapplicable to delayed gratuity claims; special allowance includibility in wages demands factual probe; interest accrues on unpaid ....
Gratuity is a statutory entitlement not subject to withholding after superannuation absent explicit legal grounds for forfeiture, emphasizing employee protection under the Act.
The Payment of Gratuity Act allows claims for both statutory and contractual gratuity to be adjudicated under the same authority, ensuring employee rights are protected.
(1) Forfeiture of gratuity may be directed to the extent of damage or loss so caused or destruction of property belonging to employer.(2) Provisions of Gratuity Act have superiority over all other pr....
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