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A.T.E. (P) Ltd. vs Asstt. Cit on 24 February, 2003
The Commissioner Of Income Tax vs M/S.Pricol Limited on 1 April, 2014
Income-Tax Officer vs Hoechst Pharmaceuticals Ltd. on 24 April, 1981
Agrawal Minerals (Goa) Pvt. Ltd. vs Commissioner Of Income-Tax on 25 August, 1993
Mewar Sugar Mills Ltd. vs Deputy Commissioner Of Income Tax on 9 February, 1998

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[Section 40A] [Complete Act]
Central Government Act
Section 40A(7) in The Income- Tax Act, 1995
(7) 2 (a)' Subject to the provisions of clause (b), no deduction shall be allowed in respect of any provision (whether called as such or by any other name) made by the assessee for the payment of gratuity to his employees on their retirement or on termination of their employment for any reason.
(b) Nothing in clause (a) shall apply in relation to-
(i) any provision made by the assessee for the purpose of payment of a sum by way of any contribution towards an approved gratuity fund,
999999. -- to the employee or an amount calculated at the rate of one thousand rupees for each month or part thereof comprised in the period of employment in India of the employee during the previous year, whichever is less. Explanation 1-The provisions of this sub- section shall apply notwithstanding that any amount not to be allowed under this sub- section is included in the total income of the employee or, as the case may be, the former employee. Explanation 2.- In this sub- section,- (a) salary' has the meaning assigned to it in clause (1) read with clause (3) of section 17 subject to the following modifications, namely:- (1) in the said clause (1), the word' perquisites' occurring in sub- clause (iv) and the whole of sub- clause (vii) shall be omitted; (2) in the said clause (3), the references to' assessee' shall be construed as references to' employee or former employee' and the references to' his employer or former employer' and' an employer or a former employer' shall be construed as references to' the assessee'; (b)' Perquisite' means- (i) rent- free accommodation provided to the employee by the assessee; (ii) any concession in the matter of rent respecting any accommodation provided to the employee by the assessee; (iii) any benefit or amenity granted or provided free of cost or at concessional rate to the employee by the assessee; (iv) payment by the assessee of any sum in respect of any obligation which, but for such payment, would have been payable by the employee; and (v) payment by the assessee of any sum, whether directly or through a fund, other than a recognised provident fund or an approved superannuation fund, to effect an assurance on the life of the employee or to effect a contract for an annuity."
1. Prior to the omission, sub- section (6), as amended by the Finance Act, 1984, w. e. f. 1- 4- 1985, read as under:" (6) Where the assessee incurs any expenditure by way of fees for services rendered by a person who at any time during the twenty- four months immediately preceding the previous year was an employee of the assessee,- (a) such expenditure by way of fees, or (b) where the assessee has also incurred in relation to such person any expenditure by way of salary referred to in sub- clause (i) of clause (a) of sub- section (5), the aggregate of such expenditure by way of fees and by way of salary, shall not be allowed as a deduction to the extent such expenditure by way of fees or, as the case may be, the aggregate of such expenditure by way of fees and by way of salary exceeds ninety thousand rupees."
2. Inserted by the Finance Act, 1975, w. r. e. f. 1- 4- 1973.
or for the purpose of payment of any gratuity, that has become payable during the previous year;
(ii) any provision made by the assessee for the previous year relevant to any assessment year commencing on or after the 1st day of April, 1973 , but before the 1st day of April, 1976 , to the extent the amount of such provision does not exceed the admissible amount, if the following conditions are fulfilled, namely:-
(1) the provision is made in accordance with an actuarial valuation of the ascertainable liability of the assessee for payment of gratuity to his employees on their retirement or on termination of their employment for any reason;
(2) the assessee creates an approved gratuity fund for the exclusive benefit of his employees under an irrevocable trust, the application for the approval of the fund having been made before the 1st day of January, 1976 ; and
(3) a sum equal to at least fifty per cent of the admissible amount, or where any amount has been utilised out of such provision for the purpose of payment of any gratuity before the creation of the approved gratuity fund, a sum equal to at least fifty per cent of the admissible amount as reduced by the amount so utilised, is paid by the assessee by way of contribution to the approved gratuity fund before the 1st day of April, 1976 , and the balance of the admissible amount or, as the case may be, the balance of the admissible amount as reduced by the amount so utilised, is paid by the assessee by way of such contribution before the 1st day of April, 1977 . Explanation 1-For the purpose of sub- clause (ii) of clause (b) of this sub- section," admissible amount" means the amount of the provision made by the assessee for the payment of gratuity to his employees on their retirement or on termination of their employment for any reason, to the extent such amount does not exceed an amount calculated at the rate of eight and one- third per cent of the salary [ as defined in clause (h) of rule 2 of Part A of the Fourth Schedule] of each employee entitled to the payment of such gratuity for each year of his service in respect of which such provision is made. Explanation 2.- For the removal of doubts, it is hereby declared that where any provision made by the assessee for the payment of gratuity to his employees on their retirement or on termination of their employment for any reason has been allowed as a deduction in computing the income of the assessee for any assessment year, any sum paid out of such provision by way of contribution towards an approved gratuity fund or by way of gratuity to any employee shall not be allowed as a deduction in computing the income of the assessee of the previous year in which the sum is so paid.]
(8) 1 Omitted by the Finance Act, 1985 w. e. f 1- 4- 1986 .]
1. Prior to the omission, sub- section (8), as inserted by the Finance Act, 1975, w. e. f. 1- 4- 1976, read as under:" (8) Where the assessee, being a company (other than a banking company or a financial company), incurs any expenditure by way of interest in respect of--
999999. -- any deposit received by it, fifteen per cent of such expenditure shall not be allowed as a deduction. Explanation.- In this sub- section,- (a)" banking company" means a company to which the Banking Regulation Act, 1949 (10 of 1949 ) applies and includes any bank or banking institution referred to in section 51 of that Act; (b)" deposit" means any deposit of money with, and includes any money borrowed by a company, but does not include any amount received by the company- (i) from the Central Government or any State Government or any local authority or from any other source where the repayment of the amount is guaranteed by the Central Government or a State Government; (ii) from the Government of a foreign State, or from a citizen of foreign State, or from any institution, association or body (whether incorporated or not) established outside India; (iii) as a loan from a banking company or from a co- operative society engaged in carrying on the business of banking (including a co- operative land mortgage bank or a co- operative land development bank); (iv) as a loan from any institution or body specified in the list in the Tenth Schedule or such other institution or body as the Central Government may, having regard to the nature and objects of the institution or body, by notification in the Official Gazette, specify in this behalf; (v) from any other company; (vi) from an employee of the company by way of security deposit; (vii) by way of security or as an advance from any purchasing agent, selling agent or other agent in the course of, or for the purpose of, the business of the company or as advance against orders for the supply of goods or for the rendering of any service; (viii) by way of subscription to any share, stock, bond or debenture (such bond or debenture being secured by a charge or a lien on the assets of the company) pending the allotment of the said share, stock, bond or debenture, or by way of advance payment of any moneys uncalled and unpaid upon any shares in the company, if such moneys are not repayable in accordance with the articles of association of the company; (ix) as a loan from any person where the loan is secured by the creation of a mortgage, charge or pledge of any assets of the company (such loan being hereafter in this sub- clause referred to as the relevant loan) and the amount of the relevant loan, together with the amount of any other prior debt or loan secured by the creation of a mortgage, charge or pledge of such assets, is not more than seventy- five per cent of the price that such assets would ordinarily fetch on sale in the open market on the date of creation of the mortgage, charge or pledge for the relevant loan; (c)" financial company" means- (i) a hire- purchase finance company, that is to say, a company which carries on, as its principal business, hire- purchase transactions or the financing of such transactions; or (ii) an investment company, that is to say, a company which carries on, as its principal business, the acquisition of shares, stock, bonds, debentures, debenture stock, or securities issued by the Government or a local authority, or other marketable securities of a like nature; or (iii) a housing finance company, that is to say, a company which carries on, as its principal business, the business of financing of acquisition or construction of houses, including acquisition or development of land in connection therewith; (iv) a loan company, that is to say, a company[ not being a company referred to in sub- clauses (i) to (iii)] which carries on, as its principal business, the business of providing finance, whether by making loans or--
(9) 1 No deduction shall be allowed in respect of any sum paid by the assessee as an employer towards the setting up or formation of, or as contribution to, any fund, trust, company, association of persons, body of individuals, society registered under the Societies Registration Act, 1860 (21 of 1860 ), or other institution for any purpose, except where such sum is so paid, for the purposes and to the extent provided by or under clause (iv) or clause (v) of sub- section (1) of section 36, or as required by or under any other law for the time being in force.]
(10) 2 Notwithstanding anything contained in sub- section (9), where the 3 Assessing] Officer is satisfied that the fund, trust, company, association of persons, body of individuals, society or other institution referred to in that sub- section has, before the 1st day of March, 1984 , bona fide laid out or expended any expenditure (not being in the nature of capital expenditure) wholly and exclusively for the welfare of the employees of the assessee referred to in sub- section (9) out of the sum referred to in that sub- section, the amount of such expenditure shall, in case no deduction has been allowed to the assessee in respect of such sum and subject to the other provisions of this Act, be deducted in computing the income referred to in section 28 of the assessee of the previous year in which such expenditure is so laid out or expended, as if such expenditure had been laid out or expended by the assessee.]
(11) 4 Where the assessee has before the 1st day of March, 1984 , paid any sum to any fund, trust, company, association of persons, body of individuals, society or other institution referred to in sub- section (9), then, notwithstanding anything contained in any other law or in any instrument, he shall be entitled-
(i) to claim that so much of the amount paid by him as has not been laid out or expended by such fund, trust, company, association of persons, body of individuals, society or other institution (such amount being hereinafter referred to as the unutilised amount) be repaid to him, and where any claim is so made, the unutilised amount shall be repaid, as soon as may be, to him;
(ii) to claim that any asset, being land, building, machinery, plant or furniture acquired or constructed by the fund, trust, company, association of persons, body of individuals, society or other institution out of the sum paid by the assessee, be transferred to him, and where any claim is so made, such asset shall be transferred, as soon as may be, to him.]
999999. -- advances or otherwise; (v) a mutual benefit finance company, that is to say, a company which carries on, as its principal business, the business of acceptance of deposits from its members and which is declared by the Central Government under section 620A of the Companies Act, 1956 (1 of 1956 ), to be a Nidhi or Mutual Benefit Society; (vi) a miscellaneous finance company, that is to say, a company which carries on exclusively, or almost exclusively, two or more classes of business referred to in the preceding sub- clauses."
1. Inserted by the Finance Act, 1984, w. r. e. f. 1- 4- 1980.
2. Ibid.
3. Substituted for" Income- tax" by the Direct Tax Laws (Amendment) Act, 1987, w. e. f. 1- 4- 1988.
4. Inserted by the Finance Act, 1984, w. r. e. f. 1- 4- 1980.