The Judgment of the Court was delivered by

Abdul Hadi, J.:— In this tax case reference by the Revenue, the two questions referred to us under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”), in relation to the assessment year 1977-78 are:

“1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the provision of Rs. 2,00,000 made by the assessee in the accounts for purposes of making contributions to the approved gratuity fund should be allowed under section 40A(7)(b)(i) of the Income-tax Act, 1961, despite the fact that there was no incremental liability towards gratuity due for the assessment year under consideration?

2. Whether keeping in view the provision in rule 4(2) of Part C of Schedule IV to the Income-tax Act, 1961, and the rules and conditions of the fund as at the time approval was accorded by the Commissioner, the ad hoc provision of Rs. 2 lakhls is an admissible deduction?”

2. In so far as the abovesaid second question is concerned, learned counsel for the Revenue himself represents that the said question does not arise from the order of the Tribunal. Hence, we return the said question unanswered. In so far as the abovesaid first question is concerned, clause (a) of section 40A(7) (which came into force with effect from April 1, 1973, by an amendment introduced by the Finance Act, 1975) of the Act provides thus:

“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.”

3. Then, the abovesaid clause (b)(i) thereof runs as follows:

“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, or for the purpose of payment of any gratuity that has become payable during the previous year.”

(emphasis* supplied)

4. While so, the only question to be decided in the present reference is whether the abovesaid expression “that has become payable during the previous year” qualifies both the parts of the said clause (b)(i), viz., (A), “any provision made by the assessee for the purpose of payment of any contribution towards an approved gratuity fund,” and (B) “(any provision made by the assessee) for the purpose of payment of any gratuity” (as contended by learned counsel for the Revenue), or, qualifies only the latter part, viz. “(any provision made by the assessee) for the purpose of payment of any gratuity” (as contended by learned counsel for the assessee-respondent).

5. It is clear to us from a plain reading of the said section 40A(7)(b)(i) that the said clause qualifies both the above parts. If really it qualifies only the abovesaid latter part, any amount of provision (or provision to any extent) made by the assessee for the purpose of contribution towards an approved gratuity fund, would be deductible, which could not be the intention of the Legislature in enacting the said provision.

6. That apart, the use of the comma, after the words “gratuity fund” and also the words “any gratuity” in the abovesaid clause, also indicates that the said clause qualifies both the abovesaid parts. In Aswini Kumar Ghose v. Arabinda Bose, AIR 1952, SC 369, 383, it has also been observed thus:

“When a statute is carefully punctuated and there is doubt about its meaning, a weight should undoubtedly be given to the punctuation.”

7. Likewise in Mohd. Shabbir v. State of Maharashtra, (1979) 1 SCC 568 : AIR 1979 SC 564, 565, while considering section 27 of the Drugs and Cosmetics Act, 1940, which provides that whoever “manufactures for sale, sells, stocks or exhibits for sale dr distributes” a drug without a licence, is liable for punishment the Supreme Court has held that only stocking for sale could amount to offence and not mere stocking, in view of the presence of comma after “manufactures for sale” and “sells” and absence of any comma after “stocks”.

8. In the present case, the respondent-assessee had created an approved gratuity fund with effect from June 26, 1974, and during the previous year ending with June 30, 1976, relevant to the assessment year 1977-78, the assessee made provision in its accounts towards gratuity to the tune of Rs. 2 lakhs, which amount was also subsequently paid into the said fund, in four instalments subsequent to the said previous year, that is, on July 24, 1978, July 27, 1978, July 28, 1978 and September 28, 1978. The Income-tax Officer noticed that while the amount to be provided as on June 30, 1975, was Rs. 27,57,274 the liability as on June 30, 1976, was Rs. 26,44,572 only and that, therefore, there was no incremental liability on account of gratuity for the abovesaid previous year, viz., the year ending with June 30, 1976, in relation to the abovesaid assessment year in question. He, therefore, refused to allow the said sum provided for in the accounts. The assessee went on appeal to the Commissioner of Income-tax (Appeals). The latter held that inasmuch as the assessee had paid the said sum subsequently, the provision accorded in the accounts should be allowed as deduction. The Department, thereupon, went on appeal to the Appellate Tribunal. The Appellate Tribunal held that with the enactment of section 40A(7) of the Act; the concept of incremental liability and the actuarial valuation for the assessment years commencing from 1976-77 had become irrelevant and that those ideas were relevant only when the provision made in the accounts without payment of the relevant amount into any fund, was being allowed as deduction. It also observed that after the abovesaid amendment, if a provision for gratuity, without payment of it in the relevant previous year itself into the fund or without the provision being an actual outgo, is allowed as a deduction, it is only because of payment of that sum into the fund in subsequent assessment years and not because of any contractual or statutory liability. While so holding, the Tribunal allowed the abovesaid claim of the assessee on the footing that the abovesaid sum has been paid into the abovesaid fund subsequently in 1978.

9. Thus, it appears that impliedly the Tribunal has interpreted the abovesaid section 40A(7)(b)(i) in such a way that the abovesaid expression “that has become payable during the previous year” qualifies only the latter of the abovesaid two parts of section 40A(7)(b)(i). In our view, in view of the reasons given therein, the abpvesaid reading of the Tribunal, of the abovesaid clause (b)(i), is not correct and the abovesaid expression “that has become payable during the previous year” qualifies both the abovesaid parts of clause (b)(i).

10. No doubt in relation to the position just prior to the introduction of the abovesaid section 40A(7), the view taken by courts was that a provision made by the assessee in his accounts in respect of estimated service gratuity payable to employees would be deductible in computing the taxable income in cases where provision has been made on a scientific basis in the form of actuarial valuation. But, that led to some uncertainty in the matter. That is why the abovesaid Finance Act, 1975, has inserted a new sub-section (7) in section 40A. The Supreme Court has also observed in Shree Sajjan Mills Ltd. v. CIT, [1985] 156 ITR 585, while considering the question in relation to the assessment years prior to the coming into force of the abovesaid amendment, that after the abovesaid insertion of section 40A(7), deduction for gratuity payment cannot be allowed on general principles under any other section of the Act. In this connection, the following significant observation of the Supreme Court may be noted (at page 598):

“Payment of gratuity… is the payment made to the employee by the employer on his retirement or termination of his service for any reason…. The right to receive the payment accrued to the employees on their retirement or termination of their services and the liability to pay gratuity became the accrued liability of the assessee, when the employees retired or their services were terminated. Until then the right to receive gratuity is a contingent right and the liability to pay gratuity continues to be a contingent liability qua the employer… Since the amount of gratuity payable in any given year would be a variable amount depending upon the number of employees who would be entitled to receive the payment during the year, the amount being a large one in one year and a small one in another year, the employer often finds it desirable and/or convenient to set apart for future use, a sum every year to meet the contingent liability as a provision for gratuity or a fund for gratuity. He might create an approved gratuity fund for the exclusive benefit of his employees under an irrevocable trust and make contributions to such fund every year. Contingent liabilities do not constitute expenditure and cannot be the subject-matter of deduction even under the mercantile system of accounting. Expenditure which was deductible for income-tax purposes is towards a liability actually existing at the time but setting apart money which might become expenditure on the happening of an event is not expenditure.”

(emphasis supplied)

11. Further, the Supreme Court in the abovesaid decision also points out the intention of the Legislature in enacting section 40A(7) by quoting the Notes on Clauses of the abovesaid amendment, which, inter alia, runs as follows (page 600):

“In order to remove uncertainly in the matter, it is proposed to specifically provide in the law that no deduction will be allowed in the computation of profits and gains of a business or profession, in respect of any reserve created or provision made for the payment of gratuity to the employees and retirement or on termination of employment for any reason. This restriction will, however, not apply in relation to a provision made for the purpose of payment of a sum by way of contribution towards an approved gratuity fund that has become payable during the relevant year, or for the purpose of meeting actual liability in respect of payment of gratuity to the employees that has arisen during such year.”

(emphasis supplied)

12. The above referred to italicized words clearly bring out the intention of the Legislature in allowing the deduction in relation to the provision made for the purpose of payment of a sum by way of contribution towards approved gratuity fund. In other words, in such a case also, unless the abovesaid contribution has become payable during the relevant year, deduction cannot be granted.

13. No doubt, learned counsel for the respondent relies on the following passage in CIT v. Andhra Prabha P. Ltd., [1980] 123 ITR 760 (Mad) (page 766):

“Sub-section (7) of section 40A prohibits the deduction of a provision for gratuity. But the prohibition does not extend to the following cases:

(a) provision for contribution to approved gratuity fund, or

(b) provision for payment of gratuity for which a liability has arisen during the year.”

14. But, it must be stated first of all that the said observation cannot be taken as a ratio decidendi of the said decision, since on the facts, the said decision related only to the assessment year 1969-70 that is, much prior to the above referred to introduction of section 40A(7). That apart, if the above referred to observation in CIT v. Andhra Prabha P. Ltd., [1980] 123 ITR 760 (Mad), is taken to mean that only with reference to the provision for payment of gratuity and not for provision for contribution to approved gratuity fund, the expression “that has become payable during the previous year” would apply, then, we should state with due respect that the abovesaid observation is not correct in the light of the observations in the abovesaid Supreme Court decision in Shree Sajjan Mills Ltd. v. CIT, [1985] 156 ITR 585.

(emphasis supplied)

15. Then, with reference to Triplicane Permanent Fund Ltd. v. CIT, [1989] 179 ITR 492 (Mad), relied on by learned counsel for the assessee, we must state that the said decision does not specifically deal with section 40A(7) or the provision spoken to therein, but is concerned with allowability of payment made by the assessee to the gratuity fund. It no doubt refers to the abovesaid observation in CIT v. Andhra Prabha P. Ltd., [1980] 123 ITR 760 (Mad) about which we have already expressed our view.

16. In the present case, since it is found that while the gratuity amount as provided as on June 30, 1975, was Rs. 27,57,274, the liability as on June 30, 1976 was Rs. 26,44,572 only, it is not possible to hold that the provision made by the assessee was for the purpose of payment of the sum that has become payable during the previous year. The assessee has also not claimed that the provision of Rs. 2 lakhs made by the assessee was towards any sum that has become payable during the previous year. Therefore, it has to be concluded that the requirement pursuant to the expression “that has become payable during the previous year” appearing in clause (b)(i) of section 40A(7) has not been satisfied, and so, the said clause (b)(i) will not apply in the present case and, consequently, the abovesaid sum of Rs. 2 lakhs cannot be allowed as deduction. No doubt, it appears that the abovesaid fall in extent of liability was sought to be explained as due to the retirement or resignation, during the year ended with June 30, 1976, some of the members of the staff who were eligible for gratuity (as indicated in the appellate order of the Commissioner of Income-tax (Appeals)). But it must be noted, as pointed out by the Income-tax Officer, that the assessee should have obtained a certificate from the actuary regarding the liability in respect of employees, who were still in service on June 30, 1976, so that a comparison between the two figures could have been made and the exact liability as on June 30, 1976, ascertained. The assessee has not obtained and produced such a certificate. Therefore, the disallowance of the abovesaid two lakhs of rupees by the Income-tax Officer was correct and the first appellate authority and the Tribunal erred in holding differently.

17. Learned counsel for the respondent also argues that in case we concur with the abovesaid Income-tax Officer's view, we should at least make an observation and also give a direction to the assessing authority to allow the said sum of Rs. 2 lakhs, in the succeeding year when the abovesaid sum of Rs. 2 lakhs was paid into the fund in four instalments as stated above. But, we are of the view that while giving our advisory opinion under section 256 of the Act in relation to the present assessment year, viz., 1977-78, we have no jurisdiction to make any observation or give any direction in relation to any succeeding assessment year. No doubt, we realise that in view of the limitation for rectification under section 154 of the Act, learned counsel appears to have made the above referred to request. But, while exercising the present advisory jurisdiction, we have no jurisdiction to make any such observation or give any such direction as requested by the said learned counsel.

18. In support of his contention that we have such jurisdiction, learned counsel drew our attention to section 150 of the Act. But, we must point out that section 150 will not at all help learned counsel for the assessee. Section 150 will come in, only in the case of income escaping assessment, which is dealt with in section 147 and the subsequent sections. In that connection only, sub-section (1) of section 150 says thus:

“Notwithstanding anything contained in section 149, the notice under section 148 may be issued at any time for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision or by a court in any proceeding under any other law.”

19. Further, though in sub-section (1) of section 150, the above referred to term “at any time” is used, sub-section (2) of section 150 says thus:

“The provisions of sub-section (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the time the order which was the, subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken.”

20. So, it is clear even in the case of income escaping assessment, no authority can give a direction to make an assessment or reassessment, which would have been time barred if it has been made at the time when the relevant order was made.

21. Further, section 150 read with section 147 would come into operation only if “any income chargeable to tax has escaped assessment”, (emphasis* supplied). Obviously, the present ease is not one such case, where, only the above referred to deduction of provision of abovesaid Rs. 2 lakhs is claimed. While the said deduction is not allowable for the assessment year in question, in case it is allowable(.under section 36(1)(iv) of the Act in the subsequent year in which the above referred to sum of Rs. 2 lakhs was paid in four instalments, the assessee could only work out his rights, if any, within the four corners of the Act. Unless such right is still exercisable under any of the provisions of the Act, the assessee cannot get such a right by seeking to get an observation or finding or direction from us in the way in which it is sought for. As already pointed out, we have no jurisdiction to give any such finding or direction. Learned counsel no doubt sought to rely on CIT v. Moduri Rajaiah Gari Kishtaiah, [1980] 123 ITR 494 (AP), CIT v. Indian Express (Madurai) Pvt. Ltd., [1983] 140 ITR 705 (Mad) and Abad Fisheries v. Commissioner Of Income-Tax, [1995] 213 ITR 694 (Ker). But, in our view, they have no application to the issue on hand.

22. The net result is, we answer the abovesaid first question in the negative and in favour of the Revenue and we return the abovesaid second question unanswered as stated in paragraph 2 above. No costs.