Deduction not admissible

Payment made to gratuity fund was allowed by the First Appellate Authority with the observation that "Taxation Officer disallowed the claim of payment made to gratuity fund as it was incurred in the earlier year while in all the previous years the provisions for gratuity were disallowed and subject to tax only after allowing any sum actually paid during that year"

Validity

If the principle adopted by the Taxation Officer was followed then any expenses on accrual basis would not be allowed as deduction in the year of accrual if mercantile system of accounting was followed

Section 24 (g) of the Income Tax Ordinance, 1979 it provided that deductions were not admissible to any sum paid to any provident fund, superannuation fund or gratuity fund not being a recognized provident fund, an approved superannuation fund, or a approved gratuity fund

Payments made to an approved gratuity fund was allowable deduction

Treatment meted out by the First Appellate Authority was in accordance with law which was upheld by the Appellate Tribunal and appeal filed by the department was dismissed.

Appellants had prayed for increase in their special additional pension allowed to them at the time of retirement and to set aside orders of Ministry of Finance whereby orderly allowance was freezed after their retirement, which was contrary to the rule laid down by the Supreme Court

Appellant being retired employees had constantly been aggrieved that the State had failed to look after their needs in their old-age as compared with the serving employees

State counsel had contended that Government was within its lawful authorities not to allow the increase in the pension corresponding to that allowed to the serving government servants and further that it could not be said to be in violation of Art.25 of the Constitution when lesser increases were sanctioned for the pension as compared with the serving. employees

Validity

Superannuation pension and retirement pension serve three main purposes; firstly, it provided economic and social security to the government employee during old-age and protected him from financial want and social despair; secondly, it enabled the government employee to maintain himself at some level commensurate with the dignity of the post or office lastly held by him and thus indirectly preserved the honour of the State and thirdly, it would serve to attract and induce competent persons to join government service as opposed to private service, where security of tenure and retirement benefits were not attractive

Authorities, in circumstances, were directed to amend relevant para.2 of O.M.1(2)/Reg.(6)(9) of 29-9-1991 accordingly to read on retirement, a government officer in B-20, 21 & 22 would be allowed a special additional pension equal to orderly allowance as sanctioned from time to time"; and apply it retrospectively with effect from date from which it was originally sanctioned to avoid violation of Art.25 of the Constitution.