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13/02/2010

PROVISION FOR LEAVE ENCASHMENT GRATUITY NOT ALLOWED IN 2008-09 -INCOME TAX DEPARTMENT

PROVISION FOR LEAVE ENCASHMENT GRATUITY NOT ALLOWED IN 2008-09 -INCOME TAX DEPARTMENT

In a move that could impact organizations across all sectors, the Income Tax (I-T) Department has disallowed expenses towards leave encashment and gratuity as deduction when calculating taxable income. Explaining the move, department officials said: “Both are provisions or expenses which are actually not incurred. They are set aside to meet future liabilities as and when they occur.” Therefore, they added, deductions on all such expenses and provisions are being disallowed in the returns filed 2008-09 onwards. “The decision is expected to affect all organisations and have huge revenue implications,” the officials said.

Till now, deductions under leave encashment and gratuity were covered under Section 43B of I-T Act. The other such expenses, which are allowed as expenses to be deducted from taxable income are contribution to provident fund, payments made to government, etc. The I-T officials said, henceforth, expenses and provisions towards leave encashment and gratuity will be considered as deductions from taxable income only on actual basis. This means both will be allowed as deductible expenses only when they are actually paid to the employees. Under Section 4 of the Payment of Gratuity Act 1972, gratuity is paid to the employer by an employee as a mark of recognition of the service rendered by the person. It is given on retirement, death or resignation after five years of continued service. Similarly, leave encashment is the amount payable for the employee’s leave period, depending on the leaves to his credit and his salary at the time of termination of employment. The amount may be paid to the employees (or to their dependents) on retirement, death or disability.

Before 2008-09, deduction towards leave encashment and gratuity was a controversial issue following a Calcutta High Court judgment in the case of Exide Industries. The court ruled in favour of Exide and against the revenue department, saying that such provisions whether paid or not were eligible for deductions on the basis of actuarial valuation. A stay was announced in 2008 for 2008-09 returns assessed in the current financial year. In response to the high court ruling, the I-T Department filed a special leave petition in Supreme Court, which stayed the judgment. The revenue department, based on this stay, has disallowed the expenses towards leave encashment and gratuity as deduction when calculating taxable income. Tax experts said while the department will benefit more in terms of revenue, most of the assessees will go on appeal.

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PME Due Date

Master Circular No. 25



Copy of Railway Board’s letter No. 69/H/3/11 dated 06.12.1974



Subject: Implementation of the Recommendations of the Visual Sub-Committee.



6. Periodical re-examination of serving Railway Employees:



6.l. In order to ensure the continued ability of Railway employees in Classes A l, A 2, A 3, B l and B 2 to discharge their duties with safety, they will be required to appear for re-examination at the following stated intervals throughout their service as indicated below:



6.1.1. Classes A l, A 2 and A 3 —At the termination of every period of three years, calculated from the date of appointment until they attain the age of 45 years, and thereafter annually until the conclusion of their service.



Note: (l) The staff in categories A l, A 2 and A 3 should be sent for special medical examination in the interest of safety under the following circumstances unless they have been under the treatment of a Railway Medical Officer.



(a) Having undergone any treatment or operation for eye trouble irrespective of the duration of sickness.



(b) Absence from duty for a period in excess of 90 days.



(2) If any employee in medical category A has been periodically medically examined at any time within one year prior to his attaining the age of 45, his next medical examination should be held one year from the due date of the last medical examination and subsequent medical examination annually thereafter.



If, however, such an employee has been medically examined, at any time earlier, than one year prior to his attaining the age of 45, his next medical examination should be held on the date he attains the age of 45 and subsequent medical examination annually thereafter.




Ammendment: It was ammended in 1993 as below



Age Group PME Due



Age 00-45 every 4yrs



Age 45-55 every 2yrs



Age 55-60 every year
Details:-
As per Rly Bd's Guideline of Medical Exam issued vide LNo. 88/H/5/12 dated 24-01-1993

a) PME would be done at the termination of every period of 4 years from date of appointment / Initial medical Exam till the date of attainment of age of 45 years, every 2 years upto 55 years & there after annual till retirement.
b) Employees who has been periodically examined at any time within 2years prior to his attaining the age of 45years would be examined after 2years from the date of last PME & subsequent PME for every 2years upto 55years age.Of

NRMU 4 you
SMLokhande





6.1.2. Classes B-1 and B-2—On attaining the age of 45 years, and thereafter at the termination of every period of five years.