Tribunal allows unrecognised gratuity fund, interest on non-interest bearing funds, and depreciation on intangible assets.

The Tribunal upheld the allowability of unrecognised gratuity fund under section 37(1) despite non-compliance with section 36(1)(v) based on a previous order and a judgment of the High Court. It allowed the assessee's claim regarding the disallowance of proportionate interest on investments and loans to a subsidiary as the funds used were non-interest bearing. Additionally, the Tribunal ruled in favor of the assessee on the allowability of depreciation on intangible assets, citing past decisions and dismissing the Revenue's grounds. Ultimately, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decisions in favor of the assessee.

---

---

Issues:
1. Allowability of unrecognised gratuity fund under section 37(1) despite non-compliance with section 36(1)(v).
2. Disallowance of proportionate interest on investments and loans to subsidiary.
3. Allowability of depreciation on intangible assets.

Analysis:

Issue 1:
The first issue pertains to the allowability of unrecognised gratuity fund under section 37(1) despite non-compliance with section 36(1)(v). The Tribunal referred to a previous order in the assessee's own case where a similar issue was decided in favor of the assessee. The Tribunal held that even if a payment is made to an unapproved gratuity fund, it can be allowed under section 37 based on a judgment of the jurisdictional High Court. The Tribunal upheld the order of the CIT(A) based on the binding judgment and dismissed the ground taken by the Revenue.

Issue 2:
The second issue involves the disallowance of proportionate interest on investments and loans to a subsidiary. The Tribunal considered a previous order in the assessee's own case where a similar issue was decided in favor of the assessee. It was held that if interest-bearing funds were diverted to a sister concern for non-business purposes, the interest would be disallowed. However, in this case, the Tribunal found that the assessee used its own non-interest bearing funds for the investment in the subsidiary company, and therefore, the interest could not be disallowed. The Tribunal allowed the ground taken by the assessee against the Revenue.

Issue 3:
The final issue concerns the allowability of depreciation on intangible assets. The Tribunal, in line with previous decisions, decided the issue in favor of the assessee rather than referring it to a Special Bench. The Tribunal cited relevant case law and held that the claim for deduction under the relevant section had been admitted in previous assessment years without contravention from the Revenue. Therefore, the Tribunal dismissed this ground raised by the Revenue.

In conclusion, the Tribunal dismissed the appeal of the Revenue based on the decisions and reasoning provided for each issue, thereby upholding the orders of the CIT(A) in favor of the assessee.

---