Tribunal allows appeal, directs AO to allow disallowance for inconsistency, deletes gratuity disallowance.

The Tribunal allowed the appeal of the assessee, dismissing the claim of deduction of ESI and PF due to late remittance, directing the Assessing Officer to allow the disallowance made by the assessee for inconsistency in the total amount claimed, and ordering the deletion of the disallowance related to the gratuity payment as it was allowable under substantive law.

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Issues Involved:
1. Disallowance of deduction of ESI and PF claimed u/s. 36(1)(va) of the Act.
2. Disallowance of inconsistency in total amount claimed u/s. 37 of the Act.
3. Not considering the difference pertaining to payment made for gratuity to the employees which is of allowable expenditure as per Explanation 2 to s. 40A(7) of the Act.

Analysis:

Issue 1: Disallowance of deduction of ESI and PF claimed u/s. 36(1)(va) of the Act
The appeal arose from the order confirming the disallowance of the claim of deduction of ESI and PF made by the assessee under section 36(1)(va) of the Income Tax Act, 1961. The assessee had remitted the employees' contribution to PF and ESI after the due date as prescribed by the respective statutes. The Tribunal referred to the decision of the Hon'ble Supreme Court in the case of Checkmate Services P. Ltd. v. CIT, where it was held that the employees' contribution of ESI and PF must be remitted on or before the due date as prescribed under the respective statutes for making a claim. Consequently, the Tribunal dismissed the claim of the assessee based on this legal precedent.

Issue 2: Disallowance of inconsistency in total amount claimed u/s. 37 of the Act
The second issue involved the disallowance of the inconsistency in the total amount claimed under section 37 of the Act. The Tribunal noted discrepancies between the amount reported in the tax audit report and the amount claimed in the return of income. The Tribunal examined the details provided by the assessee regarding the discrepancies and observed that the disallowance made by the assessee was further adjusted by the Assessing Officer, resulting in an additional disallowance. The Tribunal directed the Assessing Officer to allow the disallowance made by the assessee, as the total disallowance practically equaled the reported amount, and no further disallowance was warranted.

Issue 3: Not considering the difference pertaining to payment made for gratuity to the employees
The final issue concerned the non-consideration of the difference in payment made for gratuity to the employees, which was claimed as allowable expenditure under Explanation 2 to section 40A(7) of the Act. The Tribunal reviewed the discrepancies in the treatment of gratuity payments between the tax audit report and the return of income. After considering additional evidence presented by the assessee, the Tribunal held that the deduction of gratuity was available under substantive law and could not be disallowed based on procedural provisions. Consequently, the Tribunal directed the Assessing Officer to delete the disallowance related to the gratuity payment.

In conclusion, the Tribunal allowed the appeal of the assessee based on the analysis and findings for each of the issues presented before it.

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