Tribunal allows appeal, sets aside disallowances, imposes cost, and grants leave encashment and gratuity claims.

The Tribunal allowed the appeal of the assessee, condoning the delay in filing the appeal subject to a cost of Rs. 5,000. The disallowances of leave encashment expenses and provision for gratuity were set aside, with the Tribunal allowing these claims. The order was pronounced on 19th December 2018.

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Issues:
Delay in filing appeal - Condonation of delay
Disallowance of leave encashment expenses
Disallowance of provision for gratuity

Analysis:

1. Delay in filing appeal - Condonation of delay:
The appeal by the assessee was directed against the order of the CIT(A) for the A.Y. 2013-14 with a delay of 26 days. The assessee sought condonation of delay citing closing of the financial year and other events as reasons. The Tribunal noted that the appeal could have been filed within the limitation period, and the bank's casual approach in explaining the delay. Despite this, considering the issues raised in the appeal favoring the assessee, the delay was condoned subject to a cost of Rs. 5,000.

2. Disallowance of leave encashment expenses:
The assessee's appeal challenged the disallowance of Rs. 31,53,596 under Income From Business & Profession related to provision of leave encashment expenses paid to LIC. The Assessing Officer disallowed the claim as a provision, not a crystallized liability. The CIT(A) upheld this disallowance. However, the assessee argued that the payment made to LIC was based on actual liability accrued to employees, making it allowable. Citing precedents, the Tribunal held that the payment to LIC for leave encashment was akin to EPF/ESI payments and allowed the claim as a deduction.

3. Disallowance of provision for gratuity:
The appeal also contested the disallowance of the provision for gratuity. The authorities denied the claim as the gratuity fund was not an approved scheme under Section 36(1)(v) of the Act. However, referring to previous decisions, the Tribunal ruled in favor of the assessee, stating that once payment was made to LIC for the group gratuity fund policy, separate approval of the fund was not required for the deduction under Section 36(1)(v). Consequently, the disallowance made by the authorities was deleted, and the claim of the assessee was allowed.

In conclusion, the Tribunal allowed the appeal of the assessee, setting aside the disallowances of leave encashment expenses and provision for gratuity. The order was pronounced on 19th December 2018.

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