Appellate Tribunal remands matter for verifying gratuity contribution, directs benefit under section 40A(7) (7)

The Appellate Tribunal remanded the matter to the Assessing Officer to verify the gratuity contribution made by the appellant during the relevant year. The Tribunal directed the AO to grant the benefit of section 40A(7) if the contribution was indeed made during the assessment year. The appellant's appeal was allowed for statistical purposes, with the order issued on 14.07.2021.

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Issues:
1. Disallowance of gratuity contribution under section 40A(7) for A.Y. 2017-18.

Analysis:
The appellant challenged the orders of the Assessing Officer and the Commissioner of Income Tax (Appeals) claiming that they were not in line with the facts of the case and were legally unsustainable. The appellant specifically contested the disallowance of Rs. 19,52,659 under section 40A(7) of the IT Act, 1961, which was confirmed by the CIT(A). The appellant argued that the gratuity account position showed that the claimed expenditure of Rs. 22,59,445 included an amount of Rs. 19,95,569 paid during the year, with the balance added to the income computation. The appellant contended that the disputed amount of Rs. 2,63,876 had already been taxed considering the opening and closing balance difference. The appellant asserted that there was no justification for the additional disallowance of Rs. 19,52,569, which was not warranted under sections 143(1) or 143(3) of the IT Act.

The CIT(A) disallowed the gratuity contribution based on the CPC's observation that the payment was not allowable under section 40A(7). However, the appellant presented a Chartered Accountant's certificate confirming the payment during the relevant year. The Appellate Tribunal noted that if the payment was made during the assessment year, it should be allowed as a deduction under section 40A(7). The Tribunal decided to remand the matter to the Assessing Officer for verification of the payment made by the assessee during the relevant year. The Tribunal directed the AO to grant the benefit of section 40A(7) if the contribution was indeed made during the assessment year. The AO was instructed to provide the assessee with an opportunity to present supporting documents during the verification process.

In conclusion, the appeal was allowed for statistical purposes, and the order was pronounced on 14.07.2021.

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