2023 (5) TMI 310 - AT - Income Tax

Tribunal allows deduction of Rs. 89,632 based on consistency and nature of expenditure

Valsad District Central Co-operative Bank Ltd., Versus. The AC IT, Val sad Circle, Valsad.

The Tribunal allowed the appeal, directing the AO to allow the deduction of Rs. 89,632/-. The decision was based on the principle of consistency, the ... Disallowance of expenditure being the premium actually paid to LIC under the Group Gratuity-cum-Life Insurance Scheme u/s 36(l)(v) - HELD THAT:- We note that assessee is making payment to the LIC Department in the gratuity scheme which was approved earlier by Commissioner of Income Tax. However, the assessee has not produced the necessary certificate before the lower authorities as it would not available with him, therefore, deduction was denied. The said deduction has been claiming by assessee since a long, therefore by following the principle of consistency and considering the facts and circumstances of the case, deduction should be allowed to the assessee. Therefore, we direct the Assessing Officer to allow deduction. Appeal filed by the assessee is allowed. Issues Involved:1. Initiation of proceedings under Section 147 and issuance of notice under Section 148 of the Income Tax Act.2. Disallowance of expenditure of Rs. 89,632/- under Section 36(1)(v) of the Income Tax Act.3. Applicability of Section 37(1) of the Income Tax Act for the disallowed expenditure.4. Consideration of written submissions by the assessee in the appellate order.Detailed Analysis:1. Initiation of proceedings under Section 147 and issuance of notice under Section 148 of the Income Tax Act:The assessee contended that the initiation of proceedings under Section 147 and the issuance of notice under Section 148 were based on a mere change of opinion, making the subsequent assessment under Section 144 read with Section 147 invalid. The Tribunal did not specifically address this issue in the judgment, focusing instead on the substantive issue of disallowance of expenditure.2. Disallowance of expenditure of Rs. 89,632/- under Section 36(1)(v) of the Income Tax Act:The Assessing Officer (AO) disallowed the expenditure on the grounds that the assessee's gratuity fund was not approved by the Commissioner of Income Tax, as required by Section 36(1)(v). The AO emphasized that the statutory provisions necessitate approval from the Commissioner, and without such approval, the expenditure could not be allowed. The assessee argued that the expenditure was for actual payment of premium to LIC under a Group Gratuity-cum-Life Insurance Scheme, which should be allowable under Section 36(1)(v) or alternatively under Section 37(1).3. Applicability of Section 37(1) of the Income Tax Act for the disallowed expenditure:The AO rejected the applicability of Section 37(1), asserting that specific provisions (Section 36(1)(v)) take precedence over general provisions (Section 37(1)). The Tribunal, however, referred to the judgment of the Co-ordinate Bench of ITAT, Surat, and other cases where similar claims were allowed on the grounds that the payments made to LIC under a master policy were not mere provisions but actual expenditures. The Tribunal noted that the assessee's claim had been consistently allowed in earlier years and that the principle of consistency should be applied.4. Consideration of written submissions by the assessee in the appellate order:The assessee claimed that the CIT(A) did not properly consider the written submissions. The Tribunal found that the CIT(A) upheld the AO's decision without adequately addressing the assessee's arguments and the supporting evidence provided. The Tribunal emphasized the importance of considering all relevant submissions and evidence before making a determination.Conclusion:The Tribunal allowed the appeal, directing the AO to allow the deduction of Rs. 89,632/-. The Tribunal's decision was based on the principle of consistency, the actual nature of the expenditure, and precedents where similar claims were allowed. The Tribunal underscored that the assessee had no control over the funds managed by LIC, and the payments were made under an approved scheme, albeit the specific approval document was not available. The decision was pronounced on 27/02/2023.