Approval requirement for gratuity fund exemption; absence of certificate led to remittal to AO to verify approval and allow hearing.

Entitlement to exemption under Section 10(25)(iv) turns on approval of the gratuity fund and ordinarily requires proof of that approval; absence of the approval certificate and prolonged inaction by the competent authority amount to an administrative lapse. The matter is remitted to the assessing officer to obtain verification from the competent authority, afford the assessee an opportunity to produce evidence and be heard, and then decide the exemption claim in accordance with law.

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Issues: Whether the assessee is entitled to claim exemption under Section 10(25)(iv) of the Income-tax Act, 1961 for the assessment years 2016-17 and 2017-18 despite not possessing a copy of the approval certificate, where an application for approval was filed in 2004 and the record shows delay or lapse on the part of the competent authority.

Analysis: The exemption under Section 10(25)(iv) applies only to an approved gratuity fund, and proof of approval is ordinarily required. The facts show an application for approval dated 23-09-2004 and multiple follow-ups by the assessee, while communication or action from the competent authority was absent for an extended period; correspondence from the competent authority and the assessee indicates the approval may have been issued earlier but the assessee does not possess the certificate. The assessee cannot be compelled to produce a document it does not possess, and the matter involves administrative lapse by the authority. The appropriate course is to remit the matter to the assessing officer to obtain relevant details from the office of the competent authority and allow the assessee an opportunity to explain and file evidence, after which the AO shall decide in accordance with law.

Conclusion: The appeals are allowed for statistical purposes by setting aside the orders under challenge and restoring the issues to the file of the assessing officer for fresh examination in accordance with law; the AO is directed to obtain relevant details from the competent authority and afford the assessee an opportunity to be heard.

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