TaxTMI 
TaxTMI 
2019 (7) TMI 78
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....ondone the delay in filing the appeals. 3. The Revenue has raised the following grounds of appeal in ITA No.166/VIZ/2019:- "1) The order of the Ld. CIT(A), Rajahmundry is erroneous in law or facts or both. 2) The CIT(A) erred in observing that since the payments were actually made and genuine and the same are to be allowed, without appreciating the fact that, the contributions to [IC, though stated to be on actuarial basis, do not enable the assessee to claim deduction of payments made to LIC since the same is not in accordance with sections 36(1)), 40A(7) and 40A(9). 3) The CIT(A) ought to have appreciated that the contribution made by the assessee towards gratuity fund was to an unapproved gratuity fund and as such, the contribution/ payment is not an allowable deduction. 4) The CIT(A) ought to have relied upon the decision of the Apex Court in the case of M/s. Sri Sajjan Mills reported in 156 ITR 585 (SC), wherein it was categorically held that, after insertion of section 40A, gratuity payment cannot be allowed on general principles under any other sections of the Act. 5) The CIT(A) erred in directing the AO to allow the vehicle hi....
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.... ITAT, Visakhapatnam Bench in assessee's own case for the A.Ys. 2007-08 to 2009-10 and submitted that claim made by the assessee may be allowed. The ld. CIT(A) by considering the submissions made by the assessee and also by following the decision of the ITAT, Visakhapatnam Bench in assessee's own case, directed the Assessing Officer to allow the amounts paid by the assessee towards employees gratuity contribution. For the sake of convenience, the relevant portion of the order is extracted as under:- "4.3 Decision: On perusal of the material available, it come into sight that the amounts of Rs. 50,00,000/- for the A.Y:2014-15 and Rs. 1,50,00,000/- for the A.Y:2015-16 should have been allowed in full as the appellant bank making annual contribution of gratuity to LIC. The appellant-bank, further, contended that it is a genuine payment credited on behalf of Employees Group Gratuity Fund and the provision is made as per 'the agreement entered by and between the appellant-bank and the employees.' Therefore, the appellant requested that it should not be denied the benefit U/s.36(i)(v) for the reason that 'the entire payments were deposited with LIC directly' as s....
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....rder is extracted as under:- "8. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The assessee is a cooperative bank and created the group gratuity fund/trust of the District Co-operative Central Bank Employees but the same was not yet approved by the CIT. We have heard the arguments of the parties Pending receipt of approval, the assessee had made application to LIC of India under pension and group schemes, and taken policy under Master proposal for group for payment of gratuity on 1.7.2003, and is contributing the sums to the LIC of India towards the group gratuity on actuarial basis. The assessee has not made any provision and made the payment before filing the return of income. On happening the event, the assessee bank is receiving the gratuity payment from the LIC which is being paid to the employee concerned and no further deduction is being claimed by the assessee as expenditure. Thus no double deduction is claimed. The expenditure claimed by the assessee under group gratuity scheme to LIC of India was allowed in the earlier years prior to 2007-08. During the previous year releva....
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....ses shall be allow d in respect of the matters dealt with therein, in computing the income referred to in section 28 - (v) any sum paid by the assessee as an employer by way of contribution towards an approved gratuity fund created by him for the exclusive benefit of his employees under an irrevocable trust". We have also carefully gone through the provisions of sec. 37 of the Income-tax Act. Sec. 37 provides for deduction of expenditure not being in the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenditure of the assessee, but laid out and expended wholly and exclusively for the purposes of the business or profession, while computing income chargeable to tax. The main contention of the Revenue is that under sec. 36(1)(v), the payment made by the assessee as employer could be allowed only in respect of approved gratuity fund. Since the Group Gratuity Scheme is not approved by the CIT, according to the Revenue, it cannot be allowed. However, the contention of the assessee is that in view of the judgment of the Madras High Court in the case of Premier Spinning Mills Ltd. (supra) and the judgment of ....
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....It is clear from the above provision that section 40A (7) of the IT Act would apply in respect of the provision only. However, in the case of the assessee, the assessee claimed deduction of the expenditure on account of actual expenses claimed under the head gratuity contribution. ITAT Ahmedabad Bench in the case of New Bharat Engineering Works (Jam) Ltd. (supra) held "Disallowance under s. 40A(7) - Gratuity - Actual payment of funds to LIC and not mere provision - Not hit by s. 40A(7) - CIT vs Gujarat Machine Tools (ITA 666/A hd/1985) followed". Hon'ble Punjab & Haryana High Court in the case of CIT Vs Bitoni Lamps Ltd. 144 Taxman 33 held that "Section 40A(7) of the Income-tax Act, 1961 - Business disallowance - Gratuity - Assessment year 1979-80 - Assessee-company claimed deduction under section 40A(7) (b) (i) on account of gratuity actually deposited in fund created by it - Whether such a claim could only have been disallowed if it had been proved that gratuity, in respect of which said payment had been made, had not become payable during previous year - Held, yes - Whether in absence of such a case made out by revenue, Tribunal was right in holding that gr....