TaxTMI 
TaxTMI 
2020 (8) TMI 471
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....ion with LIC of India and since the contribution in each year has been claimed as deduction, thereby, not claimed each years accrual. Hence, the Appellant has rightly claimed the deduction, which may kindly be allowed in the interest of justice. 3) For that the order passed U/s 263 is not sustainable being change of opinion and passed without application of mind since, the appellant has formed a trust on 29.01.1999 to look after independently the Gratuity Fund of all the employees and made a Group Gratuity Scheme through Life Insurance Corporation of India. Every year whatever sum of premium calculated by LIC at the beginning of the year considering present employees and their current emoluments, the appellant deposited the amount in Group Gratuity Scheme and consider it in the Profit & Loss account for the relevant year and the employees left are being paid gratuity by the Trust having no impact in the Profit & Loss Account. Hence, the same may kindly be allowed in the interest of justice. 4) For that any of the grounds incidental to the grounds of this case may kindly be permitted to urge at the time of hearing of the case. 2. Brief facts of the case are that....
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....at Rs. 2,36,56,768/- assessing total income of the assessee at Rs. 2,50,43,120/-. 3. Subsequently, the Pr. CIT invoking the revisonary power vested u/s.263 of the Act called for the assessment records and after due examination, directed the AO to modify the assessment order making disallowance u/s.40A(7) of the Act on account of payment made to unapproved gratuity fund. 4. Against the above order of Pr.CIT, the assessee is in appeal before the Income Tax Appellate Tribunal. 5. Ld. AR before us filed his written submissions, which read as under :- 1. That the Appellant is Private Limited Company engaged in the business of manufacture of detergent .The return of income for the Assessment Year 2014-15 was filed on 11.10.2014 disclosing total income of Rs. 1,96,44,310.00 . The assessment was completed u/s 143 (3) of the income Tax Act, 1961 (in short the Act.) by the ACIT Circle-2 (1), Cuttack (in short the AO) on 17.1.2016 determining the total income at Rs. 2,50,43,120.00. 2. That during the impugned year of assessment the Appellant Company has formed a trust on 29.01.1999 to look after independently the gratuity Fund of all the employees and made a Group G....
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....e Corporation of India. Every year whatever sum of premium calculated by LIC at the beginning of the year considering present employees and their current emoluments. We deposit the amount in Group Gratuity Scheme and consider it in our Profit & Loss account for the relevant year. The employees left are being paid gratuity by the Trust having no impact in our Profit & Loss Account. In the financially year 2013-14 we have paid Rs. 16,65,030.00 towards premium for gratuity as calculated by LIC and taken it in our Profit & Loss Account but erroneously in the Tax Audit Report 3CD at point No. 21 (e) shown under " Provision for payment of gratuity not allowable under section 40 A (7). " We would like to further inform you that the amount paid to Life Insurance Corporation towards provision for gratuity which was due for the year in question under Group Gratuity Scheme and not paid the sum out of provision to any employee except throughLIC under the scheme. Hence section 40A(7) is not applicable in our case. We highly regret for the erroneous qualification show in Tax Audit Report 3CD at point No. 21 (e) under section 40A(7)." 6. That learned Principal Commissio....
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....le ITAT, Delhi "B" Bench in the case of ITO v. MMTC Ltd,. 3 ITD (Del)305 Further, the Hon'ble ITAT in the case of PCIT, Circle-3 (2) , Hyderabad v. Sri Krishna Drugs Ltd, in ITA No. 198/ Hvd/2011, dated 16.12.2011. has also held that payment to Group Gratuity Fund of LIC of India is allowable as business expenditure u/s. 37 (1) of the Act. Even though not recognized bythe Commissioner of income Tax, The Hon'ble Tribunal has relied on the decision of the Andhra Pradesh High Court in the case of Warner Hindustan Ltd, while allowing the payment of premium to the LIC group Gratuity Fund. Similarly, ITAT Ahmedabad Bench in the case of Baroda Gujarat GrameenBank cited fsupra) held that the payment made to LIC of India is not a provision but it is actual expenditure claimed under the gratuity contribution. Hon'ble ITAT Ahrnedabad Bench held the since assessee has not claimed the provision and claimed on actual basis, the expenditure is allowable deduction. For ready reference, para Nos.4 &5 of the order of the Hon'ble ITAT Ahrnedabad Bench are reproduced which reads as under: "4. We have considered the rival submission and material available on record. Se....
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....e payments to the LIC towards group gratuity scheme directly in approved schemes . The assessee has also obtained the policy in favour of the bank. The assessee has no control oyer the funds contributed to LIC towards the gratuity. The assessee is receiving the gratuity payment directly from the LIC of India as per the scheme which is paid to the employees on happening of the event i.e retirement or death or resignation. Therefore, the facts of the assessee's case are squarely covered by the decisions cited supra. The coordinate bench of Hyderabad while delivering the ruling relied on the decision of jurisdictional High Court in the case of Warner Hindustan Ltd. Since the facts are identical, respectfully following the view taken by the coordinate benches, we hold that the assessee is entitled for the deduction for payment of gratuity to LIC and accordingly, we set aside the order of the lower authorities and allow the appeal of the assessee. 8. That, in the instant case of the appellant, the premium has been deposited with LIC of India and there is no provision and the claim of expenditure is on actual payment of the premium and on which the appellant has no ....
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.....2014 and the mode of payment is yearly. Further on perusal of the case law relied on by the ld. AR of the assessee in the case of The Guntur District Cooperative Central Bank Ltd., ITA Nos.77&78/Viz/2018 along with other appeals vide order dated 31.07.2018, we found that the similar issue has already been decided by the Vizag Bench of the Tribunal in the above case and the Tribunal while deciding the issue has followed the decision rendered by the Ahmedabad Bench of the Tribunal in the case of Baroda Gujarat Gramin Bank(Erstwhile Panchmahal Vadodara Gramin Bank Ltd.), ITA No.1479/Ahd/2010, order dated 06.08.2010. The relevant observations of the Tribunal in the case of The Guntur District Cooperative Central Bank Ltd (supra) are as under :- "2. During the assessment proceedings, the Assessing Officer (AO) found that the assessee debited the expenditure of Rs. 76,15,159/- towards premium paid to LIC under 'Group Gratuity Scheme'. As per Part 'C' to Schedule-IV of the Income Tax Act (hereinafter called as 'Act'), any such contributions should be under a scheme duly approved by the Chief Commissioner or Commissioner of Income Tax, for allowing as eligible deduction. The c....
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....only are allowable expenditure under the provisions ofsec.36(1)(v) of the Income Tax Act, 1951. In the instant case, the assessee is contributing for group gratuity scheme to LIC of India which does not have approval of the concerned authority. Hence, added to the total income. The Hon 'ble ITAT, Hyderabad B-Bench, in the case of international Ore and Fertilizer (India) (P) Lid., Vs ITO (3 ITO Hyd., 593) has held that payment to LIC Group Gratuity Scheme is in the nature of business expenditure deductible under the provisions of Section 37 of the Act and therefore, is to be allowed as it is laid out wholly and exclusively for the purposes of the business. The Hon'ble ITAT has in this case has observed that provisions of section 40A(7) of the Act would apply only in respect of provision made for gratuity in case of unapproved finds and not actual payments made, which are covered by section 37 of the Act. The similar view has been taken by the Ho 'ble ITAT, Delhi "B" Bench in the case of ITO vs MMTC Ltd, 3 ITD (Del) 305. Further, the Hon'ble ITAT in the case of DCI?', Circle-3(2), Hyderabad Vs Sri Krishna Drugs Ltd., in ITA No. 198/Hyd/2011, dated 16.12.2....
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....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 relevant to the assessment year 2007-08, the A.O. disallowed the same since the payment made to LIC of India towards group gratuity scheme is not covered by section 36(1)(v), 40A(7)(b) & 40A(9) of the Act because the assessee has not satisfied the conditions. The argument of the assessee is that since the payments were made to LIC of India in Master policy scheme, the premiums contributed to the LIC of India is allowable deduction and relied on the decisions of coordinate bench of Hyderabad in the case of Capital IQ Information Systems (India) Pvt. Limited (supra). The Hon'ble ITAT Hyderabad Bench while deciding the issue on similar facts held as under: 8. We have heard the arguments of the parties, perused the material on record and have gone through the orders of the authorities below. We find that the issue is squarely covered by the decision of the ITAT, Hyderabad in the case of M/s. Sri Krishna Drugs Ltd. Vs. Department of Income-tax in ITA No.2126/Hyd/2011 for AY 2007.08 dated 11.4.2012, where the JM ....
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.... However, the contention of the assessee is that in view of the judgement of the Madras High Court in the case of Premier Spinning Mills Ltd. (supra) and the judgement of the jurisdictional High Court in the case of Warner Hindustan Ltd. (supra), it has to be allowed. 5. We have carefully gone through the judgement of the jurisdictional High Court in the case of Warner Hindustan Ltd. (supra). In the case before the jurisdictional High Court, the Provident Fund was not approved by the CIT. The Andhra Pradesh High Court after referring to the judgement of the Bombay High Court in Tata Iron & Steel Co. Ltd. v. D. V. Bapat, ITO (1975) 101 ITR 292, and the judgement of the Supreme Court in Metal Box Company of India Ltd. vs. The Workmen (1969) 73 ITR 53, held that the amount paid towards an unapproved gratuity fund can be deducted under sec. 37 of the I.T. Act, though not under sec. 36(1)(v). In view of this judgment of the jurisdictional High Court, in our opinion, even if any payment is made to an unapproved gratuity fund, it has to be allowed under sec. 37. By respectfully following the binding judgement of Andhra Pradesh High Court in the case of warner Hindustan Ltd. (supr....
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....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 grant of approval of gratuity fund was not relevant for purpose of instant case as said deduction was not being claimed on account of any provision and amount of gratuity was an allowable deduction - Held, yes". 5. Considering the above aspects, we do not find any infirmity in the order of the learned CIT(A) in deleting the addition. There is no merit in the departmental appeal. Same is accordingly dismissed." 10. In the case of Verizon Data Services India Pvt. Ltd. (supra) the coordinate bench of Madras held that payment made to gratuity fund maintained with LIC has no control over the irrevocable trust created exclusively for the benefit of employees and deduction shall be allowed. The coordinate bench of Madras while deciding the appeal relied on the decision of Hon'ble Madras High court in the case of Textool India Pvt. Limited (supra) (civil appeal No.447 of 2003). In the instant case the assessee has made the payments to the LIC towards group gratuity scheme directly in approved schemes. T....