2021 (3) TMI 352

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.... admitted income made by the assessing authority by not deleting such disallowance in total. 2. The Assg. authority has erred in disallowing the premium amount of Rs. 1,97,592 paid to LIC of India to cover the payment of gratuity liability to its employees on death or retirement on the pretext that the Group Gratuity Scheme framed by LIC of India is not an "Approved gratuity fund". 3. The Assg. authority ought to have consider the obligation of appellant as an employer to pay the gratuity on death or retirement to its employees. 4. The Assg. authority has erred in disallowing the premium paid by the appellant to L.I.0 of India, which is a government of India Corporation under Group Gratuity Scheme as per the master policy issued by th....

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.... of Rs. 16,585/-as per demand notice received from LIC of India during the year under consideration. Assessee claimed sum of Rs. 1,16,585/- as expenses by debiting it into P&L account. 3. The Ld.AO disallowed the said expenses by observing that, assessee has not created any approved gratuity fund by forming a trust on its own but merely paying the amount to LIC of India as premium, which is treated as expenses to the assessee. The Ld. AO observed as under: "3.3. The assessee's submissions were examined carefully. As per the provision of the Income Tax Act, 1961, the contribution to the Gratuity Fund is allowed as a deduction only if such contribution is made to an "Approved Gratuity Fund. As per the provisions of the Act "approved gr....

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....s 40A(7) of the Act and added back to the taxable income." 4. Aggrieved by the order of the Ld.AO, assessee preferred appeal before the Ld.CIT(A). The Ld.CIT(A) was of the opinion that, the claim is not an allowable expenditure under section 36(1)(v) of the Act, since the scope of section 40A(7) relates to provisions and not the case of actual payment, by observing as under: "4.4 A perusal of the above shows that when the gratuity becomes payable to any employee on his death, retirement or cessation of service, the LIC of India will pay the benefits to the appellant company out of the accumulated balance. Thus the amount paid by LIC of India comes back to the appellant itself, as it is the "Grantee" eligible to receive all payments, whic....

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....Since in the case under consideration the deduction itself is not allowable as per Section 36(I)(v) of the Act, so the question of invoking Section 43B of the Act for allowing the same would not arise. Further, although the AO has disallowed amount as per Section 40A(7) of the Act, however, as noted above, the amount is not allowable as per provisions of Section 36(l)(v) of the Act since the scope of Section 40A(7) relates to provisions and not to the cases of actual payment. 4.6 Considering above, since the appellant not complied with the requirement of Section 36(1)(v) of the Act, deduction of Rs. 1,97,592 cannot be allowed to it. So the grounds of appeal 2 to 4 of the appellant are dismissed." 5. Aggrieved by the order of the Ld.CIT(A....