2023 (1) TMI 474

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....nd in case no. PN/CIT(A)10/DCIT Cir.(Exemp.)/25/16-17, assessment year-wise, respectively, in proceedings u/s. 143(3) of the Income Tax Act, 1961 (in short "the Act"). 2. Heard both the parties. Case files perused. 3. The Revenue's former appeal ITA. No. 786/PUN./2019 raises the following substantive grounds: 1. The learned Assessing Officer has erred in determining the net taxable income of the appellant at Rs. 4,56,79,340/- as against the returned income of Rs. NIL/-. The addition of Rs. 4,56,79,340/- made by the learned Assessing Officer on account denial of exemption u/s. 11 & 12 of the Act is patently illegal and unsustainable in law and the same may please be deleted. 1.1. The Ld. AO has erred in treating t....

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....t have valid registration. 4. The Ld. AO has erred in disallowing an amount of Rs. 2,41,27,211/- being Provision for Gratuity u/s. 40A(7) of the Act without appreciating that the said provisions are not applicable to the assessee as its income is chargeable to tax under the head of 'Income from Other Sources'. 5. The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal." 4. The Revenue's pleadings are no different in its latter appeal ITA. No. 787/PUN./2019 for assessment year 2013-14 wherein the only difference is that of the amount of sec. 40A(7)(b) disallowance of Rs. 2,41,27,211/- and Rs. 2,76,54,732/- appeal-wise, respectively. 5. We first of all come to the Revenu....

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....nditure account. The AO contended that, as per the provisions of section 40A(7)(b) of the Act, the assessee should have contributed the provisions done towards an approved gratuity fund. Admittedly, the same had not been done and therefore such provision for gratuity could not be allowed as expenditure u/s. 40A(7) of the Act. The AO, therefore, had added the same to the total income. 7.1 The appellant in the written submission dated 20/04/2018 in this connection, vide para 4, submitted as below:- "4. Ground No. 4 - Disallowance of Provision for Gratuity u/s. 40A(7) of the Act: 4.1] For the year under consideration, the appellant has debited an amount of Rs. 2,41,27,211/- to Income & Expenditure A/c. on account of ....

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....vour of the appellant. The ITAT relied upon the decision Hon'ble Madras High Court in the case of CIT vs. Rao Bahadur Calavald Cunnan Chetty Charities 135 ITR 485 and held income for purposes of section 11(1)(a) has to be computed on commercial basis without reference to normal provisions of the Act. It is therefore prayed before your honour that the addition made u/s. 40A(7) of the Act may kindly be deleted as the assessee is eligible for exemption u/s. 11 and not to be treated as AOP." 7.2 I have perused the assessment order, the submission of the appellant and the materials on record carefully. I find that the Hon'ble ITAT Pune vide order in ITA nos. 921 to 923/PN/2012 dated 16/05/2017 for A.Ys. 2005-06 to 2007-08 in thi....