2026 (2) TMI 203

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....al Centre (NFAC), Delhi ["Ld. CIT(A)", for short] dated 20.02.2023 for the Assessment Year 2020-21, wherein the assessee has raised following grounds:- "1. In law and in the facts and circumstances of the case, the learned CIT(A) has erred in rejecting the claim of appellant for Rs. 6,51,894/-towards gratuity expense when such claim is duly allowable in view of provisions of section 40A(7) and 43B of the Income Tax Act, 1961. Accordingly, the disallowance made by learned AO is required to be deleted. 2. The appellant craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal." 2. Since, the assessee has taken single issue of disallowance ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ount was transferred to the above said company by passing a journal entry in its book. He observed that the amount of Rs. 6,51,894/- no doubt relates to preceding years towards accumulation for gratuity, since the employee was transferred to the other concern, above said employee no more remains with the assessee, therefore, liability in the name of above said employee who was transferred to other entity, which is in the nature of journal entry without actual payment. According to him the assessee has passed just a journal entry and adjusted the same under the head domestic debtors in its book. He observed that without making actual payment, merely passing a journal entry, the claim of the assessee does not fall under the provision 40A(7), ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....s incurred a certain gratuity expenditure and claimed the same in its profit and loss account. The Assessing Officer disallowed the same as its provision of gratuity which does not fall u/s 40A(7) of the Act. We observed that Ld. CIT(A) has analyzed the gratuity expenditure claimed by the assessee and he has allowed to the extent of actual payment made by the assessee to the employee Mr. Neelesh Singh, however rejected the claim related to other employee Mr. Ajay Bhatnagar, who was transferred to another concern. Ld. CIT(A) is of the view that mere transfer of the gratuity liability does not fall under the category of actual payment. It is only a journal entry, therefore, the assessee has not discharged the relevant payment. After consideri....