2015 (11) TMI 1664 - AT - Income Tax

Contribution to State Renewal Fund - allowable expenditure - Held that - ITAT Jaipur Bench has decided this issue in assessee s own case for the assessment year 2005-06 in favour of the assessee as the amount was set apart not for shareholder but it was provided for the benefits of the employees by following our earlier decisions we uphold the order of CIT(A) on this issue. - Decided against revenue Deduction for the contribution made to an unapproved gratuity fund.- Held that - As decided in assessee s own case for the assessment year 2005-06 in favour of the assessee wherein held assessee had already applied for the approval thus there was no lapse on the part of the assessee - Decided against revenue Prior period expenses - allowable business expenditure - Held that - The approval for payment of these expenditure were given during the year and therefore the liability crystalised during the year in view of these facts and the consistent view of this Bench that the liability crystalised on approval of payment we find no infirmity in the order of ld.CIT (A) deleting the disallowance - Decided against revenue

Summary

Issues involved:
1. Allowability of contribution to State Renewal Fund as expenditure.
2. Deduction for contribution made to an unapproved gratuity fund.
3. Allowability of prior period expenses as expenses.

Analysis:

1. Allowability of contribution to State Renewal Fund as expenditure:
The Revenue challenged the allowance of a contribution of Rs. 10.00 lacs to the State Renewal Fund as an expenditure for the assessment year 2007-08. The ITAT Jaipur Bench had previously decided a similar issue in favor of the assessee for the assessment year 2006-07. The Tribunal upheld the order of the CIT(A) based on precedents and held that the amount set apart for the benefit of employees, not shareholders, qualifies as an allowable expenditure. Therefore, the issue was decided against the Revenue for the current assessment year as well.

2. Deduction for contribution made to an unapproved gratuity fund:
The Revenue disputed the allowance of a deduction for the contribution of Rs. 17,94,199/- made to an unapproved gratuity fund. The ITAT Jaipur Bench had previously ruled in favor of the assessee for the assessment year 2006-07. The Tribunal upheld the order of the CIT(A) based on precedents and the fact that the assessee had applied for approval, justifying the deduction. Consequently, the Tribunal held that the CIT(A) was correct in deleting the disallowance of Rs. 11,92,460/- for the current assessment year.

3. Allowability of prior period expenses as expenses:
The Revenue contested the allowance of prior period expenses amounting to Rs. 1,96,917/- as expenses. The ITAT Jaipur Bench had previously decided a similar issue in favor of the assessee in the case of DCIT vs. Rajasthan State Seeds Corporation Ltd. The Tribunal upheld the order of the CIT(A) by considering the approval for payment of these expenses during the year, leading to the crystallization of the liability. As per the consistent view of the Bench, the liability crystallized upon payment approval, justifying the allowance of the expenses. Consequently, the grounds raised by the Revenue were dismissed, and the appeal of the Revenue was ultimately dismissed.

In conclusion, the ITAT Jaipur upheld the decisions of the CIT(A) based on precedents and consistent interpretations of the law, resulting in the dismissal of the Revenue's appeal for all the issues raised.