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2018 (7) TMI 814 - AT - Income TaxDisallowance of Contribution of Gratuity Fund - Held that:- We find lot of force in the argument of the ld. AR that the actual settlement of gratuity to retired employees during the year in the sum of ₹ 16,95,886/- is to be treated as deduction. Accordingly, we direct the AO to grant deduction of ₹ 16,95,886/- towards actual payment of gratuity made to retired employees. Accordingly, ground nos. 1 to 4 raised by the assessee are partly allowed. Disallowance on account of Contribution to Provident Fund - whether the assessee, being an employees of co-operative bank, would fall within the ambit of applicability of provisions of Employees’ Provident Fund and Miscellaneous Provision Act, 1952? - Held that:- We find no finding is recorded by the ld. AO in this regard. Without such finding, it cannot be decided that whether the provisions of section 2(24)(x) and 40A(9) of the Act could be invoked on the assessee. Accordingly, we deem it fit and appropriate, to remand this issue to the file of the AO for de novo adjudication in the light of directions contained herein above. Accordingly, ground nos. 5 to 9 of the assessee appeal for assessment year 2011-12 and ground nos. 1 to 5 for assessment year 2012-13 are allowed for statistical purposes. Disallowance of Contribution to Employees Pension Fund paid to Aviva Life Insurance Ltd. - allowable business expenditure - Held that:- The payment of insurance premium paid by the assessee was made on behalf of its employee. Hence it squarely falls as an expenditure incurred for the welfare of its employees. It is not in dispute that the proceeds of the insurance policy does not fall back on the assessee and that the assessee would have no control over those funds and the said funds cannot be utilized by the assessee for its business purposes. In other words, the said funds exclusively belongs only to the employees. In this scenario, the payment made towards insurance premium would have to be construed as an expenditure incurred wholly and exclusively for the purpose of business and squarely allowable u/s 37(1) Disallowance of Interest paid on Members’ Welfare Funds - Held that:- We find that the assessee had made specific earmarked investment in fixed deposits maintained for members’ welfare fund and had derived interest income thereon at the average rate of 11.34% which has been duly offered to tax. In any case, the members’ welfare fund has been utilized for the purpose of business which is not in dispute and the said funds were also deployed by way of earmarked investment in fixed deposit deriving taxable interest income. This fact has not been verified by the ld. AO as no finding to this effect is available in the record. Hence we deem it fit and appropriate, to remand this issue to the file of ld. AO for de novo adjudication, uninfluenced by earlier decision taken either by him or by the CIT(A) in this regard Disallowance of Interest paid on Staff Provident Fund - Held that:- We find that the assessee had made specific earmarked investment in fixed deposits maintained for staff provident fund to the tune of ₹ 1,98,93,000/- and had derived interest income thereon at the average rate of 9.57% which has been duly offered to tax. In any case, the staff provident fund has been utilized for the purpose of business which is not in dispute and the said funds were also deployed by way of earmarked investment in fixed deposits deriving taxable interest income. This fact has not been verified by the AO as no finding to this effect is available in the record. Hence we deem it fit and appropriate, to remand this issue to the file of ld. AO for de novo adjudication Appeals of the assessee are allowed for statistical purposes.
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