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2021 (3) TMI 352 - AT - Income TaxDisallowance of premium paid to not Approved gratuity fund - premium 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" - 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 - 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 - HELD THAT:- Assessee paid to LIC sum of ₹ 1 lakh as premium to cover the obligation towards the gratuity payment to employees. The balance ₹ 16,585/- is only a provision. In assessment year 2015-16 contribution to LIC premium was deleted by holding that section 40A(3) cannot be invoked in respect of actual payments made by assessee to LIC. We also perused the decisions relied by the Ld.AR of coordinate benches of this Tribunal, wherein it is held that, payment made to get gratuity fund maintained with life insurance Corporation created exclusively for the benefit of its employees had to be allowed as deduction. Admittedly, during the year under consideration, assessee paid sum of ₹ 1 lakh to LIC. We agree with the submissions of the Ld.AR that, the disallowance could be at the most restricted to ₹ 16,585/- which is shown as provision during the year. Considering order passed by the Ld.CIT(A) in the subsequent year accepting the payment as an allowable expenditure actually made to LIC, we hold that assessee is to be granted relief to the extent of ₹ 1 lakh being actually made to LIC - Appeal filed by assessee stands partly allowed.
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