TMI Blog2012 (10) TMI 664X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in respect of provisions made towards payment of gratuity. - However, this restriction is subject to exceptions provided in clause (b). Clause (b) clearly steps that wherever the provisions is made for the purpose of payment of contribution towards approved gratuity fund then this clause (a) is not applicable. - It is not disputed that the payment to LIC was towards approved gratuity. Therefore, the provision towards gratuity could not have disallowed under clause (a) of Section 40A(7) of the Act. - in favour of assessee. - ITA No. 1074/Chd/2010 - - - Dated:- 13-7-2012 - SHRI H.L. KARWA AND SHRI T.R. SOOD, JJ. Appellant by: Shri Ajay Jain Respondent by: Shri N.K. Saini ORDER PER T.R. SOOD, A.M In this a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... next year. Since the provisions was not allowable expenditure, therefore, he confirmed the disallowance. 5. Before us, the ld. counsel of the assessee submitted that the assessee is a Cooperative Bank and the assessee-bank as per Rule 73 of Haryana Cooperative Societies Rule 1989 is required to contribute 2% profit subject to maximum limit of Rs.2.00 lakhs towards education fees. Since the assessee was following the mercantile system of accounting and education fee being statutory liability has been provided during the year, therefore, such expenses should have been allowed. He also referred to letter dated 22.10.2002 issued by the Registrar Cooperative Societies Haryana, which has been filed at page 6 of the paper book in which a direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mum limit of contribution for certain categories of Co-operative Societies was required to be enhanced. In this respect the matter has been discussed in detail and it has been decided that the Co-operative Societies shall contribute towards education fund to the Harcofed as per revised rates given below: S No. Type of Society Rate of contribution with maximum limit 2 Co-operative Sugar Mills 2% of the net profit of the year subject to a maximum of Rs. 1.50 lacs. 3 Central Cooperative Banks 2% of the net profit of the year subject to a maximum of Rs. 2.00 lacs 4 Other Central Cooperative Societies 2% of the net profit of th year subject to a maximum of Rs. 25,000/- 5 Co-operative Mktg Societies/Pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of above profits subject to maximum limit of Rs. 2.00 lakhs towards education fund which is of statutory nature. Since the payment is of statutory nature the expenses has to be allowed on the basis of the provision. Accordingly we set aside the order of the ld. CIT(A) and direct the Assessing Officer to allow Rs. 2.00 lakhs. Ground No. 2 is allowed. 9. Ground No. 2 After hearing both the parties we find that during assessment proceedings the Assessing Officer noticed that the assessee had made a provision for gratuity amounting to Rs. 70.00 Lakhs. In response to a query some details regarding payment of gratuity to the employees and also payment to LIC were furnished. It was contended that whole payment should be allowed on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... page 13 which is a copy of the letter written by LIC to the assessee. He submitted that as per this letter perhaps more payment was due to LIC and it can not be treated as approved gratuity fund. 14 We have heard the rival submissions carefully and find force in the submissions of the ld. counsel of the assessee. Section 40A(7) reads as under: (7) (a) Subject to the provisions of clause (b), no deduction shall be allowed in respect of any provision (whether called as such or by any other name) made by the assessee for the payment of gratuity to his employees on their retirement or on termination of their employment for any reason. (b) Nothing in clause (a) shall apply in relation to any provision made by the assessee for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X
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