TMI Blog2021 (3) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... by the coordinate benches, we hold that the assessee is entitled for the deduction for payment of gratuity to LIC and accordingly, we set aside the order of the lower authorities and allow the appeal of the assessee. - IT (TP) A No. 709/Bang/2020 - - - Dated:- 25-2-2021 - SHRI N.V. VASUDEVAN , VICE PRESIDENT AND SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER Appellant by : Shri Cyrus Jal Bharucha, CA Respondent by : Shri Balakrishnan N., Addl. CIT(DR)(ITAT), Bengaluru. ORDER Per Chandra Poojari , Accountant Member This appeal by the assessee is directed against the order dated 21.09.2020 of the CIT(Appeals), Bengalurlu-13 for the assessment year 2013-14 on the following grounds:- Si No Grounds of Appeal Tax effect relating to each Ground of Appeal (Rs.) 1 Both the lower authorities erred in disallowing the Appellant's contribution to the Employees' Superannuation Fund of ₹ 21,01,654/- u/s. 40A(9). ₹ 6,81,882/- (Inclusive of Surcharge @5% and Cess @3%) 2 The Assessing Officer err ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ground that the company had applied for approval and having verified the alternate evidences of the applications made for approval treated the amount as allowable. 3. The assessee submitted that the company had applied for the approval of Superannuation Fund as well as Gratuity Fund which is administered by the LIC in March 1999. The assessee remits the contribution to LIC in respect of Superannuation Fund governed by the provision of section 40A(9). 4. The AO was of the view that the provision of approved superannuation and Gratuity Fund in Part B and C in IV Schedule run similar and alike while the provisions for approval of provident fund in Part A of the 4th Schedule is totally distinct different from those in Part B C. Besides these entries are provisions and they clearly violate the principle u/s 40A(7) 40A(9). In this view of the matter, an amount of ₹ 21,84,256/- and ₹ 21,01,654/- being provision created for Gratuity fund and superannuation fund was disallowed u/s 40A(7) and 40A(9) respectively and added back to the total income of the assessee. The CIT(Appeals) confirmed the order of the AO. Against this, the assessee is in appeal before us. 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record and gone through the orders of the authorities below. The assessee is a cooperative bank and created the group gratuity fund/trust of the District Co-operative Central Bank Employees but the same was not yet approved by the CIT. Pending receipt of approval, the assessee had made application to LIC of India under pension and group schemes, and taken policy under Master proposal for group for payment of gratuity on 1.7.2003, and is contributing the sums to the LIC of India towards the group gratuity on actuarial basis. The assessee has not made any provision and made the payment before filing the return of income. On happening the event, the assessee bank is receiving the gratuity payment from the LIC which is being paid to the employee concerned and no further deduction is being claimed by the assessee as expenditure. Thus no double deduction is claimed. The expenditure claimed by the assessee under group gratuity scheme to LIC of India was allowed in the earlier years prior to 2007-08. During ITA No.49, 50,78, 476/Vizag/2012, 515, 524/Vizag/2014, 269/Vizag/2015 CO 33/Vizag/2013 CO 29/Vizag/2015 M/s. The District Co-operative Central Bank Ltd., Eluru the previous year rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of the matters dealt with therein, in computing the income referred to in section 28 - (v) any sum paid by the assessee as an employer by way of contribution towards an approved gratuity fund created by him for the exclusive benefit of his employees under an irrevocable trust . We have also carefully gone through the provisions of sec. 37 of the Income-tax Act. Sec. 37 provides for deduction of expenditure not being in the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenditure of the assessee, but laid out and expended wholly and exclusively for the purposes of the business or profession, while computing income chargeable to tax. The main contention of the Revenue is that under sec. 36(1)(v), the payment made by the assessee as employer could be allowed only in respect of approved gratuity fund. Since the Group Gratuity Scheme is not approved by the CIT, according to the Revenue, it cannot be allowed. However, the contention of the assessee is that in view of the judgement of the Madras High Court in the case of Premier Spinning Mills Ltd. (supra) and the judgement of the jurisdictional High Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee for payment of gratuity to his employer on their retirement or on termination of their employment for any reason. It is clear from the above provision that section 40A (7) of the IT Act would apply in respect of the provision only. However, in the case of the assessee, the assessee claimed deduction of the expenditure on account of actual expenses claimed under the head gratuity contribution. ITAT Ahmedabad Bench in the case of New Bharat Engineering Works (Jam) Ltd. (supra) held Disallowance under s. 40A(7) - Gratuity - Actual payment of funds to LIC and not mere provision - Not hit by s. 40A(7) - CIT vs Gujarat Machine Tools (ITA 666/Ahd/1985) followed . Hon'ble Punjab Haryana High Court in the case of CIT Vs Bitoni Lamps Ltd. 144 Taxman 33 held that Section 40A(7) of the Income-tax Act, 1961 - Business disallowance - Gratuity - Assessment year 1979-80 - Assessee-company claimed deduction under section 40A(7) (b) (i) on account of gratuity actually deposited in fund created by it - Whether such a claim could only have been disallowed if it had been proved that gratuity, in respect of which said payment had been made, had not become payable during previous year - Held, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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