TMI Blog2021 (3) TMI 352X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority ought to have consider the obligation of appellant as an employer to pay the gratuity on death or retirement to its employees. 4. The Assg. authority has erred in disallowing the premium paid by the appellant to L.I.0 of India, which is a government of India Corporation under Group Gratuity Scheme as per the master policy issued by the L.I.0 of India to cover the risk of the employer for payment of gratuity to its empl3oyees on death or retirement. 5. The Assg. Authority is under misconception that the premium paid to L.I.C of India under master policy is not approved by the Commissioner of Income Tax. 6. The Assg. Authority ought to have consider the fact that the appellant has not created its own trust to meet the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India as premium, which is treated as expenses to the assessee. The Ld. AO observed as under: 3.3. The assessee's submissions were examined carefully. As per the provision of the Income Tax Act, 1961, the contribution to the Gratuity Fund is allowed as a deduction only if such contribution is made to an Approved Gratuity Fund. As per the provisions of the Act approved gratuity fund means a gratuity fund which has been and continues to be approved by the Chief Commissioner or Commissioner of Income Tax in accordance with the rules contained in Part C of the Fourth Schedule of the Income Tax Act 1961. If the contribution is not made to an approved fund, then claim of deduction for contribution to such fund, is to be disallowed u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by observing as under: 4.4 A perusal of the above shows that when the gratuity becomes payable to any employee on his death, retirement or cessation of service, the LIC of India will pay the benefits to the appellant company out of the accumulated balance. Thus the amount paid by LIC of India comes back to the appellant itself, as it is the Grantee eligible to receive all payments, which it is further required to disburse to the employees or their families. Since the funds are not coming to an approved gratuity fund from LIC of India, the appellant has complete control over the funds received by it from LIC and discretion of its use. Thus the basic requirement of Section 36(1)(v) of the Act, as noted by Hon'ble Supreme Court in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 36(l)(v) of the Act since the scope of Section 40A(7) relates to provisions and not to the cases of actual payment. 4.6 Considering above, since the appellant not complied with the requirement of Section 36(1)(v) of the Act, deduction of ₹ 1,97,592 cannot be allowed to it. So the grounds of appeal 2 to 4 of the appellant are dismissed. 5. Aggrieved by the order of the Ld.CIT(A), assessee is in appeal before us now. 6. Before us, the Ld.AR submitted that, assessee made payment of ₹ 1 lakh to LIC, the receipt of which is placed at page 9 of paper book, towards the premium, which is eligible for deduction under section 37 of the Act. He submitted that, the assessee claimed expenses on the basis of actual pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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. 10. 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. 11. Considering the various decisions of this Tribunal and 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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