TMI Blog2022 (3) TMI 715X X X X Extracts X X X X X X X X Extracts X X X X ..... e. However, the AO is directed to verify the actual payment made by the assessee towards the gratuity scheme to LIC of India since there is confusion in the order of Ld. CIT(A) on this issue. With the aforesaid observation, the claim of the assessee is allowed. - I.T.A. No. 364/Kol/2020 - - - Dated:- 11-3-2022 - Shri A. T. Varkey, JM And Shri Rajesh Kumar, AM For the Appellant : Shri Akkal Dudhwewala, A.R. For the Respondent : Smt. Ranu Biswas, Addl. CIT DR ORDER PER SHRI A.T.VARKEY, JM This is an appeal preferred by the assessee against the order of Ld. CIT(A)-1, Kolkata dated 29.11.2019 for AY 2014-15. 2. The sole ground raised by the assessee is against the action of Ld. CIT(A) in upholding the disallowance of contribution to ₹ 38,85,096/- [ which figure according to Ld AR is an error because AO disallowed ₹ 65,92,737/-] made to gratuity fund (LIC Group Gratuity Scheme). 3. Brief facts of the case as noted by the AO is that the assessee which is a State Cooperative Bank returned an income of ₹ 6,84,00,990/-. During the scrutiny, the AO found that the assessee has debited in its profit and loss account of ₹ 66,74,983/- a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e had chosen the course as suggested by Section 4A(1) of the Act wherein it has obtained an insurance for its liability for payment towards gratuity from the LIC of India. Therefore according to the Ld. A.R. the actual payment made by the assessee to the tune of ₹ 65,92,737/- is an allowable expenditure u/s 37 of the Act and therefore the action of Ld. CIT(A)/AO in disallowing the same u/s 40A(7) / 37(1)(v) of the Act is erroneous and for that proposition he cited the decision of Hon ble Supreme Court in the case of CIT vs. Textool Company Ltd. (263 CTR 257) wherein the Hon ble Apex Court while hearing the similar appeal from the decision of Hon ble Madras High Court has held that the principles of reasonable construction shall not be ruled out even if one has to give strict construction in respect of fiscal statute. The Hon ble Supreme Court held that, the intention of Section 36(1)(v) of the Act, is that the employer should not have any control over the funds of the irrevocable trust created exclusively for the benefit of the employees (gratuity) of the assessee. Thereafter he drew our attention to the decision of Hon ble Allahabad High Court in the case of M/s Scooters Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the disallowance made by the authorities below should be reversed and the deduction should be given to contribution actually made by the assessee to the tune of ₹ 65,92,737/-. 8. Per contra, the Ld. D.R. relied on the order of the Ld. CIT(A) and cited the decision of the Hon ble Madras High Court in the case of CIT vs. Coimbatore Premier Corporation (244 ITR 753) and Hon ble Supreme Court decision in Shree Sajjan Mills Ltd. vs. CIT (156 ITR 585) and does not want us to interfere with the order of the Ld. CIT(A). 9. We have heard both the parties and perused the records. It is noted that the issue in dispute relates to the disallowance of payment made towards LIC employees group gratuity scheme u/s 40A(7) of the Act. From the material placed before us, it is noted that the assessee had acquired Employees Group Gratuity Scheme from Life Insurance Corporation of India. In terms of the said Policy, the assessee was required to bear and pay the policy premium, and all the benefits arising under it shall be payable only to the Members i.e. the eligible employees of the assessee. The LIC was in-charge of the said Fund which would maintain the register of members cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the benefit of the employees of the assessee and further all the contribution made by the assessee in the said fund ultimately came back to the Textool Employees Gratuity Fund, approved by the Commissioner with effect from the following previous year. Thus, the conditions stipulated in Section 36(1)(v) of the Act were satisfied. Having regard to the facts found by the Commissioner and affirmed by the Tribunal, no fault can be found with the opinion expressed by the High Court, warranting our interference. 11. Taking note of both the above judgments of the Hon ble Supreme Court in the case of CIT Vs M/s Textool Ltd (supra) M/s Shree Sajjan Mills Ltd Vs CIT (156 ITR 585), we find that the Hon ble Allahabad High Court in the case of M/s Scooters India Ltd Vs CIT (399 ITR 559) allowed the contributions paid by the assessee to LIC directly for obtaining policies under the group gratuity scheme as deductible business expense. The questions which came up for consideration before the Hon ble High Court were as follows: (iii) Whether the Tribunal was justified in overlooking the provisions of section 43B relating to disallowance of ₹ 1,40,57,860 on account of payment of gra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act, 1961. The court held that a narrow interpretation straining language of sub-clause (v) so as to deny deduction to the assessee should not be followed since the objective of fund was achieved .. 26. In view thereof, we answer questions Nos. (iii) to (vii) in favour of the assessee and against the Revenue. Both these appeals are allowed and impugned judgment of the Tribunal dated August 21, 2014 to the extent aforesaid questions have been answered in favour of the assessee, is hereby set aside. 13. We note that in this case, the assessee neither exercised any control or influence over the management of the funds nor did it have any say in the matters relating to payments of the benefits arising or accruing there from which was due to the Members/ Employees. So by relying on the ratio of the Hon ble Supreme Court in CIT vs. Text Tool (supra) wherein it was held that, the intention of Section 36(1)(v) of the Act, is that the employer should not have control over the funds of the irrevocable trust created exclusively for the benefit of the employees of the assessee and the Hon ble Allahabad High Court decision in M/s Scooters India Ltd. (supra) which decision i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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