The District Cooperative Central Bank Limited , , Eluru V. The Assistant Commissioner of Income Tax, Circle-1, , Eluru

CO 67/VIZ/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2315 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 19 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 26-06-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 07-06-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D K SONAWAL
• Keywords: Tax effect; Condonation of delay; Capital expenditure; TDS; Set aside
• Section: 143(3); 37; 28; 2; 11; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , HONBLE ACCOUNTANT MEMBER ITA NO S . 166 & 167 / VIZ /201 9 (ASST. YEAR S : 20 14 - 15 & 20 15 - 1 6 ) ACIT, CIRCLE - 1, ELURU. V S . THE DISTRICT CO - OPERATIVE CENTRAL BANK LTD., ANANDA NILAYAM, P.B. NO. 214, RAMACHANDRA RAO PETA, ELURU, WEST GODAVARI DISTRICT PAN NO. AADAT 1078 R (APPELLANT) (RESPONDENT) C.O.NOS. 67 & 68/VIZ/2019 (ARISING OUT OF ITA NO S . 166 & 167 / VIZ /201 9 ) (ASST. YEAR S : 20 14 - 15 & 2015 - 16 ) THE DISTRICT CO - OPERATIVE CENTRAL BANK LTD., ANANDA NILAYAM, P.B. NO. 214, RAMACHANDRA RAO PETA, ELURU, WEST GODAVARI DISTRICT VS. ACIT, CIRCLE - 1, ELURU. PAN NO. AADAT 1078 R (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI ADV OCATE . DEPARTMENT BY : SHRI D.K. SONAWAL CIT DR DATE OF HEARING : 20 / 0 6 /201 9 . DATE OF PRONOUNCEMENT : 26 / 0 6 /201 9 . O R D E R PER V. DURGA RAO, JUDICIAL MEMBER TH E S E APPEAL S BY THE REVENUE AND THE CROSS OBJECTIONS BY THE ASSESSEE ARE DIRECTED AGAINST THE COMMON ORDER OF 2 ITA NO S . 166 & 167/VIZ/2019 & C.O.NOS.67 & 68/VIZ/2019 ( THE DISTRICT CO - OP CENTRAL BANK LTD. ) COMMISSIONER OF INCOME TAX (APPEALS) , RAJAMAHENDRAVARAM , DATED 26 / 12 /201 8 FOR THE ASSESSMENT YEARS 20 14 - 15 & 20 15 - 1 6 . SINCE FACTS AND ISSUE ARE COMMON, CLUBBED AND HEARD TOGETHER AND DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THERE IS A DELAY OF 12 DAYS IN FILING OF BOTH THE APPEALS . THE REVENUE HAS FILED THE AFFIDAVITS FOR CONDONATION OF DELAY . WE FIND THAT THERE IS A SUFFICIENT CAUSE FOR NON - FILING THE APPEALS IN TIME, THEREFORE WE CONDONE THE DELAY IN FILING THE APPEALS. 3 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITA NO.166/VIZ/2019: - 1 ) THE ORDER OF THE LD. CIT(A), RAJAHMUNDRY IS ERRONEOUS IN LAW OR FACTS OR BOTH. 2) THE CIT(A) ERRED IN OBSERVING THAT SINCE THE PAYMENTS WERE ACTUALLY MADE AND GENUINE AND THE SAME ARE TO BE ALLOWED, WITHOUT APPRECIATING THE FACT THAT, THE CONTRIBUTIONS TO [IC, THOUGH STATED TO BE ON ACTUARIAL BASIS, DO NOT ENABLE THE ASSESSEE TO CLAIM DEDUCTION OF PAYMENTS MADE TO LIC SINCE THE SAME IS NOT IN ACCORDANCE WITH SECTIONS 36(1)), 40A(7) AND 40A(9). 3) THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE CONTRIBUTION M ADE BY THE ASSESSEE TOWARDS GRATUITY FUND WAS TO AN UNAPPROVED GRATUITY FUND AND AS SUCH, THE CONTRIBUTION/ PAYMENT IS NOT AN ALLOWABLE DEDUCTION. 4) THE CIT(A) OUGHT TO HAVE RELIED UPON THE DECISION OF THE APEX COURT IN THE CASE OF M / S. SRI SAJJAN MILLS R EPORTED IN 156 ITR 585 (SC), WHEREIN IT WAS CATEGORICALLY HELD THAT, AFTER INSERTION OF SECTION 40A, GRATUITY PAYMENT CANNOT BE ALLOWED ON GENERAL PRINCIPLES UNDER ANY OTHER SECTIONS OF THE ACT. 5) THE CIT(A) ERRED IN DIRECTING THE AO TO ALLOW THE VEHICLE HIRE CHARGES OF RS.3,75,761 / - , THOUGH THE ASSESSEE FAILED TO 3 ITA NO S . 166 & 167/VIZ/2019 & C.O.NOS.67 & 68/VIZ/2019 ( THE DISTRICT CO - OP CENTRAL BANK LTD. ) MAKE TDS ON SUCH EXPENDITURE WARRANTING DISALLOWANCE U!S.40(A)(IA) OF THE ACT. 6) THOUGH THE TAX EFFECT IS BELOW THE MONETARY LIMIT PRESCRIBED BY CBDT FOR FILING REVENUE APPEAL, THE ORDER OF THE CIT(A) IS A COMPOSITE ORDER FOR ASSESSMENT YEAR 2014 - 15 & ASST. YEAR 2015 - 16 AND FOR ASST. YEAR 2015 - 16, THE TAX EFFECT IS AT RS.50.98 L AKHS, ABOVE THE THRESHOLD LIMIT FOR FILING REVENUE APPEAL TO ITAT. 7) THE APPELLANT CRAVES LEAVE TO ADD OR AMEND OR ALTE R OR DELETE ANY GROUND AT THE TIME OF HEARING OF THE APPEAL. 8) ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF APPEAL HEARING BEFORE THE HON'BLE ITAT. 4 . FACTS OF THE CASE, IN BRIEF, ARE THAT ASSESSEE IS A CO - OPERATIVE CENTRAL BANK CARRYING ON BANKING BUSINESS, FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 3,75,24,700/ - . THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY UNDER CASS AND AFTER FOLLOWING DUE PROCEDURE , ASSESSEE WAS COMPLETED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'ACT'). IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS NOTED THAT DURING THE YEAR UNDER CONSIDERATION , THE ASSESSEE HAS MADE A PAYMENT OF RS. 50.00 LAKHS TOWARDS GRATUITY FUND FOR THE WELFARE OF THE EMP LOYEES. A S PER THE PROVISIONS OF SECTION 40A(7) , PAYMENT OF PREMIUM TOWARDS GRATUITY FUND , WHICH HAS NOT BEEN APPROVED BY THE PR. CIT , IS NOT ALLOWABLE . THIS ISSUE HAS BEEN VERIFIED AND DISCUSSED DURING THE COURSE OF ASSESSMENT PROCEEDINGS WITH REFERENCE TO THE PROVISIONS OF SECTION 40A(7) & 36(1)(V) OF THE ACT. THE AR OF THE ASSESSEE HAS BEEN SPECIFICALLY 4 ITA NO S . 166 & 167/VIZ/2019 & C.O.NOS.67 & 68/VIZ/2019 ( THE DISTRICT CO - OP CENTRAL BANK LTD. ) INTERACTED REGARDING NON - ALLOWABILITY OF THE AMOUNT PAID TOWARDS THE GRATUITY FUND SET UP WITH LIC OF INDIA. IN VIEW OF THE ABOVE, IT IS CLEAR THAT THE PROVISIONS OF THE AFORESAID TWO SECTIONS STATE THAT NO DEDUCTION IS ALLOWABLE FOR CONTRIBUTION MADE TO AN UNAPPROVED FUND . ACCORDINGLY, THE ASSESSING OFFICER DISALLOWED THE PAYMENT OF RS. 50.00 LAKHS TO WARDS GRATUITY FUND AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 5. ON APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE HAS SUBMITTED THAT THE PAYMENTS MADE BY THE ASSESSEE TOWARDS EMPLOYEES GRATUITY FUND IS TO MEET ITS ANNUAL GRATUITY LIABILITY COMMITMENTS OF ITS EMPLO YEES AND INCOMPLIANCE WITH THE MANDATORY ACCOUNTING STANDARDS OF CBDT. HE PLACED RELIANCE ON THE DECISION OF THE ITAT, VISAKHAPATNAM BENCH IN ASSESSEES OWN CASE FOR THE A.YS. 2007 - 08 TO 2009 - 10 AND SUBMITTED THAT CLAIM MADE BY THE ASSESSEE MAY BE ALLOWED. THE LD. CIT(A) BY CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AND ALSO BY FOLLOWING THE DECISION OF THE ITAT, VISAKHAPATNAM BENCH IN ASSESSEES OWN CASE, DIRECTED THE ASSESSING OFFICER TO ALLOW THE AMOUNTS PAID BY THE ASSESSEE TOWARDS EMPLOYEES GRATUITY CONTRIBUTION. FOR THE SAKE OF CONVENIENCE, THE RELEVANT PORTION OF THE ORDER IS EXTRACTED AS UNDER: - 5 ITA NO S . 166 & 167/VIZ/2019 & C.O.NOS.67 & 68/VIZ/2019 ( THE DISTRICT CO - OP CENTRAL BANK LTD. ) 4. 3 DECISION: ON PERUSAL OF THE MATERIAL AVAILABLE, IT COME INTO SIGHT THAT THE AMOUNTS OF RS.50,00,000/ - FOR THE A.Y:2014 - 15 AND RS.1,50,00,000/ - FO R THE A.Y:2015 - 16 SHOULD HAVE BEEN ALLOWED IN FULL AS THE APPELLANT BANK MAKING ANNUAL CONTRIBUTION OF GRATUITY TO LIC. THE APPELLANT - BANK, FURTHE R, CONTENDED THAT IT IS A GENUINE PAYMENT CREDITED ON BEHALF OF EMPLOYEE S GROUP GRATUITY FU ND AND THE PROVISION IS MADE AS PER 'THE AGREEMENT ENTERE D BY AND BETWEEN THE APPELLANT - BANK AND THE EMPLOYEES.' THEREFORE, TH E APPELLANT REQUESTED THAT IT SHOULD NOT BE DENIED THE BENEFIT U/S.36(I)(V) F OR THE REASON THAT 'THE ENTIRE PAYMENTS WERE DEPOSITE D WITH LIC DIRECTLY' AS SUC H THE QUESTION OF APPROVAL IS NOT RELEVANT. SINCE THE PAYMENT OF GRATUITY IS GENUINE EXPENDITURE, IT SHOULD HAVE BEEN ALLOWED. IN THIS CONNECTION, IT MA Y BE SUBMITTED THAT THE APPELLANT BANK GOT THE IMPUGNED POLICY INCOMPLIANC E W ITH THE MANDATORY ACCOUNTING STANDARDS OF CBDT. SINCE THE ENTIRE AMOU NT IS CONTRIBUTED TOWARDS PAYMENT OF PREMIUM TO LIC AS PER POLICY ISSUED UND THE GROUP GRATUITY SCHEME AND HENCE, ACCORDING TO THE APPELLANT, THE A.O NOT JUSTIFIED/CORRECT THAT MERELY AS THIS CLAIM IS NOT A DEDUCTIBLE EXPEN SE SINCE THE LIC FUND/TRUST IS NOT RECOGNISED BEFORE THE COMMISSIONER INCOME TAX AND HENCE, THE CONTRIBUTION IS NOT A ALLOWABLE DEDUCTION. KEEPING IN VIEW THE ACCOUNTING STANDARDS OF CBDT TOWARDS 'EMPLOYEE S GROUP GRATUITY' AS WELL CONSIDERING THE DECISIONS AS RELIED ON BY T APPELLANT - BANK IN IT'S OWN CASES CITED SUPRA, VIDE I.T.A.NO.49 & 50, 78 & 4; IN THE RECENT ORDER OF HON'BLE ITAT HAS ALSO TAKEN THE SAME VIEW IN THE CA SE OF THE 'ELURU DIST. CO. OP. CENTR AL BANK', I FIND THAT THE CLAIM OF GRATUITY SHOU LD HAVE BEEN ALLOWED IN FULL MERELY BECAUSE THE PAYMENTS HAVE MADE DIRECTLY TO THE LIC, HENCE, THE APPELLANT - BANK COULD NOT BE DENIED THE BENE FIT U/S. 36(I)(V). SINCE IT IS A GENUINE EXPENDITURE AND REPRESENTS THE ACTUAL PAYME NT MADE TO LIC, SEC.36(1)(V) HAS NO APPLICATION, THEREFORE, THE A.O IS DIRECTED TO ALLOW THE EX P ENDITURE OF RS.50,00,000/ - FOR THE A.Y:2014 - 15 A RS. 1,50,00,000/ - FOR THE A Y : 2015 - 16 TOWARDS THE AMOUNT ACTUALLY PAID. 6 . ON BEING AGGRIEVED, REVENUE CARRIED THE MATTER IN APPEAL BEFORE THIS TRIBUNAL. 7 . AT THE VERY OUTSET , LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE 6 ITA NO S . 166 & 167/VIZ/2019 & C.O.NOS.67 & 68/VIZ/2019 ( THE DISTRICT CO - OP CENTRAL BANK LTD. ) COORDINATE BENCH OF TH IS TRIBUNAL IN ASSESSEES OWN CASE AND REQUESTED THAT SAME MAY BE FOLLOWED. 8 . ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE GROUNDS OF APPEAL. 9. THE ISSUE INVOLVED IN THIS APPEAL RELATES TO CONTRIBUTION PAID BY THE ASSESSEE TO THE LIC OF INDIA TOWARDS GROUP GRATUITY. THE VERY SAME ISSUE CAME UP BEFORE THE TRIBUNAL FOR THE ASSESSMENT YEAR S 2007 - 08 & 2008 - 09 IN ASSESSEES OWN CASE IN ITA NOS.49 & 50/VIZ/2012 , WHEREIN THE TRIBUNAL HAS HE L D THAT THE GROUP GRATUITY PREMIUM PAID TO THE LIC OF INDIA IS ALLOWABLE AND ACCORDINGLY ALLOWED THE ASSESSEES APPEALS. FOR THE SAKE OF CONVENIENCE, THE RELEVANT PORTION OF THE ORDER IS EXTRACTED AS UNDER : - 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIALS AVAILABLE ON 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 CLA IMED BY THE ASSESSEE AS EXPENDITURE. THUS NO DOUBLE DEDUCTION IS CLAIMED. THE EXPENDITURE CLAIMED BY THE ASSESSEE UNDER GROUP 7 ITA NO S . 166 & 167/VIZ/2019 & C.O.NOS.67 & 68/VIZ/2019 ( THE DISTRICT CO - OP CENTRAL BANK LTD. ) GRATUITY SCHEME TO LIC OF INDIA WAS ALLOWED IN THE EARLIER YEARS PRIOR TO 2007 - 08. DURING THE PREVIOUS YEAR RELEVANT TO THE AS SESSMENT YEAR 2007 - 08, THE A.O. DISALLOWED THE SAME SINCE THE PAYMENT MADE TO LIC OF INDIA TOWARDS GROUP GRATUITY SCHEME IS NOT COVERED BY SECTION 36(1)(V), 40A(7)(B) & 40A(9) OF THE ACT BECAUSE THE ASSESSEE H A S NOT SATISFIED THE CONDITIONS. THE ARGUMENT OF THE ASSESSEE IS THAT SINCE THE PAYMENTS WERE MADE TO LIC OF INDIA IN MASTER POLICY SCHEME, THE PREMIUMS CONTRIBUTED TO THE LIC OF INDIA IS ALLOWABLE DEDUCTION AND RELIED ON THE DECISIONS OF COORDINATE BENCH OF HYDERABAD IN THE CASE OF CAPITAL IQ INFORMA TION SYSTEMS (INDIA) PVT. LIMITED (SUPRA). THE HONBLE ITAT HYDERABAD BENCH WHILE DECIDING THE ISSUE ON SIMILAR FACTS HELD AS UNDER: 8. WE HAVE HEARD THE ARGUMENTS OF THE PARTIES, PERUSED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUT HORITIES BELOW. WE FIND THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE ITAT, HYDERABAD IN THE CASE OF M/S. SRI KRISHNA DRUGS LTD. VS. DEPARTMENT OF INCOME - TAX IN ITA NO.2126/HYD/2011 FOR AY 2007.08 DATED 11.4.2012, WHERE THE JM WAS ONE OF THE P ARTY. THE TRIBUNAL IN THE SAID CASE HELD AS FOLLOWS: 3. THE SECOND GROUND RAISED BY THE REVENUE IS AS UNDER: 'THE LEARNED CIT(A) ERRED IN HOLDING THAT UNRECOGNISED GRATUITY FUND IS ALLOWABLE U/S. 37(1),WHEN THE CASE IS HIT BY THE PROVISIONS OF SECTION 40 A(9) AND ESPECIALLY WHEN THE ASSESSEE FAILED TO COMPLY WITH THE PROVISIONS OF SECTION 36(1)(V).' 4. AFTER HEARING BOTH THE SIDES, WE FIND THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE IN I.T.A. NO. 198/HYD/2011 IN ASSESSEE'S OWN CASE FOR A.Y. 2006 - 07 ORDER DATED 16.12.2011 WHEREIN THIS TRIBUNAL HELD AS FOLLOWS: 3. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OPINION THAT SIMILAR ISSUE CAME UP FOR CONSIDERATION IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2002 - 03 IN I.T.A. NO. 349/HYD/2006. THE TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE VIDE ITS ORDER DA TED 15.2.2008 BY HOLDING AS FOLLOWS: 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE GROUP GRA TUITY SCHEME WAS NOT RECOGNISED BY THE COMMISSIONER OF INCOME - TAX. 8 ITA NO S . 166 & 167/VIZ/2019 & C.O.NOS.67 & 68/VIZ/2019 ( THE DISTRICT CO - OP CENTRAL BANK LTD. ) THIS FACT IS NOT IN DISPUTE. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SEC. 36(1)(V) OF THE INCOME - TAX AC. SEC. 36(1)(V) READS AS FOLLOWS: '36. (1) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWING CLAUSES SHALL BE ALLOW D IN RESPECT 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 FO R 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 T HE 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. HOW EVER, THE CONTENTION OF THE ASSES SEE IS THAT IN VIEW OF THE JUDG MENT OF THE MADRAS HIGH COURT IN THE CASE OF PREMIER SPINNING MILLS LTD. (SUPRA) AND THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF WARNER HINDUSTAN LTD. (SUPRA), IT HAS TO BE AL LOWED. 5. WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF WARNER HINDUSTAN LTD. (SUPRA). IN THE CASE BEFORE THE JURISDICTIONAL HIGH COURT, THE PROVIDENT FUND WAS NOT APPROVED BY THE CIT. THE ANDHRA PRADESH HIGH COURT AFTER REFERRING TO THE JUDGMENT OF THE BOMBAY HIGH COURT IN TATA IRON & STEEL CO. LTD. V. D. V. BAPAT, ITO (1975) 101 ITR 292, AND THE JUDGMENT OF THE SUPREME COURT IN METAL BOX COMPANY OF INDIA LTD. VS. THE WORKMEN (1969) 73 ITR 53, HELD THAT THE AM OUNT PAID TOWARDS AN UNAPPROVED GRATUITY FUND CAN BE DEDUCTED UNDER SEC. 37 OF THE I.T. ACT, THOUGH NOT UNDER SEC. 36(1)(V). IN VIEW OF THIS JUDGMENT OF THE 9 ITA NO S . 166 & 167/VIZ/2019 & C.O.NOS.67 & 68/VIZ/2019 ( THE DISTRICT CO - OP CENTRAL BANK LTD. ) JURISDICTIONAL HIGH COURT, IN OUR OPINION, EVEN IF ANY PAYMENT IS MADE TO AN UNAPPROVED GRATUITY FU ND, IT HAS TO BE ALLOWED UNDER SEC. 37. BY RESPECTFULLY FOLLOWING THE BINDING JUDGMENT OF ANDHRA PRADESH HIGH COURT IN THE CASE OF WARNER HINDUSTAN LTD. (SUPRA), WE UPHOLD THE ORDER OF THE CIT(A). IN VIEW OF THE ABOVE DISCUSSION, WE DISMISS THE GROUND TAKEN BY THE REVENUE. 5. IN VIEW OF THE ABOVE DECISION OF THIS TRIBUNAL, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 9. SINCE THE ISSUE UNDER CONSIDERATION IS MATERIALLY IDENTICAL TO THE ONE DEC IDED BY THE ITAT IN THE CASE OF M/S. SRI KRISHNA DRUGS LTD. (SUPRA), RESPECTFULLY FOLLOWING THE SAME, WE SET ASIDE THE ORDER OF THE CIT(A) AND ALLOW THE GROUND OF APPEAL OF THE ASSESSEE. 9. SIMILARLY, ITAT AHMEDABAD BENCH IN THE CASE OF BARODA GUJARAT GR AMEEN BANK CITED (SUPRA) HELD THAT THE PAYMENT MADE TO LIC OF INDIA IS NOT A PROVISION BUT IT IS ACTUAL EXPENDITURE CLAIMED UNDER THE GRATUITY CONTRIBUTION. HONBLE ITAT AHMEDABAD BENCH HELD THAT SINCE ASSESSEE HAS NOT CLAIMED THE PROVISION AND CLAIMED ON ACTUAL BASIS, THE EXPENDITURE IS ALLOWABLE DEDUCTION. FOR READY REFERENCE, WE REPRODUCE PARA NOS.4 & 5 OF THE ORDER OF THE HONBLE ITAT AHMEDABAD BENCH WHICH READS AS UNDER: 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MATERIAL AVAILABLE ON RECORD. SECTION 40A (7) OF THE IT ACT PROVIDES THAT SUBJECT TO PROVISION OF CLAUSE (B), NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF ANY PROVISION MADE BY THE ASSESSEE 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 CLA IMED 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) - CI T VS GUJARAT MACHINE TOOLS (ITA 666/A HD/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 1 979 - 80 - ASSESSEE - COMPANY 10 ITA NO S . 166 & 167/VIZ/2019 & C.O.NOS.67 & 68/VIZ/2019 ( THE DISTRICT CO - OP CENTRAL BANK LTD. ) 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 PA YMENT HAD BEEN MADE, HAD NOT BECOME PAYABLE DURING PREVIOUS YEAR - HELD, YES - WHETHER IN ABSENCE OF SUCH A CASE MADE OUT BY REVENUE, TRIBUNAL WAS RIGHT IN HOLDING THAT GRANT OF APPROVAL OF GRATUITY FUND WAS NOT RELEVANT FOR PURPOSE OF INSTANT CASE AS SAID DEDUCTION WAS NOT BEING CLAIMED ON ACCOUNT OF ANY PROVISION AND AMOUNT OF GRATUITY WAS AN ALLOWABLE DEDUCTION - HELD, YES'. 5. CONSIDERING THE ABOVE ASPECTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) IN DELETING THE ADDITION. THERE IS NO MERIT IN THE DEPARTMENTAL APPEAL. SAME IS ACCORDINGLY DISMISSED. 10 . THEREFORE, RESPECTFULLY FO LLO WI NG THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NOS. 49 & 50/ V IZ/2012, DATED 25/01/2018 FOR THE A.YS. 2007 - 08 & 2008 - 09 , WE FIND NO REASON TO INTERFERE WITH THE ORDER PASSED BY THE LD. CIT(A) . THUS, THESE APPEALS FILED BY THE REVENUE ARE DISMISSED. 11 . SO FAR AS CROSS OBJECTIONS FILED BY THE ASSESSEE ARE CONCERNED, THESE ARE ONLY SUPPORTIVE TO THE ORDER OF THE LD.CIT(A). AS THE ASSESSEE HAS NO GRIEVANCE AGAINST THE ORDER OF THE LD.CIT(A), THESE C.OS. FILED BY THE ASSESSEE HAVE BECOME INFRUCTUOUS AND ARE DISMISSED ACCORDINGLY . 11 ITA NO S . 166 & 167/VIZ/2019 & C.O.NOS.67 & 68/VIZ/2019 ( THE DISTRICT CO - OP CENTRAL BANK LTD. ) 12. IN THE RESULT, APPEAL S FILED BY THE REVENUE AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON TH IS 2 6 T H DAY OF JUNE , 201 9 . S D / - S D / - ( D.S. SUNDER SINGH ) ( V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 2 6 T H JUNE , 201 9 . VR/ - COPY TO: 1. THE ASSESSEE THE DISTRICT CO - OPERATIVE CENTRAL BANK LTD., ANANDA NILAYAM, P.B. NO. 214, RAMACHANDRA RAO PETA, ELURU, WEST GODAVARI DISTRICT . 2. THE REVENUE - ACIT, CIRCLE - 1, ELURU. 3. THE PR. CIT , RAJAMAHENDRAVARAM. 4. THE CIT(A) , RAJAMAHENDRAVARAM. 5. THE D.R . , VISAKHAPATNAM. 6. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SR. PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.