DCIT-4(1), INDORE, INDORE V. MARAL OVERSEAS LTD, KHARGONE

ITA 571/IND/2025

AI Insights

The case revolves around the appeal by the Revenue against Maral Overseas Ltd. concerning the disallowance of a gratuity claim under section 40A(7) of the Income Tax Act. The primary contention was whether the contributions made to a gratuity trust, which was not approved during the relevant assessment year but was subsequently approved, should be allowed as a deduction. The CIT(A) had allowed the deduction, noting that the delay in approval was not the assessee's fault. The Tribunal agreed with the CIT(A), referencing several judicial precedents that supported the assessee's position.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 842039 (ITAT-INDORE)
• Duration Of Justice: 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2026
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 02-07-2025
• Other Referred Cases: CIT v. Textool Co. Ltd., PCIT v. State Bank of India, ACIT v. Gujarat State Co-op Marketing Federation Ltd., Twinings P. Ltd. v. DCIT
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: FORTHEREVENUEHAS; FORTHEREVENUEDIDNOTMAKEANYFURTHERSUBMISSION; FORREVENUESAVE; EXCEPTRAISINGGROUNDSIN; FORREVENUEINVIEWOFOUROBSERVATIONS; SHRIASHISHPORWAL
• Assessee Lawyers: SHRISATYAJEETGOEL; THEDECISIONOFHONBLESPECIALBENCH; THEDECISIONOFSUPREMECOURTANDHIGHCOURTAS
• Keywords: Set aside; Tax effect; Competent authority
• Section: 143(3); 68; 37; 10B

Judgement Text

"Page 1 of 20 आयकरअपीलीयअिधकरण, इंदौरɊायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI B.M. BIYANI, ACCOUNTANT MEMBER AND SHRI PARESH M JOSHI, JUDICIAL MEMBER ITA No.571/Ind/2025 (AY: 2006-07) DCIT-4(1), Indore बनाम/ Vs. Maral Overseas Ltd., Maral Sarovar, V& PO khalbujurg, Kasrawad, Khargone, Bhopal (PAN: AACCM0230B) (Appellant) (Respondent) Assessee by Shri Satyajeet Goel, CA Revenue by Shri Ashish Porwal, Sr.DR Date of Hearing 03.02.2026 Date of Pronouncement 27.02.2026 आदेश/ O R D E R Per Paresh M Joshi, J.M.: This is an Appeal filed by the Assessee under section 253 of the income tax Act 1961,[ herein after referred to as the Act for the sake of brevity] before this tribunal as & by way of a second Appeal. The Assessee is aggrieved by the order bearing Number:-1046/2021-22 dated 29.07.2022[DR No. 39/12 D No. 427] passed by the Ld. CIT(A) u/s 250 of the Act, which is herein after referred to as the “Impugned Printed from counselvise.com Maral Overseas Ltd. ITA No. 571/Ind/2025 - A.Y.2006-07 Page 2 of 20 order”. The Relevant Assessment year is 2006-07 and the corresponding previous year period is from 01.04.2005 to 31.03.2006. 2. Factual Matrix 2.1 That as and by way of an assessment order made u/s 143(3) of the Act the balance losses of AY 2005-06 were carried forwarded to Rs. 20,20,76,816/-. The total Income as per the ROI was at Rs. 1,57,87,570/-. The Ld. AO in the aforesaid assessment order has made following additions as below:- Total income as per return Rs. 1,57,84,570- Add: as discussed above 1. Deduction u/s 10B as per para-3 Rs. 1,16,32,645/ 2. Disallowance out of Business Promotion Expenses as per para-4 Rs. 1,00,000/- Difference on accounts as per para - 5 Rs. 16,131/- 4. Unsecured loans as per para - 6 Rs. 30,000/- 5. Gratuity claim u/s 40A(7) as per para - 7 Rs. 1,45,87,125/- 6. Prepayment penalty as per para -8 Rs 10,00,000/- Total Income Assessed at Rs. 4,31,50,471/- The total income was assessed at Rs. 4,31,50,471/-. Less set off of b/F losses as per order u/s 143(3) dated 29.12.2007 of AY 2005-06 Rs. 24,52,27,287/-.That the aforesaid assessment order was dated 24.12.2008 which is Printed from counselvise.com Maral Overseas Ltd. ITA No. 571/Ind/2025 - A.Y.2006-07 Page 3 of 20 here in after referred to as the “Impugned assessment order”. The core issue was under caption gratuity claim u/s 40A(7) wherein para 7 of the “Impugned assessment order” the Ld. AO had held as follows:- 7.“Gratuity claim u/s 40A(7) Assessee has claim gratuity u/s 40A(7) Rs. 1,45,87,125/-. Assessee has filed the application for approval of gratuity trust with income tax authorities for which approval was not received during the year. Assessee was asked to explain the claim of gratuity u/s 40A(7). Assessee in its written submission dated 25.08.2008 stated that:- \"The claim of Rs. 1,45,67,125/- is allowable to the assessee company as per clause (b) of section 40A(7). The gratuity fund set up for the employees of the company has been, subsequently granted approval by the Hon'ble Commissioner of Income Tax, Range-11, Indore w.e.f. 01.04.2007, It may be clarified that the assessee company has applied for the approval of its Gratuity trust to the Income lax Department way back in April, 2004. In view of the matter and also in light of the specific provisions of section 40A(7)(b), the same allowable, Since gratuity fund set up by the company for the employees was not approved by competent authority and assessee got approval w.e.f. 01.04.2007, it is not a approved gratuity fund. Therefore claim of assessee u/s 40A(7), for gratuity is not allowable. It is also not allowable as per u/s 40A(9) also which is reproduced as under:- \"No deduction shall be allowed in respect of any sum paid by the assessee as an employer towards the setting up or formation of, or as contribution to, any fund, trust, company, association of persons, body of individuals, society registered under the Societies Registration Act, 1860(21 of 1860), or other institution for any purpose, except where such sum is so paid, for the purposes and to the extent provided by or under clause (iv) or clause (v) or clause (v) of sub-section (1) of section 36, or, as required by or under any other law for the time being is force\", The contribution of Rs. 1,45,87,125/- was not made by the assessee in approved gratuity found, it is being disallowed and an amount of Rs. 1,45,87,125/-is added back to the taxable income of the assessee.” Printed from counselvise.com Maral Overseas Ltd. ITA No. 571/Ind/2025 - A.Y.2006-07 Page 4 of 20 2.2 That the assessee being aggrieved by the aforesaid “Impugned assessment order” prefers the first appeal u/s 246A of the act before the Ld. CIT(A) who by the “Impugned order” has allowed the first appeal of the assessee on the grounds & reasons stated therein. In respect of core issue of gratuity claim u/s 40A(7) the Ld. CIT(A) in the “Impugned order” had held as under:- “9. Ground no. 4 is related to disallowance u/s 40A(7) of Rs. 1,45,87,125/-. During the year under consideration the appellant had made a contribution of Rs. 1,44,73,819/- to the Gratuity Trust by the name of Maral Overseas Ltd Employees Group Gratuity Trust Fund, which was not a recognized Gratuity Trust. A further payment of Rs. 1,13,306/ was made directly to the employees of the assessee company by way of gratuity. The AO has disallowed the gross payment of Rs. 1,45,87,125/ on the grounds that the Trust was not recognized. The appellant stated that the Trust had applied for approval way back in April, 2004, which was however given by the concerned CIT belatedly vide order dated 28.11.2007 w.c.f. 01.04.2007, and in the said order itself, it has been noted by the CIT that all the formalities stood completed upon filing of deed of variation dated 20.12.2005. It is further submitted by the appellant that the said variation deed merely contained cosmetic changes in the original deed and no substantive changes which would have any impact as far as requirement under the Act is concerned. The appellant has further drawn attention to the fact that as per the audited balance sheet of the gratuity fund as on 31.03.2006, it can be seen that the funds received from the company have been kept invested in LIC and other prescribed modes. The_appellant has further relied on the decisions in the cases of English Indian Clays Ltd (supra), Shalimar Wire and Industries Ltd (supra) and the District Co- operative Central Bank (supra), in support of the contention that where the delay in granting approval to a gratuity fund is not on the part of the appellant, the appellant could not be penalized for the same. Printed from counselvise.com Maral Overseas Ltd. ITA No. 571/Ind/2025 - A.Y.2006-07 Page 5 of 20 9.1. I have considered the assessment order and the submissions of the appellant. The AO has disallowed the gross payment of Rs. 1,45,87,125/- on the grounds that the Trust was not recognized. The Trust had applied for approval way back in April, 2004 which was however given by the concerned CIT belatedly vide order dated 28.11.2007 w.e.f. 01.04.2007, and in the said order itself, it has been noted by the CIT that changes proposed through deed of variation dated 20.12.2005 have also been considered alongwith Original Trust deed dated 08.01.2004. The said variation deed merely contained cosmetic changes in the original deed and no substantive changes, mainly in the nature of adding M/s ICICI Prudential Life Insurance -Company Ltd-as-an-\"Insurer for the gratuity-sehemes-being taken-by-the Trust-for-its employees. From the audited balance sheet of the gratuity fund as on 31.03.2006, it can be seen that the funds received from the company have been kept invested in LIC and other prescribed modes. The appellant has further rightly relied on the decisions in the cases of English Indian Clays Ltd (supra), Shalimar Wire and Industries Ltd (supra) and the District Co-operative Central Bank (supra), in support of the contention that where the delay in granting approval to a gratuity fund is on the part of the Department, the appellant could not be penalized for the same. In this regard, the jurisdictional High Court also, in the case of CII' Vs. Arya Exports and industries (2017) 85 taxmann.com 34 (Delhi), has held that where the assessee export house had applied for renewal of its trade house certificate and application was under consideration, it could not be said that renewal was negatived by relevant authority and hence the assessee could not be denied appropriate deduction. The logic applied in the above ruling equally applies to the case at hand, where delay in granting approval to a gratuity fund is not on the part of the appellant, the appellant could not be penalized for the same. It is accordingly held that the appellant was eligible for deduction u/s 40A(7) in respect of the amount contributed to the Gratuity Trust as well as the amount paid directly to employees on account of gratuity. As a result, the addition of Rs. 1,45,87,125/- is hereby deleted. Ground no. 4 is allowed.” 2.3 That the Revenue being aggrieved by the “Impugned order” has preferred the instant appeal in the form No. 36 Printed from counselvise.com Maral Overseas Ltd. ITA No. 571/Ind/2025 - A.Y.2006-07 Page 6 of 20 against the “Impugned order” on grounds which are as under:- “1.Whether on the facts and circumstances of the case, the Ld.CIT(A)-31, New Delhi has erred in law and on facts in allowing exemption u/s 108 of the Act of Rs. 1,16,32,645/-, account of income of unit IV, which started as a measure of enhancing the capacity of the existing units operational from AY 1992-93. 2.Whether, an undertaking claiming exemption u/s 10B of the Income-tax Act, 1961, as it existed prior to 01.04.1999 would be entitled for exemption/deduction u/s 10B for extended period of ten years as per the amended provisions of law brought on statute with effect from 01.04.1999? 3.Whether on the facts and circumstances of the case, the Ld.CIT(A)-31, New Delhi has erred in law and on facts in deleting the disallowance of Rs. 1,00,000/- made by the AO on account of disallowance of business promotion expenses on account of tour & travel, conveyance and telephone charges ete incurred by employees, despite assessee agreeing to the fact that some expenses were not supported by bills? 4.Whether on the facts and circumstances of the case, the Ld.CIT(A)-31, New Delhi has erred in treating the addition of Rs. 30,000/- made u/s 68 of the Act as disallowance made u/s 37 of the Act by directing the AO to verify whether the transaction is in normal conduct of business and if so, DLEETE the addition, ignoring the fact that addition u/s 68 was made as the source and nature of transaction remained unexplained and not just the nature? 5.Whether on the facts and in the circumstances of the case, the Ld.CIT(A)-31, New Delhi has erred in deleting disallowance of Rs. 1,45,87,125/- made by the AO on account of contribution made to unapproved gratuity fund? 6.Whether on the facts and in the circumstances of the case, the Ld.CIT(A)-31, New Delhi erred in deleting the disallowance of 6 Rs. 10,00,000/-made by the AO on account of disallowance of prepayment penalty charges to the bank on resetting of interest rate, being penal in nature? 7.The order of the Ld.CIT(A)-31, New Delhi is perverse, erroneous and is not tenable on facts and in law. 8. The grounds of appeal are without prejudice to each other. 9.The appellant craves leave to add, amend, alter OR forgo any ground(s) of appeal either on OR before the final hearing of the appeal.” Printed from counselvise.com Maral Overseas Ltd. ITA No. 571/Ind/2025 - A.Y.2006-07 Page 7 of 20 Record of hearing 3.1 The hearing in the matter took place before this Tribunal on 03.02.2026 when the Ld. DR for and on behalf of the Revenue appeared before this Tribunal & interalia contended that the “Impugned order” is bad in law, illegal & not proper. It therefore deserves to be set aside. It was next contended that the registry of this Tribunal has pointed out the delay of 975 days in preferring the present appeal. The “Impugned order” is dated 29.07.2022. The date of service of the impugned order is dated 05.08.2022. The appeal was e-filed 02.07.2025 which period is well beyond the statutory time limit of 60 days. In this regard the Revenue has placed on the record of this Tribunal a letter dated 16.12.2025 by virtue of which the Revenue has prayed the delay be condoned. In the said letter a detailed explanation is given by the Revenue on the delay in the filling of the instant appeal the contents of the said letter is reproduced by us as below:- Printed from counselvise.com Maral Overseas Ltd. ITA No. 571/Ind/2025 - A.Y.2006-07 Page 8 of 20 Printed from counselvise.com Maral Overseas Ltd. ITA No. 571/Ind/2025 - A.Y.2006-07 Page 9 of 20 Printed from counselvise.com Maral Overseas Ltd. ITA No. 571/Ind/2025 - A.Y.2006-07 Page 10 of 20 3.2 In this regard the Ld. AR of the assessee has submitted that the assessee has no objection on the delay aspect accordingly we condone the delay. There are no malafides. The cause of the delay is bonafidely explained basis bonafide reasons. The appeal is admitted & taken up for hearing. 3.3 During the course of the hearing thereafter the Ld. AR for the assessee company addressed this Tribunal first, for which the Ld. DR had no objection. 3.4 The Ld. AR stated that the assessee presently is in to the manufacturing of yarn, knitting etc & has a factory premises in the khargone district of MP. 3.5 The Ld. AR for & on behalf of the assessee has placed on record of this Tribunal a chart of issues covering all the grounds raised by the Revenue in the instant appeal in summary manner which we reproduce as below:- Gro und No. Issue Amoun t (In Rs.) Assessm ent order CIT(A) order Remarks 1 to 3 Disallowance of claim of exemption u/s 10B in respect of unit IV. 1,16,32 ,645/- Page 2 to 7 Para 3 Finding: page 6 to 7 Page 20 to 26 Para 6 to 6.5 The AO considered the disallowance based on view taken by the assessing officer in AY 2001-02 and 2002-03 wherein the claim of exemption u/s 10B was disallowed on the ground that Unit IV is mere extension of existing units and cannot be considered as separate industrial undertaking. The issue raised by the AO in AY 2001-02 and 2002-03 was finally decided by Hon’ble Special Bench of ITAT vide order dated 28/03/2012 reported in 136 ITD 177 (Indore Printed from counselvise.com Maral Overseas Ltd. ITA No. 571/Ind/2025 - A.Y.2006-07 Page 11 of 20 Special bench) wherein the claim of exemption in respect of Unit III and Unit IV was allowed. The order of Hon’ble Special bench of ITAT has attained finality as the appeal filed by the revenue stands dismissed by High Court on account of low tax effect. The CIT(A) allowed the claim of exemption u/s 10B in respect of Unit IV by placing reliance on the decision of Special bench. The issue is fully and squarely covered in favour of the assessee by the decision of Hon’ble Special Bench. 4 to 5 Ad-hoc disallowance of business promotion expenses 1,00,00 0 Page 7 to 8 Para 4 Page 26 to 27 Para 7 to 7.1 AO considered the ad-hoc disallowance merely based on earlier order and on the ground that complete verification of expenses in possible. The CIT(A) deleted the disallowance by holding the AO has not given any justifiable basis for ad-hoc disallowance. Further, the CIT(A) placed reliance on the decision of Hon’ble ITAT in assessee’s own case for AY 1997-98 (ITA No. 415/Ind/2000 dated 15/12/2009) wherein also the ad- hoc disallowance of Rs. 1 lakhs out of business promotion expenses was deleted. The issue is covered in favour of the assessee from the decision of Hon’ble ITAT for AY 1997-98 to 2000-01. 6 Addition u/s 68 in respect of deposit received from M/s. Radiant Tanker Services 30,000 Page 8 to 9 Para 6 Page 27 Para 8 The AO considered addition u/s 68 merely on the ground that confirmed copy of account was not furnished. The assessee before CIT(A) explained that the assessee availed transportation service from the said party and the amount standing in the books pertain to such transactions. The CIT(A) has directed the assessing officer to verify the bills and nature of transaction and delete the addition in case the same are found in order. 7 to 11 Disallowance of claim of gratuity paid to trust u/s 40A(7) 1,45,87 ,125/- Page 9 to 10 Para 7 Page 28 to 29 Para 9 to 9.1 The AO considered the disallowance u/s 40A(7) on the misconceived ground that the gratuity trust to which gratuity contribution was paid was approved by CIT from immediately subsequent year i.e. w.e.f 01/04/2007 and as such contribution paid to unapproved trust is not allowable. Printed from counselvise.com Maral Overseas Ltd. ITA No. 571/Ind/2025 - A.Y.2006-07 Page 12 of 20 The CIT(A) deleted the disallowance by observing that the application for approval of gratuity trust was filed by the assessee in April 2004, however, the approval was granted by CIT belatedly on 28/11/2007 w.e.f 01/04/2007. The CIT(A) further observed that the assessee has satisfied all the conditions and the funds of trust have been kept in specified mode and the assessee cannot be penalized for the delay in grant of approval. The CIT(A) allowed the claim by placing reliance on the decision of Hon’ble Delhi High Court, Kerala High Court and Calcutta High Court. The Ld. CIT(A) has rightly deleted the disallowance. Further, the case of assessee is also covered from the decision of Hon’ble Supreme Court in the case of CIT v. Textool Co. Ltd. [2013] 216 Taxman 327 (SC) and PCIT v. State Bank of India [2023] 294 Taxman 428 (SC). Further, reference is made to the decision of Hon’ble ITAT in the following cases wherein under similar circumstances, the claim of deduction was accepted:  ACIT v. Gujarat State Co-op Marketing Federation Ltd. [2021] 129 taxmann.com 53 (Ahd. Trib) Twinings P. Ltd. v. DCIT (ITA No. 391/Kol/19 dated 08/01/24) 12 to 13 Disallowance of prepayment charges paid for resetting the loan interest 10,00,0 00 Page 10 Para 8 Page 29 to 30 Para 10 to 10.1 The AO has considered the disallowance on the ground that prepayment charges are in the nature of penalty thus not allowable u/s 37(1). The CIT(A) deleted the disallowance by placing reliance on the decision of Apex Court in the case of CIT v. Gujarat Guardian Ltd. (Civil Appeal No. 7615 of 2009 dated 14/01/2020) wherein it was held that prepayment premium paid to bank for restructuring of rate is allowable expense. The issue is fully and squarely covered in favour of the assessee by the decision of Supreme Court and High Court as referred in the order of CIT(A). 3.6 In so far as ground No. 1 & 2 is concerned where there is disallowance of Rs. 1,16,32,645/[Disallowance of claim of exemption u/s 10B in respect of unit IV ] it was submitted Printed from counselvise.com Maral Overseas Ltd. ITA No. 571/Ind/2025 - A.Y.2006-07 Page 13 of 20 that Ld. AO findings in the “Impugned assessment order” at pages 2 to 7 stands set aside by virtue of pages 20 to 26 of the impugned order vide para 6 to 6.5. It was submitted that issue u/s 10B is resolved by ITAT Indore Bench in their own case which is reported in (2012) 136 ITD 177 (Indore)(SB) dated 28.03.2012. 3.7 The issue of Ad hoc disallowance of Rs. 1 lakh as business promotion expenses too stands resolved by ITAT Indore bench in ITA No. 415/Ind/2000 dated 15.12.2009 wherein also the ad hoc disallowance of Rs. 1 lakh out of business promotion expense is deleted. [AY 97-98 to 2000-01]. 3.8 With regard to ground No. 4 where AO had made addition of Rs. 30,000/- u/s 68 of the Act on the ground that confirmed copy of account was not furnished of m/s Radiant Tanker services. The ld. CIT(A) remanded the matter back to Ld. AO for verification of bills/vouchers and to delete the addition if same are found to be in the order. 3.9 With regard to the core dispute of disallowance of claim of gratuity paid to trust u/s 40A(7) of Rs. Printed from counselvise.com Maral Overseas Ltd. ITA No. 571/Ind/2025 - A.Y.2006-07 Page 14 of 20 1,45,87,125/- the Ld. AO in the “Impugned assessment order” disallowed the claim basis that the “gratuity Trust” to which the gratuity contribution was paid was approved by CIT from immediately subsequent year i.e. w.e.f. 01.04.2007 & as such contribution was paid to unapproved Trust which is not allowable. The Ld. CIT(A) in the “Impugned order” deleted the disallowance by observing that the application for approval of gratuity Trust was filed by the assessee in April 2004, however, the approval was granted by CIT belatedly on 28.11.2007 w.e.f. 01.04.2007. Ld. CIT(A) held that assessee cannot be penalised for delay in the grant of approval. Claim was allowed by following the decisions of Hon’ble Delhi High Court, Kerala HC & Calcutta HC. i.e. CIT v/s Agra Export and Ind (2017) 85 Taxmann.com 34 (Delhi), PCIT v/s English Indian clays Ltd. (2018) 89 Taxmann.com134(Kerala) & CIT v/s Sharlimar wire & ind Ltd. (1991) 188 ITR 814 (CAL).It was submitted by the Ld. AR while the Ld. CIT(A) has rightly deleted the disallowance further the assessee case is also covered from the decision of Hon’ble Supreme Court of India in case of CIT v/s Taxtool co. Printed from counselvise.com Maral Overseas Ltd. ITA No. 571/Ind/2025 - A.Y.2006-07 Page 15 of 20 Ltd. (2013) 216 taxmann 327 (SC) & PCIT v/s SBI (2023) 294 Taxman 428 (SC).Even now the ITAT in case of twinings Pvt. Ltd. v/s DCIT (ITA No. 391/Kol/2019 dated 08.01.2024 under similar circumstances have accepted claims of deduction. 3.10 Per contra the Ld. DR appearing for the Revenue has addressed the issue of contribution to the gratuity fund as discussed in para 3.4 above by submitting in the hearing that Ld. AO is correct that since approval was granted to w.e.f 01.04.2007 the claim for deduction would not be available prior to that. That save except this submission the Ld. DR for the Revenue did not make any further submission & thereafter the arguments were closed by the Bench. 4. Observations Findings & conclusions 4.1 We have to decide the legality, validity and proprietary of the “impugned order” basis records of the case & the rival submission canvassed before us. Printed from counselvise.com Maral Overseas Ltd. ITA No. 571/Ind/2025 - A.Y.2006-07 Page 16 of 20 4.2 We have carefully perused the records of the case and have heard the submissions. 4.3 We basis records of the case & after hearing & upon examining the rival contentions of the Ld. AR & the Ld. DR canvassed before us, are of the considered opinion that in so far as the core ground No. 5 is concerned werein the revenue has raised the ground to the effect that “whether on the facts & in the circumstances of the case, the Ld. CIT(A)-31 new Delhi has erred in deleting disallowance of Rs. 1,45,87,125/- made by the AO on account of contribution made to un approved gratuity fund. We hold that Ld. CIT(A) in the “Impugned order” has not erred in law. In para 9 & 9.1 internal page 28 & 29 of the impugned order which is already reproduced by us in the premises drawn up by us at para 2.2 has given meritorious finding basis judicial precedents of various High Courts. The Ld. AR has additionally relied upon the judgment of Hon’ble Supreme Court of India in cases of CIT v/s Taxtool Co Ltd (2013) 216 Taxman 327 (SC) & that of PCIT v/s SBI (2023) 294 Taxman 428 (SC). Printed from counselvise.com Maral Overseas Ltd. ITA No. 571/Ind/2025 - A.Y.2006-07 Page 17 of 20 4.4 In Re Taxtool Co Ltd. Case Hon’ble Apex Court has held as under: “8.Having considered the matter in the light of the background facts, we are of the opinion that there is no merit in the appeal. True that a fiscal statute is to be construed strictly and nothing should be added or subtracted to the language employed in the Section, yet a strict construction of a provision does not rule out the application of the principles of reasonable construction to give effect to the purpose and intention of any particular provision of the Act. (See : Shri Sajjan Mills Ltd. vs. Commissioner of Income Tax, M.P. & Anr. (1985) 156 ITR 585). From a bare reading of Sectin 36(1)(v) of the Act, it is manifest that the real intention behind the provision is that the employer should not have any control over the funds of the irrevocable trust created exclusively for the benefit of the employees. In the instant case, it is evident from the findings recorded by the Commissioner and affirmed by the Tribunal that the assessee had absolutely no control over the fund created by the LIC for 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.” 4.5 The Ld. AR has rightly relied upon the ITAT order of Ahmedabad reported in (2021) 129 taxmann.com 53 (Ahmedabad) (Tribunal) [ACIT vs. Gujarat State Co-operative Marketing Federation Ltd. ] wherein the following was held:- “9. We have heard the rival contentions of both the parties and perused the materials available on record. The limited controversy that arises for our adjudication in the given facts and circumstances whether the assessee is entitled for the deduction for the contribution made to the gratuity fund which was not approved by the Commissioner of income tax under section 2(5) of the Act in the year under consideration. xxxxxxxxxxxxxxxxxxx Printed from counselvise.com Maral Overseas Ltd. ITA No. 571/Ind/2025 - A.Y.2006-07 Page 18 of 20 9.4 Undoubtedly, the gratuity fund created by the assessee was not approved by the Commissioner of income tax under section 2(5) of the Act in the year under consideration. In fact, the approval was granted by the Commissioner of income tax with effect from 1st April 2012 effective from the assessment year 2013-14. However, it is also a fact on records that the assessee has made an application for the approval under section 2(5) of the Act to the Commissioner of income tax vide letter dated 25-11-1985. This fact has not been disputed by the authorities below as well as the learned DR appeared before us. The copy of the application for the approval under section 36(1)(v) of the Act is placed on pages 41-45 of the paper book. At this stage the question arises, the assessee can be penalised for non- granting of the approval by the Commissioner of income tax. In this connection, we note that substantial time has been elapsed between the original application made ITA no.1851/Ahd/2018 Asstt. Year 2011-12 by the assessee and the fresh application made by the assessee dated 08-03-2016. To our understanding, the assessee should be vigilant enough to pursue its matter before the authorities. The assessee should not fold his hands on the reasoning that its job has done upon making the requisite application before the Commissioner of income tax under section 2(5) of the Act. 9.5 Be that as may be, undisputedly the approval was granted under section 2(5) of the Act subsequently by the Commissioner of income tax with effect from 1st April 2012. Furthermore, we note that the purpose of creating the approved gratuity fund was to ensure that the amount contributed by the assessee as the employer should leave the possession from its hands. In other words, the assessee should not have any control on the fund created for the welfare of the employees. In the case on hand, there is no ambiguity that there was no control of the assessee of whatsoever on the funds created by it for the welfare of the employees as the fund was invested with the LIC of India and LIC was directly paying amount to the employee on occasion of retirement. xxxxxxxxxxxxxxxxxxxxxx 9.8 In the light of the above judgements, there is hardly any doubt regarding allowability of deductions for any contributions made to an approved gratuity fund established under an irrevocable trust. Further, no deduction shall be allowed to an organization of any provision for payment of gratuity.” Printed from counselvise.com Maral Overseas Ltd. ITA No. 571/Ind/2025 - A.Y.2006-07 Page 19 of 20 4.6 The Ld. DR for Revenue save & except raising grounds in form No. 36 on several issues including the above core issue has failed to establish basis any narration, arguments & contentions to assail the findings & conclusions reached by the Ld. CIT(A) in the impugned order. The only arguments canvassed before us during the hearing was that the Ld. AO is right holding that wef 01.07.2007 approval to the Trust came in to force & for any Period Prior these to the claim will not be admissible as the Trust in not approved one. We respectfully do not concur with the views expressed & submitted by Ld. DR for Revenue in view of our observations & finding as aforesaid. The other issues/grounds are more or less covered one in connected appeal No. ITA 570/Ind/2025 [ issue u/s 10B, disallowance of Rs.10 lac for staff welfare expense, business promotion expense of Rs.1 lac ]. In fact ITANos.569 to 571/Ind2025 were all heard together with consent of the both the Parties. In all these appeal Revenue is appellant & different assessment years are involved. In these appeals Revenue has assailed the impugned orders. Printed from counselvise.com Maral Overseas Ltd. ITA No. 571/Ind/2025 - A.Y.2006-07 Page 20 of 20 4.7 In view of the above, we up held the “impugned order” & dismiss the appeal of the Revenue. 5 Order 5.1 In the result appeal of Revenue is dismissed. Pronounced in open court on 27.02.2026. Sd/- Sd/- (BHAGIRATH MAL BIYANI) (PARESH M JOSHI) ACCOUNTANT MEMBER JUDICIAL MEMBER Indore Dated : 27/02/2026 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Senior Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore Printed from counselvise.com "