The DCIT, Bharuch Circle, Bharuch V. Baroda Gujarat Gramin Bank, Bharuch

ITA 1479/AHD/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0241 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 30-07-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 06-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K M MAHESH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND A. N. PAHUJA, AM) ITA NO.1479/AHD/2010 A. Y.: 2006-07 THE D. C. I. T., BHARUCH CIRCLE, ABOVE BANK OF BARODA, STATION ROAD, BHARUCH VS BARODA GUJARAT GRAMIN BANK (ERSTWHILE PANCHMAHAL VADODARA GRAMIN BANK LTD.), PANCHBATTI, BHARUCH PA NO. AAAAPO 0442N (APPELLANT) (RESPONDENT) APPELLANT BY SHRI K. M. MAHESH, DR RESPONDENT BY MS. URVASHI SHODHAN, AR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-VI, BARODA DATED 08 -01-2010 FOR ASSESSMENT YEAR 2006-07 ON THE FOLLOWING GROUND: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE DISAL LOWANCE OF CONTRIBUTION MADE TO GROUP GRATUITY SCHEME OF LIC O F INDIA, BEING AN UNAPPROVED FUND U/S 40A(7) OF THE ACT. 2. THE AO OBSERVED THAT CONTRIBUTION TOWARDS GRATUITY OF LIC OF RS.26,53,000/- WAS CLAIMED U/S 40 A (7) OF THE IT A CT. IT WAS STATED BY THE ASSESSEE THAT APPLICATION FOR RECOGNITION OF GR OUP GRATUITY SCHEME WAS PENDING FOR APPROVAL BEFORE THE INCOME TAX AUTH ORITIES. ACCORDINGLY, CLAIM OF PAYMENT OF RS.26,53,000/- TO LIC WAS NOT A LLOWABLE U/S 40A (7) OF THE IT ACT. IT WAS SUBMITTED THAT CONTRIBUTION T O LIC TOWARDS GRATUITY WAS ALLOWABLE IN THE LIGHT OF THE DECISION OF HONB LE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS BITONI LAMPS LTD. 277 ITR 396. THE AO HOWEVER, HELD THAT GRATUITY LIABILITY CANNOT BE ALL OWED WHEN THE ASSESSEE DID NOT HAVE ANY APPROVED GRATUITY FUND. THE CLAIM WAS ACCORDINGLY ITA NO.1479/AHD/2010 DCIT, BHARUCH VS BARODA GUJARAT GRAMIN BANK 2 DISALLOWED. SAME SUBMISSIONS WERE MADE BEFORE THE L EANED CIT(A). THE LEARNED CIT(A) CONSIDERING THE ORDER OF ITAT AHMEDA BAD BENCH IN THE CASE OF CRYSTAL SOLVENT PVT. LTD. (ITA NO.655/AHD/ 2005) ALLOWED THE APPEAL OF THE ASSESSEE IN WHICH IT WAS HELD THAT DI SALLOWANCE U/S 40 A(7) OF THE IT ACT CANNOT BE MADE ON THE GROUND OF ABSEN CE OF APPROVAL OF GRATUITY FUND AS THE DEDUCTION WAS NOT CLAIMED ON A CCOUNT OF ANY PROVISION. 3. THE LEARNED DR RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT APPROVAL OF THE COMMISSIONER OF INCOME TAX WAS NOT OBTAINED. THEREFORE, CONTRIBUTION TOWARDS GRATUITY CANNOT BE ALLOWED AS DEDUCTION U/S 40A (7) OF THE IT ACT. ON THE OTHER HAND, THE L EARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND ALSO RELIED UPON THE ORDER OF ITAT AHMEDABAD BE NCH IN THE CASE OF NEW BHARAT ENGINEERING WORKS (JAM) LTD. VS ITO 44 T TJ (AHD) 522. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEE MADE A CLAIM ON ACTUAL EXPENSES INCURRED UNDER THE HEAD GRATUITY CONTRIBUTION. THEREFORE, PROVISIONS OF SECTION 40A (7) OF THE ACT WOULD NOT APPLY IN THE MATTER. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MAT ERIAL AVAILABLE ON RECORD. SECTION 40A (7) OF THE IT ACT PROVIDES T HAT SUBJECT TO PROVISION OF CLAUSE (B), NO DEDUCTION SHALL BE ALLOWED IN RES PECT OF ANY PROVISION MADE BY THE ASSESSEE FOR PAYMENT OF GRATUITY TO HIS EMPLOYER ON THEIR RETIREMENT OR ON TERMINATION OF THEIR EMPLOYMENT FO R 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 EXP ENDITURE ON ACCOUNT OF ACTUAL EXPENSES CLAIMED UNDER THE HEAD GRATUITY CONTRIBUTION. ITAT AHMEDABAD BENCH IN THE CASE OF NEW BHARAT ENGINEERI NG WORKS (JAM) LTD. (SUPRA) HELD DISALLOWANCE UNDER S. 40A(7) GRATUITY ACTUAL ITA NO.1479/AHD/2010 DCIT, BHARUCH VS BARODA GUJARAT GRAMIN BANK 3 PAYMENT OF FUNDS TO LIC AND NOT MERE PROVISION N OT HIT BY S. 40A(7) CIT VS GUJARAT MACHINE TOOLS (ITA 666/AHD/ 1985) FOLLOWED. HONBLE 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 GRAT UITY 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, YES WHETHER IN ABSENCE OF S UCH A CASE MADE OUT BY REVENUE, TRIBUNAL WAS RIGHT IN HOLDING THAT GRANT OF APPROVAL OF GRATUITY FUND WAS NOT RELEVANT FOR PURP OSE OF INSTANT CASE AS SAID DEDUCTION WAS NOT BEING CLAIMED ON ACC OUNT OF ANY PROVISION AND AMOUNT OF GRATUITY WAS AN ALLOWABLE D EDUCTION HELD, YES. 5. CONSIDERING THE ABOVE ASPECTS, WE DO NOT FIND AN Y INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) IN DELETING THE ADDITIO N. THERE IS NO MERIT IN THE DEPARTMENTAL APPEAL. SAME IS ACCORDINGLY DISMIS SED. 6. AS A RESULT, THE DEPARTMENTAL APPEAL IS DISMISS ED. ORDER PRONOUNCED ON 06-08-2010. SD/- SD/- (A. N. PAHUJA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 06-0 8-2010 LAKSHMIKANT/- ITA NO.1479/AHD/2010 DCIT, BHARUCH VS BARODA GUJARAT GRAMIN BANK 4 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD