M/s. Cranedge India Pvt. Ltd., Pune V. Additional Commissioner of Income-tax,

ITA 2275/PUN/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9354 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 23-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: R R PETHE
• Keywords: Depreciation
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 22 75 /P U N/201 4 / ASSESSMENT YEAR : 20 11 - 12 M/S.CRANEDGE INDIA PVT. LTD., 16/3, F - 2 BLOCK, MIDC, PIMPRI, PUNE 411018 . / APPELLANT PAN: AA DCC7490A VS. THE ADDL. COMMISSIONER OF INCOME TAX, RANGE 8 , PUNE . / RESPONDENT / APPELLANT BY : S /S HRI C.H. NANIWADEKAR AND R.R. PETHE / RESPONDENT BY : SHRI YOGESH KAMAT, ADDL. CIT / DATE OF HEARING : 30 .0 5 . 2017 / DATE OF PRONOUNCEMENT: 16 . 0 6 .201 7 / ORDER PER SUSHMA CHOWLA, J M : TH IS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT (A) - V , PUNE , DATED 16.09.2014 RELATING TO ASSESSMENT YEAR 20 11 - 12 AGAINST ORDER PASSED UNDER SECTION 14 3(3) OF T HE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - ITA NO. 22 75 /P U N/20 1 4 M/S. CRANEDGE INDIA PVT. LTD. 2 1. THE ID. CIT (APPEALS) - V ERRED ON FACTS AND IN LAW IN HOLDING THAT THE ASSESSEE HAS MADE A PAYMENT TO UNAPPROVED GRATUITY FUND. WHEREAS THE FACT THAT THE ASSESSEE HAD ALREADY APPLIED TO THE CIT FOR THE APPROVAL OF GRATUITY SCHEME ON 20TH MAY 2011 . THE ASSESSEE HAS NOT RECEIVED THE APPROVAL FROM CIT TILL THE DATE OF ASSESSMENT INSPITE OF DUE FOLLOW - UPS BY THE ASSESSEE. DURING THE COURSE OF ASSESSM ENT THE LEARNED ADDL. CIT HAS DISALLOWED THE ENTIRE CONTRIBUTION MADE TO EMPLOYEES GROUP GRATUITY CUM LIFE ASSURANCE SCHEME U/S 36( 1 )(V). HE HAS DONE SO JUST BECAUSE ACTUAL APPROVAL TO THE GROUP GRATUITY TRUST IS NOT RECEIVED FROM CIT. THE SAME WAS AFFIRME D BY ID CIT (APPEALS) - V, PUNE. 2. THE L D. CIT (APPEALS) - V ERRED ON FACTS AND IN LAW IN CONCLUDING THAT THE EXPENSES OF RS . 16,88,394/ - WROTE OFF TO PROFIT & LOSS A/C WERE PERTAINING TO EARLIER YEAR. AS THE EXPENDITURE IS CAPITAL IN NATURE AND IT PERTA INS TO FY 2009 - 10 RELEVANT TO AY 2010 - 11 , ASSESSEE SHOULD BE ALLOWED TO CAPITALISE IN AY 2010 - 11 OR AY 2011 - 12 AND ALLOW TO CLAIM DEPRECIATION ACCORDINGLY. 3. THE ISSUE RAISED VIDE GROUND OF APPEAL NO.1 IS AGAINST DISALLOWANCE MADE IN RESPECT OF PAYMENT T O UNAPPROVED GRATUITY FUND. 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD PAID SUM OF RS.18,79,516/ - BY WAY OF CONTRIBUTION TOWARDS GRATUITY TO A TRUST WHICH WAS CREATED FOR THE BENEFIT OF EMPLOYEES OF THE AS SESSEE COMPANY. THE ASSESSING OFFICER NOTED THAT THE SAID GRATUITY FUND SCHEME WAS NOT APPROVED BY THE COMMISSIONER OF INCOME TAX. AS PER PROVISIONS OF SECTION 36(1)(V) OF THE ACT, ANY SUM PAID BY THE ASSESSEE AS AN EMPLOYER BY WAY OF CONTRIBUTION TOWARD S APPROVED GRATUITY FUND IS ALLOWABLE AS DEDUCTION. THE ASSESSEE WAS THUS, SHOW CAUSED AS TO WHY THE SAID AMOUNT SHOULD NOT BE DISALLOWED AS THE GRATUITY SCHEME WAS NOT APPROVED TILL DATE OF ASSESSMENT PROCEEDINGS. IN RESPONSE THERETO, THE ASSESSEE POINT ED OUT THAT AS PER PROVISIONS OF SECTION 40A(7) OF THE ACT, NO DEDUCTION IS ALLOWABLE IN RESPECT OF ANY PROVISION MADE BY THE ASSESSEE FOR THE PAYMENT OF GRATUITY TO HIS EMPLOYEES. HOWEVER, WHERE THE ASSESSEE HAD MADE ACTUAL PAYMENT OF THE SAID AMOUNT AND HAD NOT MADE ANY PROVISION, THEN THE SAID AMOUNT IS ITA NO. 22 75 /P U N/20 1 4 M/S. CRANEDGE INDIA PVT. LTD. 3 ALLOWABLE. RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF PUNJAB & HARYANA IN CIT VS. BITONI LAMPS LTD. REPORTED IN 227 ITR 396 (P&H). THE ASSESSING OFFICER WAS OF THE VIEW THA T THE PROVISIONS OF SECTION 40A(7) OF THE ACT WOULD APPLY IF THE PROVISION IS MADE FOR PAYMENT FOR GRATUITY FUND. HOWEVER, IN ASSESSEES CASE, THERE WAS ACTUAL PAYMENT OF GRATUITY FUND AND HENCE, PROVISIONS OF SECTION 40A(7) OF THE ACT WOULD NOT COME INTO PICTURE. THE ASSESSING OFFICER APPLIED THE PROVISIONS OF SECTION 36(1)(V) OF THE ACT WHICH REQUIRE SUCH PAYMENT TO BE MADE TO DULY APPROVED GRATUITY FUND AND SINCE THE ASSESSEE HAD NOT RECEIVED APPROVAL FROM THE COMMISSIONER OF INCOME TAX OF THE GRATUITY SCHEME, THE SAID AMOUNT WAS DISALLOWED AND ADDED BACK IN THE HANDS OF ASSESSEE. 5. THE CIT(A) UPHELD THE ORDER OF ASSESSING OFFICER HOLDING THAT THE PROVISIONS OF SECTION 40A(7) OF THE ACT WERE NOT APPLICABLE AND THE SAID AMOUNT WAS NOT ALLOWABLE UNDER S ECTION 36(1)(V) OF THE ACT. 6. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 7. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT EVEN IF THE SAID AMOUNT WAS DISALLOWABLE UNDER SECTION 36(1)(V) OF THE ACT, THEN THE SAME I S TO BE ALLOWED AS DEDUCTION UNDER SECTION 37(1) OF THE ACT . IN THIS REGARD, RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE HYDERABAD BENCH OF TRIBUNAL IN CAPITAL IQ INFORMATION SYSTEM (INDIA) P. LTD. VS. ADDL. CIT IN ITA NO.84/HYD/2013, RELATING TO AS SESSMENT YEAR 2008 - 09, ORDER DATED 31.05.2013. ITA NO. 22 75 /P U N/20 1 4 M/S. CRANEDGE INDIA PVT. LTD. 4 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF CIT(A) . 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE WHICH ARISES BY WAY OF GROUND OF A PPEAL NO.1 IS THE PAYMENT OF GRATUITY TO A FUND FORMULATED BY THE ASSESSEE FOR THE BENEFIT OF ITS EMPLOYEES. THE ASSESSEE CLAIMS THAT IT HAD PAID SUM OF RS. 18,79,516/ - TO LIC ON ACCOUNT OF GRATUITY FUND. THE ASSESSEE HAD APPLIED FOR RECOGNITION OF THE SA ID GRATUITY FUND BEFORE THE COMMISSIONER OF INCOME TAX, WHICH HAS NOT BEEN APPROVED TILL DATE. THE ASSESSING OFFICER AND THE CIT(A) THUS, INVOKED THE PROVISIONS OF SECTION 36(1)(V) OF THE ACT TO DISALLOW THE SAID CLAIM OF ASSESSEE AS THE AMOUNT WAS NOT PA ID TO AN APPROVED GRATUITY FUND. THE CASE OF ASSESSEE BEFORE US ON THE OTHER HAND, IS THAT EVEN OTHERWISE, THE SAID AMOUNT IS TO BE ALLOWED IN THE HANDS OF ASSESSEE UNDER SECTION 37(1) OF THE ACT. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IN THIS REGARD, HAS PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HYDERABAD BENCH OF TRIBUNAL IN CAPITAL IQ INFORMATION SYSTEM (INDIA) P. LTD. VS. ADDL. CIT (SUPRA) . FROM THE PERUSAL OF SAID DECISION, WE FIND THAT REFERENCE IS MADE TO THE DECISION OF HONBL E BOMBAY HIGH COURT IN TATA IRON & STEEL CO. LTD. VS. D.V. BAPAT, ITO (1975) 101 ITR 292 (BOM) AND THE JUDGMENT OF HON'BLE SUPREME COURT IN METAL BOX COMPANY OF INDIA LTD. VS. THE WORKMEN (1969) 73 ITR 53 (SC), WHEREIN IT HAS BEEN HELD THAT THE AMOUNT PAID TOWARDS UNAPPROVED GRATUITY FUND CAN BE DEDUCTED UNDER SECTION 37(1) OF THE ACT , THOUGH NOT UNDER SECTION 36(1)(V) OF THE ACT. FOLLOWING THE RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT, WE HOLD THAT THE AMOUNT WHICH HAS BEEN PAID BY THE ASSESSEE TOW ARDS AN UNAPPROVED GRATUITY FUND IS DULY ALLOWABLE AS DEDUCTION UNDER SECTION 37(1) OF THE ACT THOUGH THE ASSESSEE IS NOT ENTITLED TO ITA NO. 22 75 /P U N/20 1 4 M/S. CRANEDGE INDIA PVT. LTD. 5 CLAIM THE DEDUCTION UNDER SECTION 36(1)(V) OF THE ACT. ACCORDINGLY, THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS A LLOWED. THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IS NOT PRESSED AND HENCE, THE SAME IS DISMISSED AS NOT PRESSED. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, PARTLY ALLOWED. 1 0 . IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 16 TH DAY OF JUNE , 201 7 . SD/ - SD/ - (ANIL CHATURVEDI ) (SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DA TED : 16 TH JUNE , 201 7 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - V , PUNE ; 4. / THE CIT - V , PUNE ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / ASSISTANT REGISTRAR, , / ITAT, PUNE