The DCIT, Circle-1, RAJKOT-GUJARAT V. M/s. Creative Castings Ltd., JUNAGADH

ITA 68/RJT/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76404 (ITAT-RAJKOT)
• Duration Of Justice: 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-01-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 21-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR J B JHAVERI
• Assessee Lawyers: J C RAMPURA C A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBULAL: RAJKOT BENCH, RAJKOT. BEFORE SHRI T. K. SHARMA JM AND SHRI B. R. JAIN AM ITA NO. 68/RJT/2013 / ASSESSMENT YEAR 2009-10. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, JUNAGARH. ( / APPELLANT V/S M/S CREATIVE CASTINGS LTD., 102, GIDC ESTATE-II, DOLATPARA, JUNAGARH. PAN- AAACC8652R / RESPONDENT ! '# / REVENUE BY DR. J.B. JHAVERI, D.R. $% ! '# / ASSESSEE BY SHRI J.C. RAMPURA, C.A. ' & ' %( / DATE OF HEARING 07/01/2014 ) %( / DATE OF PRONOUNCEMENT 09/01/2014 / ORDER PER B. R. JAIN, A. M. : THIS APPEAL BY THE REVENUE AGAINST THE ORDER DATED 31/01/2013 OF DR. K. SRINIVAS REDDY, LEARNED CIT(A)-IV, RAJKOT RA ISES THE SOLITARY GROUND AS UNDER:- 1. THE LD. CIT(A)-IV HAS ERRED IN LAW AND ON FACTS OF THE CASE IN ALLOWING GRATUITY EXPENSES OF RS. 11,67,980/- THROU GH THE SAME IS DISALLOWABLE U/S 40A(7) OF THE IT ACT. 2. BRIEFLY THE FACTS ARE THAT THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS. 11,67,980/- OUT OF GRATUITY EXPENSES OF RS. 18,45,030/- CLAIMED AS DEDUCTION BY THE ASSESSEE. ADMITTEDLY THE GRATUITY TO ANY EMPLOYEES OF ASSESSEES COMPANY ARE PAID BY THE LIC OUT OF FUND CREATED FOR THAT PURPOSE. THE ASSESSING OFFICER FOUND THAT THE ASSES SEES CONTRIBUTION TO THE FUND DURING THE YEAR IS ONLY RS. 6,77,050/-. HE , THEREFORE, HAVING REGARD TO THE PROVISIONS OF SECTION 40A(7) OF THE I .T. ACT, 1961 (IN SHORT THE ITA 68/RJT/2013 2 ACT) READ WITH EXPLANATION ALLOWED THE AMOUNT OF CO NTRIBUTION OF RS. 6,77,050/- ONLY AND DISALLOWED THE BALANCE AMOUNT O F RS. 11,67,980/-. 3. IN APPEAL, THE LD. CIT(A) VIDE PARA 8.2 AND 8.3 DELETED THE DISALLOWANCE OF RS. 11,67,980/- AS THE ASSESSEE HAD MADE PROVISIONS FOR THE GRATUITY LIABILITY AND MADE PAYMENT THEREOF ON 17/7/2009, A DAY BEFORE THE DUE DATE FOR FILING THE RETURN OF INCOME. THE O PERATIVE PORTION OF IMPUGNED ORDER IS REPRODUCED AS UNDER:- 8.2 I HAVE GONE THROUGH THE OBSERVATIONS OF THE AS SESSING OFFICER AND WRITTEN SUBMISSION OF THE APPELLANT. FACTS IN B RIEF ARE THAT DURING THE RELEVANT PREVIOUS YEAR APPELLANT CLAIMED EXPEND ITURE OF RS. 18,45,030/- ON ACCOUNT OF GRATUITY, HOWEVER, AO OBS ERVED THAT AS THE APPELLANT HAD PAID ONLY RS. 6,77,050/-, DISALLO WED THE BALANCE AMOUNT OF RS. 11,67,980/-. AGAINST THIS, IT IS THE SUBMISSION OF THE LD. AR OF THE APPELLANT THAT DURING THE YEAR UNDER CONS IDERATION APPELLANT HAS PAID TOTAL PREMIUM TOWARDS APPROVED G RATUITY FUNDS AT RS. 7,20,500/- (6,77,050/- PREMIUM + 38,670/- PREMI UM + 4,780/- SERVICE TAX) AND BALANCE AMOUNT OF RS. 11,24,530/- WAS PAID ON 17/7/2009 I.E. IN THE SUBSEQUENT YEAR BUT BEFORE TH E DUE DATE OF FILING RETURN OF INCOME FOR THE ASSESSMENT YEAR UND ER CONSIDERATION. IN SUPPORT OF THE CONTENTION HE SUBMITTED COPY OF R ELEVANT ACCOUNT AND LIC PREMIUM RECEIPTS WHICH ARE AT PAGE NO. 6 TO 8 OF WRITTEN SUBMISSION DATED 30.11.2012. 8.3 AFTER GOING THROUGH THE PROVISION OF SECTION 36 (1)(V) R.W.S. 40A(7) R.W.S. 43B(B) OF THE IT ACT, 1961, THERE IS SUBSTANTIAL FORCE IN THE ARGUMENT OF THE AR THAT IF PREMIUM ON GRATUITY FUNDS PROVIDED DURING THE YEAR HAS BEEN PAID SUBSEQUENTLY I.E. PRI OR TO DUE DATE FOR FILING OF RETURN OF INCOME, THEN SUCH PROVISION IS ALLOWABLE EXPENDITURE SUBJECT TO PAYMENT MADE WITH PRESCRIBED TIME. AS THE APPELLANT HAS DEMONSTRATED THAT DUE PAYMENTS HAVE B EEN MADE WELL WITHIN THE TIME PRESCRIBED WHICH WAS ALSO BEFO RE THE AO, I DO NOT FIND ANY REASON TO SUSTAIN THE DISALLOWANCE MAD E. THEREFORE, THE AO IS DIRECTED TO DELETE THE DISALLOWANCE OF RS. 11 ,67,980/- (38,670/- + 4,780/- + 11,24,530/-). THIS GROUND OF APPEAL IS ALLOWED. 4. HEARD PARTIES WITH REFERENCE TO MATERIAL ON RECO RD. THE ASSESSEE HAS MADE A PROVISION OF GRATUITY TOTAL FOR RS. 12,6 2,084/- AND THIS IS SO EVIDENT FROM SCHEDULE-10 OF CURRENT LIABILITIES AND PROVISIONS FORMING PART OF THE BALANCE SHEET LAID ON RECORD. THE DEDUCTION FOR THIS PROVISION IS NOT SHOWN TO HAVE BEEN ALLOWED AS DEDUCTION IN THE RELE VANT YEAR NOR IN ANY OF THE EARLIER YEAR, WHILE COMPUTING ASSESSABLE INCOME OF THE APPELLANT. ITA 68/RJT/2013 3 EXPLANATION BELOW SECTION 40A(7) OF THE ACT, THUS, WAS NOT FOUND APPLICABLE. THE LD. CIT(A) HAS ALSO FOUND THAT AN A MOUNT OF RS. 11,24,530/- WAS PAID BY THE ASSESSEE ON 17/7/2009 A DAY BEFORE THE DUE DATE OF FILING OF INCOME TAX RETURN. THE LD. CIT(A) HAS ALSO FOUND THAT THE ASSESSEE HAS PAID THE PREMIUM OF RS. 38,670/- AND R S. 4,780/- AS SERVICE TAX. THE LD. CIT(A) HOWEVER, DID NOT RECORD ANY FIN DING AS REGARDS THE DATES ON WHICH THESE TWO PAYMENTS OF RS. 38,670/- A ND RS. 4,780/- HAVE BEEN MADE BY THE ASSESSEE. WE, THEREFORE, SET ASIDE THE ORDER OF LD. CIT(A) IN THAT REGARD AND REMIT THE MATTER BACK TO HIM TO VERIFY THE FACTUM OF THESE PAYMENTS OF RS. 38,670/- AND RS. 4,780/- A ND PASS A SPEAKING ORDER THEREON. IN SO FAR AS THE PAYMENT OF RS. 11,2 4,530/- FORMING PART OF THE PROVISION CREATED BY THE ASSESSEE AND PAID BEFO RE DUE DATE OF FILING OF RETURN, THE LD. CIT(A) HAVING REGARD TO THE PROVISI ON OF SECTION 36(1)(V) READ WITH SECTION 40A(7) AND SECTION 43B(B) OF THE ACT, HAS FOUND THE CLAIM TO BE IN ORDER AND DELETED THE DISALLOWANCE S O MADE BY THE LD. ASSESSING OFFICER. NO LEGAL INFIRMITY IS POINTED OU T IN THAT REGARD. WE, THEREFORE, DO NOT FIND ANY REASON TO INTERFERE WITH THE DECISION TAKEN BY THE LD. CIT(A) TO DELETE THE DISALLOWANCE OF RS.11,24,5 30/-.ACCORDINGLY, GROUND RAISED IN APPEAL BY THE REVENUE STANDS PARTL Y ALLOWED. 5. IN THE RESULT, THE APPEAL BY REVENUE STANDS PART LY ALLOWED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN THE OPEN COURT ON 09/01/2014. SD/- SD/- ( T. K. SHARMA ) ( B. R. JAIN ) '* /JUDICIAL MEMBER #( '* / ACCOUNTANT MEMBER *#+ ,*-/ ORDER DATE 09/01/014 /RAJKOT *RANJAN ITA 68/RJT/2013 4 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT- DEPUTY COMMISSIONER OF INCOME TAX, CIR CLE-, JUNAGARH. 2. /RESPONDENT- M/S CREATIVE CASTINGS LTD., JUNAGARH. 3. '-2- % & 3% / CIT-I, RAJKOT. 4. & 3%- / CIT (A)-IV, RAJKOT. 5. 789 % , , / DR, ITAT, RAJKOT 6. 9; <= / GUARD FILE. *#+ '# / BY ORDER , TRUE COPY PRIVATE SECRETARY, , INCOME TAX APPELLATE TRIBUNAL, RAJKOT.