M/s. SKF Engineering and Lubrication India Limited ( formerly known as Lincoln Helios India Limited), Bangalore V. Assistant Commissioner Of Income Tax, Circle-4(1)(1), Bangalore

ITA 709/BANG/2020

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 1944 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 19-11-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BALAKRISHNAN N CIT BENGALURU
• Assessee Lawyers: CYRUS JAL BHARUCHA
• Keywords: Business expenditure; Tax effect; Capital expenditure; Set aside
• Section: 37(1); 64; 43; 48; 73; 37; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER IT (TP) A NO . 709/BANG/2020 ASSESSMENT YEAR : 2013 - 14 M/S. SKF ENGINEERING AND LUBRICATION INDIA PVT. LTD., NO.249/250, PHASE 3, HOSUR ROAD, BOMMASANDRA INDUSTRIAL AREA, BENGALURU 560 099. PAN: AAACL 2061P VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 4(1)(1), BENGALURU. APPELLANT RESPONDENT APPELLANT BY : S HRI CYRUS JAL BHARUCHA , CA RESPONDENT BY : SHRI BALAKRISHNAN N., ADDL. C IT(DR)(ITAT ), BENGALURU. DATE OF HEARING : 25 . 02.2021 DATE OF PRONOUNCEMENT : 25 .0 2 .202 1 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 21.09.2020 OF THE CIT(APPEALS), BENGALURLU-13 FOR T HE ASSESSMENT YEAR 2013-14 ON THE FOLLOWING GROUNDS:- SI NO GROUNDS OF APPEAL TAX EFFECT RELATING TO EACH GROUND OF APPEAL (RS.) 1 BOTH THE LOWER AUTHORITIES ERRED IN DISALLOWING T HE APPELLANT'S CONTRIBUTION TO THE EMPLOYEES' SUPERANN UATION FUND OF RS.21,01,654/- U/S. 40A(9). RS. 6,81,882/- (INCLUSIVE OF IT(TP)A NO.709/BANG/2020 PAGE 2 OF 10 2 THE ASSESSING OFFICER ERRED IN HOLDING THAT THE A PPELLANT'S CONTRIBUTION TO THE EMPLOYEES' SUPERANNUATION FUND OF RS.21,01,654/- WAS MERELY A PROVISION FOR EMPLOYEES ' SUPERANNUATION. SURCHARGE @5% AND CESS @3%) 3 WITHOUT PREJUDICE TO GROUND NOS.1 AND 2, BOTH THE LOWER AUTHORITIES ERRED IN DISALLOWING DEDUCTION IN RESPE CT OF THE APPELLANTS' CONTRIBUTION TO THE EMPLOYEES' SUPERANN UATION FUND OF RS.21,01,654/- U/S. 37(1) R.W.S. 43B. 4 WITHOUT PREJUDICE TO GROUND NOS.1 TO 3, BOTH THE LOWER AUTHORITIES FAILED TO APPRECIATE THAT AN ASSESSEE S HOULD NOT BE MADE TO SUFFER FOR INACTION BY THE INCOME-TAX DEPAR TMENT. 5 BOTH THE LOWER AUTHORITIES ERRED IN DISALLOWING THE APPELLANT'S CONTRIBUTION TO EMPLOYEES' GRATUITY FUN D OF RS.21,84,256/- U/S 40A(7). RS. 7,08,682/- (INCLUSIVE OF SURCHARGE @5% AND CESS @3%) 6 THE ASSESSING OFFICER ERRED IN HOLDING THAT THE APPELLANT'S CONTRIBUTION TO EMPLOYEES' GRATUITY FUN D OF RS.21,84,256/- WAS MERELY A PROVISION FOR EMPLOYEES ' GRATUITY. 7 WITHOUT PREJUDICE TO GROUND NOS.5 AND 6, BOTH THE LOWER AUTHORITIES ERRED IN DISALLOWING DEDUCTION IN RESPE CT OF THE APPELLANTS' CONTRIBUTION TO EMPLOYEES' GRATUITY FUN D OF RS.21,84,256/- U/S 37(1) R.W.S. 43B. 8 WITHOUT PREJUDICE TO GROUND NOS.5 TO 7, BOTH THE LOWER AUTHORITIES FAILED TO APPRECIATE THAT AN ASSESSEE S HOULD NOT BE MADE FOR INACTION BY THE INCOME-TAX DEPARTMENT. 2. THE ISSUES ARE WITH REGARD TO DISALLOWANCE OF CLAIMS OF SUPERANNUATION FUND OF RS.21,01,654 U/S. 40A(9) AND GRATUITY FUND OF RS.21,84,246 U/S. 40A(7) OF THE INCOME-TAX ACT, 196 1 [THE ACT]. THE BRIEF FACTS ARE THAT THE AO ON PERUSAL OF THE FORM 3CD RE PORT NOTICED THAT THE ASSESSEE COMPANY HAD MADE PROVISION OF RS.21,84,256 AND RS.21,01,654 AND HAS CLAIMED U/S 40A(7) & 40A(9) RESPECTIVELY. D URING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO F URNISH COPIES OF THE APPROVALS OF THE GRATUITY UNDER SECTION 40A(7) AND SUPERANNUATION FUND UNDER SECTION 40A(9) RESPECTIVELY ON THE GROUND THA T THE COMPANY HAD APPLIED FOR APPROVAL AND HAVING VERIFIED THE ALTERN ATE EVIDENCES OF THE APPLICATIONS MADE FOR APPROVAL TREATED THE AMOUNT A S ALLOWABLE. IT(TP)A NO.709/BANG/2020 PAGE 3 OF 10 3. THE ASSESSEE SUBMITTED THAT THE COMPANY HAD APPL IED FOR THE APPROVAL OF SUPERANNUATION FUND AS WELL AS GRATUITY FUND WHICH IS ADMINISTERED BY THE LIC IN MARCH 1999. THE ASSESSEE REMITS THE CONTRIBUTION TO LIC IN RESPECT OF SUPERANNUATION FU ND GOVERNED BY THE PROVISION OF SECTION 40A(9). 4. THE AO WAS OF THE VIEW THAT THE PROVISION OF APP ROVED SUPERANNUATION AND GRATUITY FUND IN PART B AND C IN IV SCHEDULE RUN SIMILAR AND ALIKE WHILE THE PROVISIONS FOR APPROVAL OF PROVIDENT FUND IN PART A OF THE 4TH SCHEDULE IS TOTALLY DISTINCT DIFFERENT FROM THOSE IN PART B & C. BESIDES THESE ENTRIES ARE PROVISIONS AND THEY CLEAR LY VIOLATE THE PRINCIPLE U/S 40A(7) & 40A(9). IN THIS VIEW OF THE MATTER, AN AMOUNT OF RS.21,84,256/- AND RS.21,01,654/- BEING PROVISION C REATED FOR GRATUITY FUND AND SUPERANNUATION FUND WAS DISALLOWED U/S 40A(7) A ND 40A(9) RESPECTIVELY AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. THE CIT(APPEALS) CONFIRMED THE ORDER OF THE AO. AGAINS T THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LD. AR SUBMITTED THAT APPLICATION DATED 08/0 3/1999 UNDER RULE 4 OF PART B OF FOURTH SCHEDULE OF INCOME TAX RULES, 1 963 WAS FILED WITH THE COMMISSIONER OF INCOME TAX, MUMBAI REQUESTING TO GR ANT APPROVAL FOR SUPERANNUATION FUND AND GRATUITY FUND. THE RECEIPT OF THE APPLICATION HAS BEEN DULY ACKNOWLEDGED BY THE INCOME TAX DEPARTMENT ON 31/03/1999. SUBSEQUENTLY THE ASSESSEE FILED A LETTER DATED 12/1 1/2010 WITH CIT, MUMBAI SEEKING CONFIRMATION ON THE STATUS OF APPROV AL OF THE FUNDS WHICH IS ACKNOWLEDGED BY THE OFFICE OF CIT, MUMBAI ON 15/ 11/2010. RELIANCE WAS PLACED ON THE FOLLOWING JUDGMENTS IN SUPPORT OF THE CLAIM:- CIT VS TEXTOOL CO LTD (2013) 216 TAXMAN 0327 (SC) CIT VS JAIPUR THAR GRAMIN BANK (2016) 388 ITR 228 ( RAJ) PR CIT VS. RAJASTHAN STATE SEED CORPORATION LTD (20 16) 386 ITR 267 (RAJ) IT(TP)A NO.709/BANG/2020 PAGE 4 OF 10 PRAKASH SOFTWARE SOLUTION (P) LTD. VS ITO (2019) 19 1 TTJ 64 (AHMEDABAD ITAT) BILAGI PATTANA SAHAKARI BANK NIYAMIT VS. CIT (ITA N O. 173/BANG/2012) (BANGALORE ITAT) SRI BASAVESHWARA CO-OP BANK AND OTHERS VS. CIT (BAN GALORE ITAT) ACIT VS. VERIZON DATA SERVICES INDIA (P.) LTD. [201 5] 43 ITR(T) 436 (CHENNAI - TRIB.) CAPITAL IQ INFORMATION SYSTEM (INDIA) (P.) LTD. VS. ADDL. CIT [2014] 49 TAXMANN.COM 313 (HYD. - TRIB.) DCIT VS. CORNWALL OVERSEAS DELHI ITAT [2019] 110 TAXMANN.COM 8 (DELHI - TRIB.) DY. CIT VS. BARODA GUJARAT GRAMEEN BANK (ITA NO. 14 79/AHD/2010] (AHMEDABAD ITAT) THE DISTRICT CO OP CENTRAL BANK ELURU VS. ITO (IT A NO. 49& 50/VIZAG/2012) (VIZAG ITAT) CRANEDGE INDIA PVT LTD VS. DCIT (ITA NO. 555/PUN/20 17)(PUNE ITAT) MAASS FLANGE INDIA PVT LTD VS. DCIT (ITA NO. 1382/P UN/2019)(PUNE ITAT) CHIEF COMMISSIONER(ADMN) VS. KARNATAKA ELECTRICITY BOARD (1992) 197 ITR 48 (KAR HC) 6. AT THE TIME OF HEARING, THE LD. AR SUBMITTED THA T THE ASSESSEE CONTRIBUTED THE ABOVE AMOUNTS TO THE SCHEME FORMULA TED BY LIC OF INDIA TOWARDS SUPERANNUATION FUND. BEING SO, IT SHOULD B E ALLOWED AS BUSINESS EXPENDITURE. 7. THE LD. DR RELIED ON THE ORDERS OF LOWER AUTHORI TIES. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. WE FIND THAT SIMILAR ISSUE CAME UP FOR CONSIDERATIO N BEFORE THE VISAKHAPATNAM BENCH OF ITAT IN ITA NO.476/VIZAG/201 2 FOR AY 2009-10 AND THE TRIBUNAL VIDE ORDER DATED 25.01.2018 HELD A S UNDER:- 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE ASSESSEE IS A COOPERATIVE BANK AND CREATED THE GROU P GRATUITY FUND/TRUST OF THE DISTRICT CO-OPERATIVE CENTRAL BAN K EMPLOYEES BUT THE SAME WAS NOT YET APPROVED BY THE CIT. PENDING R ECEIPT OF APPROVAL, THE ASSESSEE HAD MADE APPLICATION TO LIC OF INDIA UNDER PENSION AND GROUP SCHEMES, AND TAKEN POLICY UNDER M ASTER 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 TH E PAYMENT IT(TP)A NO.709/BANG/2020 PAGE 5 OF 10 BEFORE FILING THE RETURN OF INCOME. ON HAPPENING TH E EVENT, THE ASSESSEE BANK IS RECEIVING THE GRATUITY PAYMENT FRO M THE LIC WHICH IS BEING PAID TO THE EMPLOYEE CONCERNED AND NO FURTHER DEDUCTION IS BEING CLAIMED BY THE ASSESSEE AS EXPENDITURE. THUS NO DOUBLE DEDUCTION IS CLAIMED. THE EXPENDITURE CLAIMED BY TH E ASSESSEE UNDER GROUP GRATUITY SCHEME TO LIC OF INDIA WAS ALLOWED I N THE EARLIER YEARS PRIOR TO 2007-08. DURING ITA NO.49, 50,78, 47 6/VIZAG/2012, 515, 524/VIZAG/2014, 269/VIZAG/2015 & CO 33/VIZAG/2 013 & CO 29/VIZAG/2015 M/S. THE DISTRICT CO-OPERATIVE CENTRA L BANK LTD., ELURU THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT 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 SEC TION 36(1)(V), 40A(7)(B) & 40A(9) OF THE ACT BECAUSE THE ASSESSEE HAS NOT SATISFIED THE CONDITIONS. THE ARGUMENT OF THE ASSESSEE IS THA T SINCE THE PAYMENTS WERE MADE TO LIC OF INDIA IN MASTER POLICY SCHEME, THE PREMIUMS CONTRIBUTED TO THE LIC OF INDIA IS ALLOWAB LE DEDUCTION AND RELIED ON THE DECISIONS OF COORDINATE BENCH OF HYDE RABAD IN THE CASE OF CAPITAL IQ INFORMATION SYSTEMS (INDIA) PVT. LIMI TED (SUPRA). THE HON'BLE ITAT HYDERABAD BENCH WHILE DECIDING THE ISS UE ON SIMILAR FACTS HELD AS UNDER: 8. WE HAVE HEARD THE ARGUMENTS OF THE PARTIES, PERU SED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE OR DERS OF THE AUTHORITIES BELOW. WE FIND THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE ITAT, HYDERABAD IN T HE 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 PARTY. 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 40A(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 IT(TP)A NO.709/BANG/2020 PAGE 6 OF 10 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 THA T 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 DATED :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 GRATUITY SCHEME WAS NOT RECOGNISED BY THE COMMISSIONER OF INCOME-TAX. THIS FACT IS NOT IN DISPUTE. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SEC. 36(1)(V) OF THE INCO ME- TAX AC. SEC. 36(1)(V) READS AS FOLLOWS: '36. (1) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWI NG CLAUSES SHALL BE ALLOW D IN RESPECT OF THE MATTERS DEALT WITH THEREIN, IN COMPUTING THE INCOME REFERRE D 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 FOR THE EXCLUSIVE BENEFIT OF HI S 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 THE 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 TH E GROUP GRATUITY SCHEME IS NOT APPROVED BY THE CIT, ACCORDING TO THE REVENUE, IT CANNOT BE ALLOWED. HOWEVER, THE CONTENTION OF THE ASSESSEE IS THAT IN IT(TP)A NO.709/BANG/2020 PAGE 7 OF 10 VIEW OF THE JUDGEMENT OF THE MADRAS HIGH COURT IN THE CASE OF PREMIER SPINNING MILLS LTD. (SUPRA) AND THE JUDGEMENT OF THE JURISDICTIONAL HIGH COURT IN T HE CASE OF WARNER HINDUSTAN LTD. (SUPRA), IT HAS TO BE ALLOWED. 5. WE HAVE CAREFULLY GONE THROUGH THE JUDGEMENT 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 N OT APPROVED BY THE CIT. THE ANDHRA PRADESH HIGH COURT AFTER REFERRING TO THE JUDGEMENT OF THE BOMBAY HIGH COURT IN TATA IRON & STEEL CO. LTD. V. D. V. BAPAT, ITO (1975) 101 ITR 292, AND THE JUDGEMENT OF THE SUPREME COURT IN METAL BOX COMPANY OF INDIA LTD. VS. THE WORKMEN (1969) 73 ITR 53, HELD THAT THE AMOUNT PAID TOWARDS AN UNAPPROVED GRATUITY FUND CAN BE DEDUCTED UNDER SEC. 37 OF THE I.T. ACT, THOU GH NOT UNDER SEC. 36(1)(V). IN VIEW OF THIS JUDGMENT O F THE JURISDICTIONAL HIGH COURT, IN OUR OPINION, EVEN IF ANY PAYMENT IS MADE TO AN UNAPPROVED GRATUITY FUND, IT HAS TO BE ALLOWED UNDER SEC. 37. BY RESPECTFULLY FOLLOWING THE BINDING JUDGEMENT OF ANDHRA ITA NO.49, 50,78, 476/VIZAG/2012, 515, 524/VIZAG/2014, 269/VIZAG/2015 & CO 33/VIZAG/2013 & CO 29/VIZAG/2015 M/S. THE DISTRICT CO-OPERATIVE CENTRAL BANK LTD., ELURU 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 MATERIALL Y IDENTICAL TO THE ONE DECIDED BY THE ITAT IN THE CASE OF M/S. SRI KRI SHNA DRUGS LTD. (SUPRA), RESPECTFULLY FOLLOWING THE SAME, WE SET AS IDE THE ORDER OF THE CIT(A) AND ALLOW THE GROUND OF APPEAL OF THE ASSESS EE.' IT(TP)A NO.709/BANG/2020 PAGE 8 OF 10 9. SIMILARLY, ITAT AHMEDABAD BENCH IN THE CASE OF BARODA GUJARAT GRAMEEN BANK CITED (SUPRA) HELD THAT THE PA YMENT MADE TO LIC OF INDIA IS NOT A PROVISION BUT IT IS ACTUAL EX PENDITURE CLAIMED UNDER THE GRATUITY CONTRIBUTION. HON'BLE ITAT AHMED ABAD BENCH HELD THAT SINCE ASSESSEE HAS NOT CLAIMED THE PROVIS ION AND CLAIMED ON ACTUAL BASIS, THE EXPENDITURE IS ALLOWABLE DEDUCTIO N. FOR READY REFERENCE, WE REPRODUCE PARA NOS.4 & 5 OF THE ORDER OF THE HON'BLE ITAT AHMEDABAD BENCH WHICH READS AS UNDER: '4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MA TERIAL AVAILABLE ON RECORD. SECTION 40A (7) OF THE IT ACT PROVIDES THAT SUBJECT TO PROVISION OF CLAUSE (B), NO DEDUCTI ON 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 FO R ANY REASON. IT IS CLEAR FROM THE ABOVE PROVISION THAT S ECTION 40A (7) OF THE IT ACT WOULD APPLY IN RESPECT OF THE PROVISION ONLY. HOWEVER, IN THE CASE OF THE ASSESSE E, THE ASSESSEE CLAIMED DEDUCTION OF THE EXPENDITURE ON AC COUNT OF ACTUAL EXPENSES CLAIMED UNDER THE HEAD GRATUITY CONTRIBUTION. ITAT AHMEDABAD BENCH IN THE CASE OF N EW BHARAT ENGINEERING WORKS (JAM) LTD. (SUPRA) HELD 'DISALLOWANCE UNDER S. 40A(7) - GRATUITY - ACTUAL P AYMENT OF FUNDS TO LIC AND NOT MERE PROVISION - NOT HIT BY S. 40A(7) - CIT VS GUJARAT MACHINE TOOLS (ITA 666/AHD/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-T AX ACT, 1961 - BUSINESS DISALLOWANCE - GRATUITY - ASSE SSMENT 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 CL AIM COULD ONLY HAVE BEEN DISALLOWED IF IT HAD BEEN PROV ED THAT GRATUITY, IN RESPECT OF WHICH SAID PAYMENT HAD BEEN MADE, HAD NOT BECOME PAYABLE DURING PREVIOUS YEAR - HELD, YES - WHETHER IN ABSENCE OF SUCH A CASE MADE OUT BY REVEN UE, TRIBUNAL WAS RIGHT IN HOLDING THAT GRANT OF APPROVA L OF GRATUITY FUND WAS NOT RELEVANT FOR PURPOSE OF INSTA NT CASE AS SAID DEDUCTION WAS NOT BEING CLAIMED ON ACCOUNT OF ANY PROVISION AND AMOUNT OF GRATUITY WAS AN ALLOWABLE DEDUCTION - HELD, YES'. IT(TP)A NO.709/BANG/2020 PAGE 9 OF 10 5. CONSIDERING THE ABOVE ASPECTS, WE DO NOT FIND AN Y INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) IN DEL ETING THE ADDITION. THERE IS NO MERIT IN THE DEPARTMENTAL APPEAL. SAME IS ACCORDINGLY DISMISSED.' 10. IN THE CASE OF VERIZON DATA SERVICES INDIA P VT. LTD. (SUPRA) THE COORDINATE BENCH OF MADRAS HELD THAT PAYMENT MADE T O GRATUITY FUND MAINTAINED WITH LIC HAS NO CONTROL OVER THE IRREVOC ABLE TRUST CREATED EXCLUSIVELY FOR THE BENEFIT OF EMPLOYEES AND DEDUCT ION SHALL BE ALLOWED. THE COORDINATE BENCH OF MADRAS WHILE DECID ING THE APPEAL RELIED ON THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF TEXTOOL INDIA PVT. LIMITED (SUPRA) (CIVIL APPEAL NO .447 OF 2003). IN THE INSTANT CASE THE ASSESSEE HAS MADE THE PAYMENTS TO THE LIC TOWARDS GROUP GRATUITY SCHEME DIRECTLY IN APPROVED SCHEMES. THE ASSESSEE HAS ALSO OBTAINED THE POLICY IN FAVOUR OF THE BANK. THE ASSESSEE HAS NO CONTROL OVER THE FUNDS CONTRIBUTED TO LIC TOWARDS THE GRATUITY. THE ASSESSEE IS RECEIVING THE GRATUITY PA YMENT DIRECTLY FROM THE LIC OF INDIA AS PER THE SCHEME WHICH IS PAID TO THE EMPLOYEE ON HAPPENING OF THE EVENT I.E. RETIREMENT OR DEATH OR RESIGNATION. THEREFORE, THE FACTS OF THE ASSESSEE'S CASE ARE SQU ARELY COVERED BY THE DECISIONS CITED SUPRA. THE COORDINATE BENCH OF HYDE RABAD WHILE DELIVERING THE RULING RELIED ON THE DECISION OF JUR ISDICTIONAL HIGH COURT IN THE CASE OF WARNER HINDUSTAN LTD. SINCE TH E FACTS ARE IDENTICAL, RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE COORDINATE BENCHES, WE HOLD THAT THE ASSESSEE IS ENTITLED FOR THE DEDUCTION FOR PAYMENT OF GRATUITY TO LIC AND ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LOWER AUTHORITIES AND ALLOW THE APPEAL OF THE A SSESSEE. 11. THIS ISSUE IS INVOLVED FOR THE ASSESSMENT YE AR 2007-08, 2008- 09, 2009-10, 2010-11 & 2011-12 ON IDENTICAL FACTS. THE APPEAL OF THE ASSESSEE ON THIS GROUND FOR ALL THE SAID ASSESSMENT YEARS STANDS ALLOWED. 9. IN VIEW OF THE ABOVE ORDER, WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. IT(TP)A NO.709/BANG/2020 PAGE 10 OF 10 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 25 TH DAY OF FEBRUARY, 2021. SD/- SD/- ( N V VASUDEV AN ) ( CHANDRA POOJARI ) VICE PRESIDENT ACCOUNTANT MEMBER BANGALORE, DATED, THE 25 TH FEBRUARY, 2021. / DESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.