M/s.Oriclean(P)limited, Cuttack V. Pr.CIT, Cuttack

ITA 83/CTK/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9398 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 15-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K GAUTAM
• Keywords: Business income; Depreciation; Business expenditure; Difference of opinion; Competent authority; Assessment record; Change of opinion; Capital expenditure; TDS; Set aside
• Section: 143(3); 37(1); 73; 13; 37; 263; 28

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI C.M. GARG, JM & SHRI L.P. SAHU, AM . / ITA NO. 83 /CTK/20 1 9 ( / ASSESSMENT YEAR : 2014 - 2015 M/S ORICLEAN PRIVATE LIMITED, AT: BANDALO, PO: KOTSAHI, VIA : TANGI, N.H.5, DISTRICT - CUTTACK - 754022 VS. THE PR. CIT, CUTTACK PAN NO. : A A ACO 2094 F ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI SUNIL MISHRA , ADVOCATE /RE VENUE BY : SHRI M.K.GAUTAM, CIT - DR / DATE OF HEARING : 1 4 / 0 8 /20 20 / DATE OF PRONOUNCEMENT : 18 / 0 8 /20 20 / O R D E R PER L.P.SAHU , A M : TH IS IS AN APPEAL FILED BY THE ASSESSEE ARE AGAINST THE ORDER OF THE PR. CIT , CUTTACK , DATED 21/22.02.2019 FOR THE ASSESSMENT YEAR 2014 - 2015 , ON THE FOLLOWING GROUNDS OF APPEAL : - 1) FOR THAT THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX, CUTTACK U/S 263 OF INCOME TAX ACT IS ILLEGAL, ARBITRARY, ERRONEOUS APPROACH TO THE F ACTS AS WELL AS LAW AND EXCESSIVE EXERCISE OF JURISDICTION AND AS SUCH LIABLE TO BE QUASHED IN THE INTEREST OF JUSTICE. 2) FOR THAT THE DISALLOWANCES OF PAYMENT MADE TO GRATUITY FUND U/S 40 A(7) OF THE ACT ON THE TECHNICAL POINT THAT THE GRATUITY FUN DS HAS NOT BEEN APPROVED BY THE COMPETENT AUTHORITY IS OUT AND OUT ILLEGAL WHEN THE ADMITTED FACT IS THAT THE GRATUITY FUND WAS CREATED BY A TRUST DEED AND A GROUP GRATUITY SCHEME WAS FLOATED IN COLLABORATION WITH LIC OF INDIA AND SINCE THE CONTRIBUTION IN EACH YEAR HAS BEEN CLAIMED AS DEDUCTION, THEREBY, NOT CLAIMED EACH YEARS ACCRUAL. HENCE, THE APPELLANT HAS RIGHTLY CLAIMED THE DEDUCTION, WHICH MAY KINDLY BE ALLOWED IN THE INTEREST OF JUSTICE. ITA NO. 83 /CTK/201 9 2 3) FOR THAT THE ORDER PASSED U/S 263 IS N OT SUSTAINABLE BEING CHANGE OF OPINION AND PASSED WITHOUT APPLICATION OF MIND SINCE, THE APPELLANT HAS FORMED A TRUST ON 29.01.1999 TO LOOK AFTER INDEPENDENTLY THE GRATUITY FUND OF ALL THE EMPLOYEES AND MADE A GROUP GRATUITY SCHEME THROUGH LIFE INSURANCE C ORPORATION OF INDIA. EVERY YEAR WHATEVER SUM OF PREMIUM CALCULATED BY LIC AT THE BEGINNING OF THE YEAR CONSIDERING PRESENT EMPLOYEES AND THEIR CURRENT EMOLUMENTS, THE APPELLANT DEPOSITED THE AMOUNT IN GROUP GRATUITY SCHEME AND CONSIDER IT IN THE PROFIT & L OSS ACCOUNT FOR THE RELEVANT YEAR AND THE EMPLOYEES LEFT ARE BEING PAID GRATUITY BY THE TRUST HAVING NO IMPACT IN THE PROFIT & LOSS ACCOUNT. HENCE, THE SAME MAY KINDLY BE ALLOWED IN THE INTEREST OF JUSTICE. 4) FOR THAT ANY OF THE GROUNDS INCIDENTAL T O THE GROUNDS OF THIS CASE MAY KINDLY BE PERMITTED TO URGE AT THE TIME OF HEARING OF THE CASE. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF DETERGENTS, IT FILED ITS RETURN OF INC OME FOR THE A.Y.2014 - 2015 ON 11.10.2014 DISCLOSING TOTAL INCOME AT RS.1,96,44,310/ - . THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICES WERE ISSUED AND SERVED UPON THE ASSESSEE. ON VERIFICATION OF THE STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED ON 31.03.2014 VIS - - VIS THE STATEMENT OF INCOME FOR THE YEAR UNDER CONSIDERATION, THE AO FOUND THAT THE ASSESSEE HAS DECLARED BUSINESS INCOME OF RS.56,60,728/ - . IN ARRIVING AT THE SAME, THE ASSESSEE HAS DEDUCTED RS.1,79,96,040/ - IN RESPECT O F INCOME FROM FACTORY RENT CREDITED TO PROFIT AND LOSS ACCOUNT AND THE SAME INCOME HAS BEEN DECLARED AS INCOME FROM HOUSE PROPERTY AT RS.1,25,97,228/ - ON A DEDUCTION OF RS.53,98,812/ - BEING 30% U/S.24 OF THE ACT. THE AO REQUIRED THE ASSESSEE TO FURNISH THE DETAILS OF SUCH RENT INCOME AND TO ITA NO. 83 /CTK/201 9 3 SHOW CAUSE AS TO WHY THE SAME SHOULD BE TREATED AS THE BUSINESS INCOME BEING IT RELATES TO OPERATION FROM BUSINESS. IN REPLY, THE ASSESSEE FILED A WRITTEN SUBMISSION ALONG WITH COPY OF LEASE AGREEMENT. ON VERIFICATION OF THE DETAILS/DOCUMENTS, THE AO FOUND THAT THE ASSESSEE IS PROCESSING THE RAW MATERIAL SUPPLIED BY HINDUSTAN UNILEVER LIMITED (HUL) TO BRING OUT SALEABLE PRODUCTS. IN THE PROCESS, RAW MATERIALS/STOCKS ARE KEPT FOR PROCESSING AT THE GODOWN OF THE ASSESSEE C OMPANY FROM WHERE THE ASSESSEE GETS RENT FROM HUL, FURTHER THE AO NOTED THAT T HERE IS NO DOUBT THAT THE HUL CREDITS THE AMOUNT AFTER EFFECTING TDS THEREFROM U/S.1941 OF THE ACT. BUT ON VERIFICATION OF THE LEDGER ACCOUNT COPIES OF EXPENSES CLAIMED IN THE P & L A/C , THE AO FOUND THAT ALL THE EXPENSES RELATING TO EARNING OF RENT INCOME, HAS BEEN DEBITED BY THE ASSESSEE IN ARRIVING AT THE BUSINESS INCOME. THE PREMISES LETTING OUT OF WHICH HAS RESULTED RENTAL INCOME, IS A BUSINESS ASSET DEPRECIATION ON WHICH HAS BEEN CLAIMED AS DEDUCTION. FURTHER SUCH RECEIPT IS FOUND TO BE RELATED TO EARLIER YEARS BUT, AS EXPLAINED, CREDITED BY HUL DURING THE PREVIOUS YEAR 2013 - 14 ONLY. HENCE, THE AO FOUND THAT THE INCOME/RECEIPT AGAINST GODOWN IS NOTHING BUT THE INCOME CHARGEAB LE UNDER THE HEAD ' BUSINESS & PROFESSION ' . THUS, THE AO HELD THAT THE SAME RECEIPT IS TAKEN AS BUSINESS RECEIPT AND ENHANCED THE INCOME FROM BUSINESS TO THAT EXTENT AND CALCULATED THE ITA NO. 83 /CTK/201 9 4 INCOME FROM BUSINESS AT RS.2,36,56,768/ - ASSESSING TOTAL INCOME OF THE A SSESSEE AT RS.2,50,43,120/ - . 3. SUBSEQUENTLY, THE PR. CIT INVOKING THE REVISONARY POWER VESTED U/S.263 OF THE ACT CALLED FOR THE ASSESSMENT RECORDS AND AFTER DUE EXAMINATION, DIRECTED THE AO TO MODIFY THE ASSESSMENT ORDER MAKING DISALLOWANCE U/S.40A(7) OF THE ACT ON ACCOUNT OF PAYMENT MADE TO UNAPPROVED GRATUITY FUND. 4. AGAINST THE ABOVE ORDER OF PR.CIT, THE ASSESSEE IS IN APPEAL BEFORE THE INCOME TAX APPELLATE TRIBUNAL. 5. LD. AR BEFORE US FILED HIS WRITTEN SUBMISSIONS, WHICH READ AS UNDER : - 1. THAT THE APPELLANT IS PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE OF DETERGENT .THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2014 - 15 WAS FILED ON 11.10.2014 DISCLOSING TOTAL INCOME OF RS.1,96,44,310.00 . THE ASSESSMENT WAS COMPLETED U/S 143 (3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT.) BY THE ACIT CIRCLE - 2 (1), CUTTACK (IN SHORT THE AO) ON 17.1.2016 DETERMINING THE TOTAL INCOME AT RS.2,50,43,120.00. 2. THAT DURING THE IMPUGNED YEAR OF ASSESSMENT THE APPELLANT COMPANY HAS FORMED A TRUST ON 29.01.1999 TO LOOK AFTER INDEPENDENTLY THE GRATUITY FUND OF ALL THE EMPLOYEES AND MADE A GROUP GRATUITY SCHEME THROUGH LIFE INSURANCE CORPORATION OF INDIA. EVERY YEAR WHATEVER SUM OF PREMIUM CALCULATED BY LIC AT THE BEGINNING OF THE YEAR CONSIDERING PRESENT EMPLOYEES AND THEIR CURRENT EMOLUMENTS, THE APPELLANT DEPOSIT THE AMOUNT IN GROUP GRATUITY SCHEME AND CONSIDER IT IN IT ' S PROFIT & LOSS ACCOUNT FOR THE RELEVANT YEAR. THE EMPLOYEES LEFT ARE BEING PAID GRATUITY BY THE TRUST HAVING NO IMPACT IN THE PROFIT & LOSS ACCOUNT. (COPY OF THE TRUST DEED DTD.29.01.1999, AGREEMENT WITH LIC INDIA LTD. AND AUDIT REPORT WITH FORM NO - 3CA ARE ENCLOSED AS ANNEXURE - 1,2 AND 3 RESPECTIVELY.) 3. THAT DURING THE IMPUGNED YEAR OF ASSESSMENT LIC INDIA LTD. VIDE LETTER D TD.28.02.2014 HAS INTIMATED THE AMOUNT OF PREMIUM IS AT ITA NO. 83 /CTK/201 9 5 RS. 16,65,030/ - AND THE APPELLANT HAS DEPOSITED THROUGH A/C PAYEE CHEQUE DTD.26.03.2014 AND LIC INDIA ENDORSED THE RECEIPT OF THE PREMIUM AND THE POLICY HAS BEEN RENEWED. DURING THE COURSE OF ASSESSME NT, THE APPELLANT HAS PRODUCED THE COPIES TRUST DEED, AGREEMENT WITH LIC, THE EVIDENCE OF PAYMENT TO LIC ETC. AND AFTER PERUSAL OF ALL THE DOCUMENTS , THE LEARNED AO HAS ALLOWED THE PAYMENT MADE TO LIC AS BUSINESS EXPENDITURE . (COPY OF THE LETTER OF LIC INDIA, THE DEPOSITED CHEQUE, THE ENDORSEMENT AND RENEWAL LETTER AND ORDER OF ASSESSMENT U/S 143(3) OF THE ACT ARE ENCLOSED AS ANNEXURE - 4,5,6 AND 7 RESPECTIVELY) 4. THAT LEARN ED PRINCIPAL COMMISSIONER INCOME TAX HAS INITIATED THE PROCEEDING U/S. 263 OF THE INCOME TAX ACT WITH THE OPINION THAT THE CLAIM OF EXPENDITURE OF THE APPELLANT AT SCHEDULE ' K ' OF THE PROFIT AND LOSS ACCOUNT AS ' INSURANCE PREMIUM ( GRATUITY ) ' UNDER THE HEAD ' EMPLOYEES REMUNERATION AND BENEFIT ' IS NOT ALLOWABLE U/S. 40 A (7) OF THE INCOME TAX ACT SINCE THE APPELLANT HAD NOT CONSTITUTED ANY GRATUITY FUNDS WITH APPROVAL OF THE COMPETENT AUTHORITY. SINCE THE LEARNED AO NEITHER CALLED FOR THE DETAIL NOR EXAMINED THIS ISSUED WHILE COMPLETING THE ASSESSMENT BUT ALLOWED THE SAID CLAIM, HENCE THE ASSESSMENT ORDER IS PREJUDICIAL TO THE INTEREST OF REVENUE AND THE LEARNED CIT ISSUED NOTICE . 5. THAT PURSUANT TO SUCH NOTICE, THE APPELLANT HAS SUBMITTED ALL THE EVIDENCES AS CALLED FOR AND NOTES OF SUBMISSION BY STATING AS FOLLOWS ' ... WE HA VE FORMED A TRUST ON 29.01.1999 TO LOOK AFTER INDEPENDENTLY THE GRATUITY FUND OF ALL THE EMPLOYEES AND MADE A GROUP GRATUITY SCHEME THROUGH LIFE INSURANCE CORPORATION OF INDIA. EVERY YEAR WHATEVER SUM OF PREMIUM CALCULATED BY LIC AT THE BEGINNING OF THE YE AR CONSIDERING PRESENT EMPLOYEES AND THEIR CURRENT EMOLUMENTS. WE DEPOSIT THE AMOUNT IN GROUP GRATUITY SCHEME AND CONSIDER IT IN OUR PROFIT & LOSS ACCOUNT FOR THE RELEVANT YEAR. THE EMPLOYEES LEFT ARE BEING PAID GRATUITY BY THE TRUST HAVING NO IMPACT IN OUR PROFIT & LOSS ACCOUNT. IN THE FINANCIALLY YEAR 2013 - 14 WE HAVE PAID RS.16,65,030.00 TOWARDS PREMIUM FOR GRATUITY AS CALCULATED BY LIC AND TAKEN IT IN OUR PROFIT & LOSS ACCOUNT BUT ERRONEOUSLY IN THE TAX AUDIT REPORT 3CD AT POINT NO. 21 ( E) SHOWN UNDER ' PROVISION FOR PAYMENT OF GRATUITY NOT ALLOWABLE UNDER SECTION 40 A (7). ' WE WOULD LIKE TO FURTHER INFORM YOU THAT THE AMOUNT PAID TO LIFE INSURANCE CORPORATION TOWARDS PROVISION FOR GRATUITY WHICH WAS DUE FOR THE YEAR IN QUESTION UNDER GROUP GRATUITY SCHEME AND NOT PAID THE SUM OUT OF PROVISION TO ANY EMPLOYEE EXCEPT THROUGHLIC UNDER THE SCHEME. HENCE SECTION 40A(7) IS NOT APPLICABLE IN OUR CASE. WE HIGHLY REGRET FOR THE ERRONEOUS QUALIFICATION SHOW IN TAX AUDIT REPORT 3CD AT POINT NO. 2 1 (E) UNDER SECTION 40A(7). ' ITA NO. 83 /CTK/201 9 6 6 . THAT LEARNED PRINCIPAL COMMISSIONER OF INCOME TAX WITHOUT GOING IN TO THE MERIT OF CASE AS WELL AS SETTLED POSITION OF THE LAW, HAS DISALLOWED THE EXPENDITURE TOWARDS GRATUITY PAYMENT BY APPLYING THE PROVISION OF SECTION 4 0 A (7) OF THE INCOME TAX ACT WITH THE FOLLOWING OBSERVATION . .. ' 10 HOWEVER, IN THE COURSE OF HEARING BEFORE THE UNDERSIGNED, IT HAS BEEN FAIRLY ADMITTED BY THE AR OF ASSESSEE THAT EVEN THOUGH A GRATUITY FUND WAS CREATED WAY BACK ON 29.01.1999 BY A TRUS T DEED AND A GROUP GRATUITY SCHEME WAS FLOATED IN COLLABORATION WITH LIC OF INDIA. NO SUCH APPROVAL FOR THE SAID GRATUITY FUND HAS BEEN OBTAINED FROM THE COMPETENT AUTHORITY SO FAR, AS MANDATED UNDER THE FOURTH SCHEDULE ( PART C ) OF THE IT ACT. HENCE, T HE CONTRIBUTION OF RS. 16,65,030.00 MADE TO LIC OF INDIA WOULD NOT BE ELIGIBLE FOR DEDUCTION IN VIEW OF THE VIOLATION OF PROVISION OF SECTION 40A(7) IN AS MUCH AS SUCH PROVISION TOWARDS GRATUITY PAYMENT TO ITS EMPLOYEE ON THEIR RETIREMENT OR ON TERMINATION OF THEIR EMPLOYMENT, HAS BEEN MADE TO AN ' UNAPPROVED FUND ' FROM THE ABOVE FINDING , IT IS CRYSTAL CLEAR THAT, A TRUST DEED WAS CREATED, A GROUP GRATUITY SCHEME WAS FLOATED IN COLLABORATION WITH LIC OF INDIA , THE PAYMENT OF PREMIUM OF RS. 16,65,030/ - WAS MADE TO LIC OF INDIA DURING THE IMPUGNED YEAR OF ASSESSMENT AND NO APPROVAL HAS BEEN OBTAINED FROM COMPETENT AUTHORITY . 7. THAT, THE LAW IS WELL SETTLED THAT CONTRIBUTION / PAYMENT TO GROUP GRATUITY FUNDS OF LIC OF INDIA IS ALLOWABLE AS BUSINESS EXPENDI TURE U/S. 37 (1) OF THE ACT , EVEN THROUGH NOT RECOGNIZED BY THE COMMISSIONER OF INCOME TAX. FOR BETTER APPRECIATION OF THE FACTS AS WELL AS LAW, SOME OF THE SETTLED LAWS ARE GIVEN BELOW. THE HON ' BLE ITAT, HYDERABAD B - BENCH, IN THE CASE OF INTERNATIONAL O RE AND FERT ILIZER (INDIA) CP) LTD,V. ITO ( MANU/ IH/0285/1982 : 3 ITD HVD.,593) HAS HELD THAT PAYMENT TO LIC GROUP GRATUITY SCHEME IS IN THE NATURE OF BUSINESS EXPENDITURE DEDUCTIBLE UNDER THE PROVISIONS OF SECTION 37 OF THE ACT AND THEREFORE, IS TO BE ALL OWED AS IT IS LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS. THE HON ' BLE ITAT HAS IN THIS CASE HAS OBSERVED THAT PROVISIONS OF SECTION 40A(7) OF THE ACT WOULD APPLY ONLY IN RESPECT OF PROVISION MADE FOR GRATUITY IN CASE OF UNAPPROVED FUN DS AND NOT ACTUAL PAYMENTS MADE, WHICH ARE COVERED BY SECTION 37 OF THE ACT. THE SIMILAR VIEW HAS BEEN TAKEN BY THE HON ' BLE ITAT, DELHI ' B ' BENCH IN THE CASE OF ITO V. MMTC LTD,. 3 ITD (DEL)305 FURTHER, THE HON ' BLE ITAT IN THE CASE OF PCIT, CIRCLE - 3 (2) , HYDERABAD V. SRI KRISHNA DRUGS LTD, IN ITA NO. 198/ HVD/2011, DATED 16.12.2011 . HAS ALSO HELD THAT PAYMENT TO GROUP GRATUITY FUND OF LIC OF INDIA IS ALLOWABLE AS BUSINESS EXPENDITURE U/S. 37 (1) OF THE ACT. EVEN THOUGH NOT RECOGNIZED BYTHE COMMISSIONER OF INCOME TAX, THE HON ' BLE TRIBUNAL HAS RELIED ON THE DECISION OF THE ANDHRA PRADESH HIGH ITA NO. 83 /CTK/201 9 7 COURT IN THE CASE OF WARNER HINDUSTAN LTD, WHILE ALLOWING THE PAYMENT OF PREMIUM TO THE LIC GROUP GRATUITY FUND. SIMILARLY, ITAT AHMEDABAD BENCH IN THE CASE OF BARODA G UJARAT GRAMEENBANK CITED F SUPRA) HELD THAT THE PAYMENT MADE TO LIC OF INDIA IS NOT A PROVISION BUT IT IS ACTUAL EXPENDITURE CLAIMED UNDER THE GRATUITY CONTRIBUTION. HON ' BLE ITAT AHRNEDABAD BENCH HELD THE SINCE ASSESSEE HAS NOT CLAIMED THE PROVISION AND CLAIMED ON ACTUAL BASIS, THE EXPENDITURE IS ALLOWABLE DEDUCTION. FOR READY REFERENCE, PARA NOS.4 &5 OF THE ORDER OF THE HON ' BLE ITAT AHRNEDABAD BENCH ARE REPRODUCED WHICH READS AS UNDER: ' 4. WE HAVE CONSIDERED THE RIVAL SUBM ISSION AND MATERIAL AVAILABLE ON RECORD. SECTION 40A (7) OF THE IT ACT PROVIDES THAT SUBJECT TO PROVISION OF CLAUSE (B), NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF ANY PROVISION MADE BY THE ASSESSEE FOR PAYMENT OF GRATUITY TO HIS EMPLOYES ON THEIR RETIREM ENT OR ON TERMINATION OF THEIR EMPLOYMENT FOR 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 EXPEN DITURE ON ACCOUNT OF ACTUAL EXPENSES CLAIMED UNDER THE HEAD GRATUITY CONTRIBUTION. ITAT AH M EDABAD BENCH IN THE CASE OF NEW BHARAT ENGINEERING WORKS. (JAM ) LTD (SUPRA) HELD ' DISALLOWANCE UNDER S. 40A (7) GRATUITY - ACTUAL PAYMENT OF FUNDS TO LIC AND NOT MERE PROVISION - NOT HIT BY S. 40A (7) - CIT V. GUJARAT MACHINE TOOLS( ITA 666/A HD/1985) FOLLOWED ' . HON ' BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. BITONI LAMPS LTD. MANU/PH/0587/2004: 144 TAXMAN 33 HELD THAT ' SECTION 40A (7) OF THE INCOME TAX ACT, 1961 - BUSINESS DISALLOWANCE - GRATUITY - ASSESSMENT YEAR 1979 - 80 - ASSESSEE - COMPANY CLAIMED DEDUCTION UNDER S ECTION 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 SUCH A CASE MADE OUT BY REVENUE, TRIBUNAL WAS RIGHT IN HOLDING THAT GRANT OF APPROVAL OF GRATUITY FUND WAS NOT RELEVANT FOR PURPOSE OF INSTANT CASE AS SAID DEDUCTION WAS NOT BEING CLAIMED ON ACCOUNT OF ANY PRO VISION AND AMOUNT OF GRATUITY WAS AN ALLOWABLE DEDUCTION - HELD, YES ' . CONSIDERING THE ABOVE ASPECTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT (A) IN DELETING THE ADDITION. THERE IS NO MERIT IN THE DEPARTMENTAL APPEAL. SAME IS ACCORD INGLY DISMISSED. ' IN THE CASE OF VERIZON DATA SERVICES INDIA PVT LTD. (SUPRA ITAT, MADRAS BENCH HELD THAT PAYMENT MADE TO GRATUITY FUND MAINTAINED WITH LIC HAS NO CONTROL OVER THE IRREVOCABLE TRUST CREATED EXCLUSIVELY FOR THE BENEFIT OF EMPLOYEES AND DED UCTION SHALL BE ALLOWED. THE COORDINATE BENCH OF MADRAS WHILE DECIDING ITA NO. 83 /CTK/201 9 8 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 MA DE 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 OYER THE FUNDS CONTRIBUTED TO LIC TOWARDS THE GRATUITY. THE ASSESSEE IS REC EIVING THE GRATUITY PAYMENT DIRECTLY FROM THE LIC OF INDIA AS PER THE SCHEME WHICH IS PAID TO THE EMPLOYEES ON HAPPENING OF THE EVENT I.E RETIREMENT OR DEATH OR RESIGNATION. THEREFORE, THE FACTS OF THE ASSESSEE ' S CASE ARE SQUARELY COVERED BY THE DECISIONS CITED SUPRA. THE COORDINATE BENCH OF HYDERABAD WHILE DELIVERING THE RULING RELIED ON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF WARNER HINDUSTAN LTD. SINCE THE FACTS ARE IDENTICAL, RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE COORDINATE BENC HES, 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 ASSESSEE. 8. THAT, IN THE INSTANT CASE OF THE APPELLANT, THE PREMIUM HAS BEEN DEPOSITED WITH LIC OF INDIA AND THERE IS NO PROVISION AND THE CLAIM OF EXPENDITURE IS ON ACTUAL PAYMENT OF THE PREMIUM AND ON WHICH THE APPELLANT HAS NO CONTROL OVER IT. HENCE, THE PROVISION OF SECTION 40A(7) OF THE ACT IS NOT APPLICABLE RATHER TH E EXPENDITURE OF THE PREMIUM OF GROUP GRATUITY SCHEME IS ALLOWABLE U/S 37 (1) OF THE ACT AS PER THE SETTLED LAW AND AS SUCH, THE APPEAL OF THE APPELLANT MAY KINDLY BE ALLOWED IN THE INTEREST OF JUSTICE AND EQUITY AND FOR THIS ACT OF KINDNESS THE APPELLANT SHALL AS IN DUTY BOUND EVER PRAY. IN ADDITION TO THE ABOVE WRITTEN SUBMISSIONS, LD. AR MADE ORAL ARGUMENTS BY WHICH HE SUBMITTED THAT THE ASSESSEE HAS PAID TO LIC OF INDIA IN WHICH GROUP GRATUITY SCHEME IS MAINTAINED. THERE IS COLLABORATION AGREEMENT BETW EEN LIC AND THE ASSESSEE. THEREFORE, THERE WAS NO VIOLATION OF SECTION 36(1)(V) OF THE ACT. IN THIS REGARD, LD. AR FILED PAPER BOOK CONTAINING PAGES FROM 1 TO 91 AND RELIED ON THE DECISION OF COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT CIRCLE - 1(1) VS. THE GUNTUR DISTRICT COOPERATIVE CENTRAL BANK LTD., ITA NOS.77&78/VIZ/2018 VIDE ORDER DATED 31.07.2018 AND THE DECISION OF ITA NO. 83 /CTK/201 9 9 AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF BARODA GUJARAT GRAMIN BANK(ERSTWHILE PANCHMAHAL VADODARA GRAMIN BANK LTD.), ITA NO .1479/AHD/2010, ORDER DATED 06.08.2010. 6. ON THE OTHER HAND, LD. CITDR SUPPORTED THE ORDER OF PR.CIT. LD. CITDR ALSO DREW OUR ATTENTION AT PARA 10 OF THE PR.CITS ORDER AND STATED THAT THE GRATUITY FUND MAINTAINED BY THE ASSESSEE HAS NOT BEEN APPROVED TI LL DATE. THEREFORE, THE ORDER OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 7. AFTER HEARING BOTH THE SIDES AND PERUSING THE ENTIRE MATERIAL AVAILABLE ON RECORD AND THE ORDERS OF AUTHORITIES BELOW, WE NOTICED THAT DURING THE IMPUGNED A SSESSMENT YEAR, THE ASSESSEE HAS CONTRIBUTED TOWARDS GRATUITY FUND OF RS.16,65,030/ - WHICH HAS BEEN PAID TO THE LIC OF INDIA IN THE GROUP GRATUITY SCHEME. THERE IS A COLLABORATION AGREEMENT BETWEEN THE ASSESSEE AND THE LIC REGARDING CONTRIBUTION INTO THE APPROVED GRATUITY FUND AND THE ASSESSEE HAS PRODUCED AGREEMENT WITH THE LIC WHICH IS AT PAGE NO.32 TO 38. ON PERUSAL OF THE PAPER BOOK FILED BY THE ASSESSEE THERE IS A DEMAND LETTER ISSUED BY THE LIC WHICH IS AT PAGE 75 TO 83 AND COPY OF CHEQUE DEPOSITED T O THE LIC OF INDIA WHICH IS PLACED AT PAGE BOOK PAGE NO.84, DATED 26.03.2014 BEARING CHEQUE NO.291811 WHICH IS IN FAVOUR OF LIC OF INDIA AND THE LIC OF INDIA HAS ISSUED RENEWAL ENDORSEMENT ON 15.04.2014 OF RS.16,65,030/ - . THE RENEWAL DUE WAS ON 01.04.2014 AND THE MODE OF ITA NO. 83 /CTK/201 9 10 PAYMENT IS YEARLY. FURTHER ON PERUSAL OF THE CASE LAW RELIED ON BY THE LD. AR OF THE ASSESSEE IN THE CASE OF THE GUNTUR DISTRICT COOPERATIVE CENTRAL BANK LTD., ITA NOS.77&78/VIZ/2018 ALONG WITH OTHER APPE ALS VIDE ORDER DATED 31.07.2018, WE FOUND THAT THE SIMILAR ISSUE HAS ALREADY BEEN DECIDED BY THE VIZAG BENCH OF THE TRIBUNAL IN THE ABOVE CASE AND THE TRIBUNAL WHILE DECIDING THE ISSUE HAS FOLLOWED THE DECISION RENDERED BY THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF BARODA GUJARAT GRA MIN BANK(ERSTWHILE PANCHMAHAL VADODARA GRAMIN BANK LTD.), ITA NO.1479/AHD/2010, ORDER DATED 06.08.2010. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL IN THE CASE OF THE GUNTUR DISTRICT COOPERATIVE CENTRAL BANK LTD (SUPRA) ARE AS UNDER : - 2. DURING THE ASSESS MENT PROCEEDINGS, THE ASSESSING OFFICER (AO) FOUND THAT THE ASSESSEE DEBITED THE EXPENDITURE OF RS.76,15,159/ - TOWARDS PREMIUM PAID TO LIC UNDER GROUP GRATUITY SCHEME. AS PER PART C TO SCHEDULE - IV OF THE INCOME TAX ACT (HEREINAFTER CALLED AS ACT), AN Y SUCH CONTRIBUTIONS SHOULD BE UNDER A SCHEME DULY APPROVED BY THE CHIEF COMMISSIONER OR COMMISSIONER OF INCOME TAX, FOR ALLOWING AS ELIGIBLE DEDUCTION. THE CONTRIBUTIONS MADE FOR GROUP GRATUITY FUND APPROVED BY AN APPROPRIATE AUTHORITY ARE ONLY ALLOWABLE EXPENDITURE UNDER THE PROVISIONS OF SEC.36(1)(V) OF THE ACT. IN THE INSTANT CASE, THE ASSESSEE MADE CONTRIBUTION TO GROUP GRATUITY SCHEME OF LIC OF INDIA WHICH DOES NOT HAVE APPROVAL OF CONCERNED AUTHORITY. THEREFORE, THE SUM OF RS.76,15,159/ - WAS DISALLOW ED U/S 36(1)(V) OF THE ACT AND ADDED BACK TO THE INCOME. THIS ISSUE IS INVOLVED FOR THE ASSESSMENT YEARS 2013 - 14 AND 2014 - 15. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND THE LD.CIT(A) FOLLOWED HIS OWN ORDER FOR THE EARLIER YEARS IN THE ASSESSEES OWN CASE AND ALLOWED THE ACTUAL PAYMENT U/S 37(1) OF THE ACT. FOR READY REFERENCE, WE EXTRACT RELEVANT PART OF THE ORDER OF THE LD.CIT(A) WHICH READS AS UNDER : DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LD.AR O F THE APPELLANT BROUGHT TO THE NOTICE THAT ON IDENTICAL ISSUE IN THE EARLIER YEARS, THE LD.CIT(A) GRANTED RELIEF AND COPIES OF THE ORDERS WERE PLACED FOR CONSIDERATION. THE APPELLANT ALSO RELIED ON SEVERAL DECISIONS. THIS ISSUE ITA NO. 83 /CTK/201 9 11 WAS CONTESTED BY THE APPELLA NT FOR THE ASSESSMENT YEARS 2008 - 09, 2009 - 10 & 2012 - 13 AND THE LD.AR ALSO CLARIFIED THAT FOR THE ASSESSMENT YEAR 2010 - 11 & 2011 - 12 THERE WAS NO SUCH AS ISSUE. THE LD.AR OF THE APPELLANT FILED COPIES OF THE ORDERS OF THE LD. CIT(APPEALS), GUNTUR FOR THE ASS ESSMENT YEARS 2008 - 09, 2009 - 10 & 2012 - 13. ON CAREFUL CONSIDERATION OF THESE ORDERS AND ALSO THE MATERIAL FACTS CONSIDERED BY THE LD. CIT(APPEALS) IN THOSE YEARS, IT IS NOTICED THAT THE ISSUE IS IDENTICAL AND I HAVE NO REASON TO DEVIATE FROM THE DECISION OF MY PREDECESSORS. THE ISSUE WAS DECIDED BY THE LD. CIT(APPEALS) - I, GUNTUR FOR THE ASSESSMENT YEAR 2012 - 13 AND OPERATING PORTION OF THE ORDER IS AS UNDER: I HAVE GONE THROUGH FACTS OF THE CASE, CONTENTS OF THE ASSESSMENT ORDER, WRITTEN SUBMISSIONS OF THE ASSESSEE AND THE EASE LAWS PREFERRED AND RELIED BY THE ASSESSEE. THE ASSESSEE HAS CLAIMED EXPENDITURE OF AS. 56, 62,325/ - TOWARDS PREMIUM ' PAID TO LIC UNDER ' GROUP GRATUITY SCHEME ' . AS PER PART ' C ' TO SCHEDULE - TV OF THE ACT, ANY SUCH CONTRIBUTIONS SHOULD BE UNDER A SCHEME DULY APPROVED BY THE CHIEF COMMISSIONER OR COMMISSIONER OF INCOME TAX, FOR ALLOWING AS ELIGIBLE DEDUCTION. ANY CONTRIBUTIONS MADE FOR GRATUITY FUND APPROVED BY AN APPROPRIATE AUTHORITY ONLY ARE ALLOWABLE EXPENDITURE UNDER THE PROVISIONS O FSEC.36(1)(V) OF THE INCOME TAX ACT, 1951. IN THE INSTANT CASE, THE ASSESSEE IS CONTRIBUTING FOR GROUP GRATUITY SCHEME TO LIC OF INDIA WHICH DOES NOT HAVE APPROVAL OF THE CONCERNED AUTHORITY. HENCE, ADDED TO THE TOTAL INCOME. THE HON ' BLE ITAT, HYDERABAD B - BENCH, IN THE CASE OF INTERNATIONAL ORE AND FERTILIZER (INDIA) (P) LID., VS ITO (3 ITO HYD., 593) HAS HELD THAT PAYMENT TO LIC GROUP GRATUITY SCHEME IS IN THE NATURE OF BUSINESS EXPENDITURE DEDUCTIBLE UNDER THE PROVISIONS OF SECTION 37 OF THE ACT AND THE REFORE, IS TO BE ALLOWED AS IT IS LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS. THE HON ' BLE ITAT HAS IN THIS CASE HAS OBSERVED THAT PROVISIONS OF SECTION 40A( 7) OF THE ACT WOULD APPLY ONLY IN RESPECT OF PROVISION MADE FOR GRATUITY IN CA SE OF UNAPPROVED FINDS AND NOT ACTUAL PAYMENTS MADE, WHICH ARE COVERED BY SECTION 37 OF THE ACT. THE SIMILAR VIEW HAS BEEN TAKEN BY THE HO ' BLE ITAT, DELHI ' B ' BENCH IN THE CASE OF ITO VS MMTC LTD, 3 ITD (DEL) 305. FURTHER, THE HON ' BLE ITAT IN THE CASE OF DCI? ' , CIRCLE - 3(2), HYDERABAD VS SRI KRISHNA DRUGS LTD., IN ITA NO. 198/HYD/2011, DATED 16.12.2011,HAS ALSO HELD THAT PAYMENT TO GROUP GRATUITY FUND OF LIC OF INDIA IS ALLOWABLE AS BUSINESS EXPENDITURE U/S 37(L) OF THE ACT, EVEN THOUGH NOT RECOGNIZED BY TH E COMMISSIONER OF INCOME TAX. THE HONBLE TRIBUNAL HAS RELIED ON THE DECISION OF THE ANDHRA PRADESH HIGH COURT IN THE CASE OF WARNER HINDUSTAN LTD, WHILE ALLOWING THE PAYMENT OF PREMIUM TO THE LIC GROUP GRATUITY FUND. IN VIEW OF THE DETAILED DISCUSSION OF THE FACTS AND COURT JUDGMENTS THE PAYMENT MADE TO GROUP GRATUITY FUND OF LIC OF INDIA, IS ALLOWABLE AS BUSINESS EXPENDITURE U/S 37(1) OF THE ACT, EVEN THOUGH IT IS NOT RECOGNIZED BY THE COMMISSIONER OF INCOME TAX. HENCE, THE ADDITION MADE BY THE A.O. IS D ELETED AND ASSESSEE ' S GROUND OF APPEAL IS ALLOWED. ITA NO. 83 /CTK/201 9 12 IN VIEW OF THE ABOVE AND CONSIDERING THE DECISION, THE ADDITION MADE BY THE ASSESSING OFFICER IS HEREBY DELETED. 4. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENUE FILED APPEAL BEFORE THE TRIBUNAL. DURING THE APPEAL HEARING THE LD.AR ARGUED THAT ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE IN THE CASE OF DIST. CO - OPERATIVE CENTRAL BANK, ELURU IN I.T.A. NOS. 49 & 50/VIZ/2012 FOR THE ASSESSMENT YEARS 2007 - 08 AND 2008 - 09 DATED 25.01.2018. THE ITA T IN THE CASE SUPRA, ALLOWED THE APPEAL OF THE ASESSEE , FOLLOWING THE DECISIONS OF ITAT, HYDERABAD AND ITAT, AHMEDABAD BENCHES. FOR THE SAKE OF CLARITY AND CONVENIENCE, WE EXTRACT RELEVANT PARA NO.8 TO 10 OF THE ITAT ORDER WHICH READS AS UNDER. 8. WE HAV E HEARD BOTH THE PARTIES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ASSESSEE IS A COOPERATIVE BANK AND CREATED THE GROUP GRATUITY FUND/TRUST OF THE DISTRICT COOPERATIVE CENTRAL BANK EMPLOYEES BUT TH E SAME WAS NOT YET APPROVED BY THE CIT. PENDING RECEIPT OF APPROVAL, THE ASSESSEE HAD MADE APPLICATION TO LIC OF INDIA UNDER PENSION AND GROUP SCHEMES, AND TAKEN POLICY UNDER MASTER PROPOSAL FOR GROUP FOR PAYMENT OF GRATUITY ON 1.7.2003, AND IS CONTRIBUTIN G THE SUMS TO THE LIC OF INDIA TOWARDS THE GROUP GRATUITY ON ACTUARIAL BASIS. THE ASSESSEE HAS NOT MADE ANY PROVISION AND MADE THE PAYMENT BEFORE FILING THE RETURN OF INCOME. ON HAPPENING THE EVENT, THE ASSESSEE BANK IS RECEIVING THE GRATUITY PAYMENT FROM 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 THE ASSESSEE UNDER GROUP GRATUITY SCHEME TO LIC OF INDIA WAS ALL OWED IN THE EARLIER YEARS PRIOR TO 2007 - 08. DURING 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 SECTION 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 THAT SINCE THE PAYMENTS WERE MADE TO LIC OF INDIA IN MASTER POLICY SCHEME, THE PREMIUMS CONTRIBUTED TO THE LIC OF INDIA IS ALLOWABLE DEDUCTION AND RELI ED ON THE DECISIONS OF COORDINATE BENCH OF HYDERABAD IN THE CASE OF CAPITAL IQ INFORMATION SYSTEMS (INDIA) PVT. LIMITED (SUPRA). THE HONBLE ITAT HYDERABAD BENCH WHILE DECIDING THE ISSUE ON SIMILAR FACTS HELD AS UNDER: 8. WE HAVE HEARD THE ARGUMENTS OF TH E PARTIES, PERUSED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE ITAT, HYDERABAD IN THE CASE OF M/S. SRI KRISHNA DRUGS LTD. VS. DEPARTMENT OF INCOME - TAX I N 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: ITA NO. 83 /CTK/201 9 13 ' THE LEARNED CIT(A) ERRED IN HOLDING THAT UNRECOGNISED GRAT UITY 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). ' 3. AFTER HEARING BOTH THE SIDES, WE FIND THIS ISSUE IS COVERED IN FAVOU R OF THE ASSESSEE AND AGAINST THE REVENUE IN I.T.A. NO. 198/HYD/2011 IN ASSESSEE ' S 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 THAT SIMILAR ISSUE CAME U P 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 I NCOME - TAX AC. SEC. 36(1)(V) READS AS FOLLOWS: ' 36. (1) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWING CLAUSES SHALL BE ALLOW D IN RESPECT OF THE MATTERS DEALT WITH THEREIN, IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 (V) ANY SUM PAID BY THE ASSES SEE AS AN EMPLOYER BY WAY OF CONTRIBUTION TOWARDS AN APPROVED GRATUITY FUND CREATED BY HIM FOR THE EXCLUSIVE BENEFIT OF HIS EMPLOYEE S 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 T HE 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 ASSESSE E AS EMPLOYER COULD BE ALLOWED ONLY IN RESPECT OF APPROVED GRATUITY FUND. SINCE THE GROUP G RATUITY SCHEME IS NOT APPROVED BY THE CIT, ACCORDING TO THE REVENUE, IT CANNOT BE ALLOWED. HOWEVER, THE CONTENTION OF THE ASSESSEE IS THAT IN VIEW OF THE JUDGEMENT OF THE MADRAS HIGH COURT IN THE CASE OF PREMIER SPINNING MILLS LTD. (SUPRA) AND THE JUDGEMEN T OF THE JURISDICTIONAL HIGH COURT IN THE 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 J URISDICTIONAL HIGH COURT, THE PROVIDENT FUND WAS NOT 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 ITA NO. 83 /CTK/201 9 14 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, THOUGH NOT UNDER SEC. 36(1)(V). IN VIEW OF THIS JUDGMENT OF 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 PRADESH HIGH COURT IN THE CASE OF WARNER HINDUSTAN LTD. (S UPRA), 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 CONSIDE RATION IS MATERIALLY IDENTICAL TO THE ONE DECIDED BY THE ITAT IN THE CASE OF M/S. SRI KRISHNA DRUGS LTD. (SUPRA), RESPECTFULLY FOLLOWING THE SAME, WE SET ASIDE THE ORDER OF THE CIT(A) AND ALLOW THE GROUND OF APPEAL OF THE ASSESSEE. 9. SIMILARLY, ITAT AH MEDABAD BENCH IN THE CASE OF BARODA GUJARAT GRAMEEN BANK CITED (SUPRA) HELD THAT THE PAYMENT MADE TO LIC OF INDIA IS NOT A PROVISION BUT IT IS ACTUAL EXPENDITURE CLAIMED UNDER THE GRATUITY CONTRIBUTION. HONBLE ITAT AHMEDABAD BENCH HELD THAT SINCE ASSESSEE HAS NOT CLAIMED THE PROVISION AND CLAIMED ON ACTUAL BASIS, THE EXPENDITURE IS ALLOWABLE DEDUCTION. FOR READY REFERENCE, WE REPRODUCE PARA NOS.4 & 5 OF THE ORDER OF THE HONBLE ITAT AHMEDABAD BENCH WHICH READS AS UNDER: 4. WE HAVE CONSIDERED THE RIVAL S UBMISSIONS AND MATERIAL AVAILABLE ON RECORD. SECTION 40A (7) OF THE IT ACT PROVIDES THAT SUBJECT TO PROVISION OF CLAUSE (B), NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF ANY PROVISION MADE BY THE ASSESSEE FOR PAYMENT OF GRATUITY TO HIS EMPLOYER ON THEIR RET IREMENT OR ON TERMINATION OF THEIR EMPLOYMENT FOR 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 EXPENDITURE ON ACCOUNT OF ACTUAL EXPENSES CLAIMED UNDER THE HEAD GRATUITY CONTRIBUTION. ITAT AHMEDABAD BENCH IN THE CASE OF NEW BHARAT ENGINEERING WORKS (JAM) LTD. (SUPRA) HELD ' DISALLOWANCE UNDER S. 40A(7) - GRATUITY ACTUALPAYMENT OF FUNDS TO LIC AND NO T MERE PROVISION - NOT HIT BY S. 40A(7) - CIT VS GUJARAT MACHINE TOOLS (ITA 666/A HD/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 - TAX ACT, 1961 - BUSINESS DISALLOWANCE - GRATUITY - 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 PROVE D 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 REVENUE, TRIBUNAL WAS RIGHT IN HOLDING THAT ITA NO. 83 /CTK/201 9 15 GRANT OF APPROVAL OF GRATUITY FUND WAS NOT RELEVANT FOR PURPOSE OF INSTANT CASE AS SAID DEDUCTION WAS NOT BEING CLAIMED ON ACCOUNT OF ANY PROVISION AND AMOUNT OF GRATUITY WAS AN ALLOWABLE DEDUCTION - HELD, YES ' . 5. CONSIDERING THE ABOVE ASPECTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LE ARNED CIT(A) IN DELETING THE ADDITION. THERE IS NO MERIT IN THE DEPARTMENTAL APPEAL. SAME IS ACCORDINGLY DISMISSED. 10. IN THE CASE OF VERIZON DATA SERVICES INDIA PVT. LTD. (SUPRA) THE COORDINATE BENCH OF MADRAS HELD THAT PAYMENT MADE TO GRATUITY FUND MA INTAINED WITH LIC HAS NO CONTROL OVER THE IRREVOCABLE TRUST CREATED EXCLUSIVELY FOR THE BENEFIT OF EMPLOYEES AND DEDUCTION SHALL BE ALLOWED. THE COORDINATE BENCH OF MADRAS WHILE DECIDING THE APPEAL RELIED ON THE DECISION OF HONBLE 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 PAYMENT DIRECTLY FROM THE LIC OF INDIA AS PER THE SCHEME WHICH IS PAID TO THE EMPLOYEE ON HAPPENING OF THE EVENT I.E. RETIR EMENT OR DEATH OR RESIGNATION. THEREFORE, THE FACTS OF THE ASSESSEES CASE ARE SQUARELY COVERED BY THE DECISIONS CITED SUPRA. THE COORDINATE BENCH OF HYDERABAD WHILE DELIVERING THE RULING RELIED ON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF W ARNER HINDUSTAN LTD. SINCE THE 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 ASSESSEE. 4 .1 SINCE THE FACTS ARE IDENTICAL, RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THIS TRIBUNAL IN THE CASE CITED, WE HOLD THAT THE ACTUAL PAYMENT MADE TO GROUP GRATUITY FUND OF LIC NEEDS TO BE ALLOWED AS DEDUC TION. ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD.CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. 8. THE ISSUE INVOLVED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE ABOVE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL . R ESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE TRIBUNAL, WE H O LD THAT THE PAYMENT MADE TO LIC OF INDIA IS NOT A PROVISION BUT IT IS ACTUAL EXPENDITURE CLAIMED UNDER THE GRATUITY CONTRIBUTION, WHICH NEEDS TO BE ALLOWED AS DEDUCTION. THEREFORE, THE ORDER PASSED BY THE AO U/S.143(3) OF TH E ACT ITA NO. 83 /CTK/201 9 16 WAS NOT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. IN OUR OPINION, THE PR.CIT IS NOT JUSTIFIED IN DIRECTING THE AO TO DISALLOW THE PAYMENT MADE TO GRATUITY FUND U/S.40A(7) OF THE ACT, HENCE, THE ORDER PASSED BY THE PR.CIT U/S.263 OF THE AC T IS HEREBY QUASHED. CONSEQUENTLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. 9 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 / 0 8 / 20 20 . SD/ - ( C.M.GARG ) SD/ - (L.P.SAHU) / JUDICIAL MEMBER / ACCOUNTANT MEMBER CUTTACK ; DATED 18 / 0 8 /20 20 PRAKASH KUMAR MISHRA, SR.P.S. / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( SENIOR PRIVATE SECRETARY ) , /ITAT, CUTTACK 1. / THE APPELLANT - M/S ORICLEAN PR IVATE LIMITED, AT: BANDALO, PO: KOTSAHI, VIA : TANGI, N.H.5, DISTRICT - CUTTACK - 754022 2. / THE RESPONDENT - THE PR. CIT, CUTTACK 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, IT AT, CUTTACK 6. / GUARD FILE. //TRUE COPY//