Appeal details
Counselvise Citation
[2013] 120 COUNSELVISE.COM (IT) 2924 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 month(s) 1 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
31-05-2013
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
A
Assessment Year
2008-2009
Appeal Filed On
29-01-2013
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 84/HYD/2013 ASSESSMENT YEAR: 2008-09 CAPITAL IQ INFORMATION SYSTEM (INDIA) P. LTD., APPELLANT HYDERABAD. (PAN AACCS8657G) VS. ADDL. COMMISSIONER OF INCOME-TAX RESPONDENT RANGE 1,HYDERABAD. APPELLANT BY : SHRI K.C. DEVDAS RESPONDENT BY : SHRI M.B. REDDY DATE OF HEARING : 08/05/2013 DATE OF PRONOUNCEMENT : 31/05/ 2013 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF DISPUTE RESOLUTION PANEL (D.R.P.), HYDERAB AD, DATED 03/08/2012 FOR THE ASSESSMENT YEAR 2008-09. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE I.E. M/S CAPITAL IQ INFORMATION SYSTEMS INDIA PVT. LTD. FILE D ITS OBJECTIONS U/S 144C(2) BEFORE THE DISPUTE RESOLUTION PANEL ON 24/01/2012 AGAINST THE DRAFT ASSESSMENT ORDER OF THE ADDL. CIT , RANGE-I, HYDERABAD. THE DRP PASSED ITS ORDER ON 03/08/2012 A ND THE ORDER U/S 143(3) READ WITH SECTION 144C(2) OF THE A CT, 1961, WAS PASSED BY THE ADDL. CIT, RANGE 1, ON 30/11/2012 I N PURSUANCE OF THE PROCEEDINGS BEFORE THE DRP. 2 ITA NO. 84/HYD/2013 CAPITAL IQ INFORMATION SYSTEM(INDIA) PVT. LTD. 3. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 4. GROUND NO.1 IS GENERAL IN NATURE AND, HENCE, NEE D NO ADJUDICATION. 5. GROUND NO. 3 IS REGARDING LEVY OF INTEREST U/S 2 34B OF THE ACT. CHARGING OF INTEREST U/S 234B IS CONSEQUENTIAL IN NATURE, THEREFORE, THE AO IS DIRECTED ACCORDINGLY. 6. GROUND NO. 4 IS REGARDING INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) ACT. THIS GROUND IS PREMATURE IN NATU RE, HENCE, THE SAME IS NOT REQUIRED TO BE ADJUDICATED BY US. 7. THE SUBSTANTIAL GROUND IS GROUND NO. 2 AND THE SAME IS AS FOLLOWS: 2 . DISALLOWANCE OF DEDUCTION OF GRATUITY EXPENDITURE INR 13,514,933/- 2.1.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. AO HAS ERRED IN PROPOSING AND THE HONBLE D RP HAS FURTHER ERRED IN CONFIRMING THE DISALLOWANCE OF PAY MENT OF GRATUITY MADE TO LIC, BY HOLDING THAT THE GRATUITY FUND MAINTAINED BY THE APPELLANT IS AN UNAPPROVED GRATUI TY FUND IN THE ABSENCE OF PRODUCING ACKNOWLEDGED COPY OF TH E ORIGINAL APPLICATION FILED BEFORE THE CIT FOR APPRO VAL OF GRATUITY FUND. 2.1.2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. AO HAS ERRED IN NOT APPRECIATING THE FACT T HAT THE APPELLANT HAS A DEFINED GRATUITY PLAN IN TERMS OF W HICH THE ANNUAL CONTRIBUTIONS ARE DEPOSITED WITH THE LIFE IN SURANCE CORPORATION OF INDIA (LIC) AND THE APPELLANT HAD NO CONTROL OVER THE FUND MAINTAINED WITH LIC FOR THE BENEFIT O F THE EMPLOYEES. 2.2 THE APPELLANT RELIES ON THE SUPREME COURT DECIS ION IN THE CASE OF CIT VS. TEXTOOL LTD. (CIVIL APPEAL NO. 447 OF 2003) WHEREIN THE HONBLE SC HAS HELD THAT WHERE TH E PAYMENT IS MADE TO THE GRATUITY FUND MAINTAINED WIT H THE 3 ITA NO. 84/HYD/2013 CAPITAL IQ INFORMATION SYSTEM(INDIA) PVT. LTD. LIC, THE APPELLANT HAS NO CONTROL OVER THE IRREVOCA BLE TRUST CREATED EXCLUSIVELY FOR THE BENEFIT OF EMPLOYEES, D EDUCTION SHALL BE ALLOWED TO THE APPELLANT. 8. WE HAVE HEARD THE ARGUMENTS OF THE PARTIES, PERU SED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE ISSUE IS SQUARE LY COVERED BY THE DECISION OF THE ITAT, HYDERABAD IN THE CASE OF M/S SRI KRISHNA DRUGS LTD. VS. DEPARTMENT OF INCOME-TAX IN ITA NO. 2126/HYD/2011 FOR AY 2007-08 DATED 11/04/2012, WHER E 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 U NDER: 'THE LEARNED CIT(A) ERRED IN HOLDING THAT UNRECOGNI SED GRATUITY FUND IS ALLOWABLE U/S. 37(1),WHEN THE CASE IS HIT BY THE PROVISIONS OF SECTION 40A(9) AND ESPECIALLY WHE N THE ASSESSEE FAILED TO COMPLY WITH THE PROVISIONS OF SE CTION 36(1)(V).' 4. AFTER HEARING BOTH THE SIDES, WE FIND THIS ISSU E IS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE R EVENUE IN I.T.A. NO. 198/HYD/2011 IN ASSESSEES OWN CASE F OR A.Y. 2006-07 ORDER DATED 16.12.2011 WHEREIN THIS TRIBUNA L HELD AS FOLLOWS: '3. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE O PINION THAT SIMILAR ISSUE CAME UP FOR CONSIDERATION IN ASS ESSEES OWN CASE FOR ASSESSMENT YEAR 2002-03 IN I.T.A. NO. 349/HYD/2006. THE TRIBUNAL DECIDED THE ISSUE IN FAV OUR OF THE ASSESSEE VIDE ITS ORDER DATED 15.2.2008 BY HOLD ING AS FOLLOWS: '4. WE HAVE CONSIDERED RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMI TTEDLY, THE GROUP GRATUITY SCHEME WAS NOT RECOGNISED BY THE COMMISSIONER OF INCOME-TAX. THIS FACT IS NOT IN DIS PUTE. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SEC. 36(1)(V) OF THE INCOME-TAX ACT. SEC. 36(1)(V) READS AS FOLLO WS: '36. (1) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWI NG CLAUSES SHALL BE ALLOWED IN RESPECT OF THE MATTERS DEALT WITH THEREIN, IN COMPUTING THE INCOME REFERRED TO IN SEC TION 28 .... (V) ANY SUM PAID BY THE ASSESSEE AS AN EMPLOYER BY WAY OF CONTRIBUTION TOWARDS AN APPROVED GRATUITY FUND CREA TED BY HIM FOR THE EXCLUSIVE BENEFIT OF HIS EMPLOYEES UNDE R AN IRREVOCABLE TRUST.' 4 ITA NO. 84/HYD/2013 CAPITAL IQ INFORMATION SYSTEM(INDIA) PVT. LTD. WE HAVE ALSO CAREFULLY GONE THROUGH THE PROVISIONS OF SEC. 37 OF THE INCOME-TAX ACT. SEC. 37 PROVIDES FOR DEDU CTION OF EXPENDITURE NOT BEING IN THE NATURE DESCRIBED IN SE CTIONS 30 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXPEND ITURE 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 CHAR GEABLE 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 APPROV ED GRATUITY FUND. SINCE THE GROUP GRATUITY SCHEME IS N OT APPROVED BY THE CIT, ACCORDING TO THE REVENUE, IT C ANNOT BE ALLOWED. HOWEVER, THE CONTENTION OF THE ASSESSEE IS THAT IN VIEW OF THE JUDGEMENT OF THE MADRAS HIGH COURT I N THE CASE OF PREMIER COTTON SPINNING MILLS LTD. (SUPRA) AND THE JUDGEMENT OF THE JURISDICTIONAL HIGH COURT IN THE C ASE 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 HI NDUSTAN LTD. (SUPRA). IN THE CASE BEFORE THE JURISDICTIONAL HIGH COURT, THE PROVIDENT FUND WAS NOT APPROVED BY THE C IT. THE ANDHRA PRADESH HIGH COURT AFTER REFERRING TO THE JU DGEMENT OF THE BOMBAY HIGH COURT IN TATA IRON & STEEL CO. L TD. V. D.V. BAPAT, ITO (1975) 101 ITR 292, AND THE JUDGEME NT 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, THOUGH NOT UNDER SEC . 36(1)(V). IN VIEW OF THIS JUDGMENT OF THE JURISDICT IONAL HIGH COURT, IN OUR OPINION, EVEN IF ANY PAYMENT IS MADE TO AN UNAPPROVED GRATUITY FUND, IT HAS TO BE ALLOWED UNDE R SEC. 37. BY RESPECTFULLY FOLLOWING THE BINDING JUDGEMENT OF ANDHRA PRADESH HIGH COURT IN THE CASE OF WARNER HIN DUSTAN LTD. (SUPRA), WE UPHOLD THE ORDER OF THE CIT(A).' IN VIEW OF THE ABOVE DISCUSSION, WE DISMISS THE GRO UND 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 KRISHNA DRUGS LTD. (SUPRA), RESPECTFULLY FOLLOWING THE SAME, WE S ET ASIDE THE ORDER OF THE CIT(A) AND ALLOW THE GROUND OF APPEAL OF THE ASSESSEE. 5 ITA NO. 84/HYD/2013 CAPITAL IQ INFORMATION SYSTEM(INDIA) PVT. LTD. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGH AVAN) ACCOUNTANT MEMBER JUDICIAL MEMBE R HYDERABAD, DATED: MAY, 2013. KV COPY TO:- 1) CAPITAL IQ INFORMATION SYSTEMS(INDIA) PVT. LTD., SURVEY NO. 12P, KONDAPUR VILLAGE, SERILLINGAMPALLY MANDAL, RANGA REDDY DIST. 500 081, HYDERABAD. 2) ADDL. CIT, RANGE 1, HYDERABAD. 3) DRP, HYDERABAD 4) DIT, INTERNATIONAL TAXATION 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD.
