THE KASAULI CLUB,SOLAN V. INCOME TAX OFFICER, EXEMPTION WARD, , SOLAN

ITA 832/CHANDI/2025

AI Insights

The case involves The Kasauli Club, which appealed against the disallowance of a gratuity provision amounting to Rs.14,50,110 for the Assessment Year 2020-21. The initial disallowance was made by the CPC under section 143(1) of the Income Tax Act, based on the Tax Auditor's report, and was upheld by the CIT(A). The main legal contention was whether the provision for gratuity made by the assessee was deductible under section 40A(7) of the Income Tax Act. The Tribunal found that the provision was not for an approved gratuity fund and thus not deductible under section 40A(7)(a) or (b). However, it allowed the appeal to the extent of actual payments made towards LIC premium and gratuity, directing the CIT(A) to re-examine these specific payments.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 787807 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2020-2021
• Appeal Filed On: 19-06-2025
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANJIT KAUR LD.
• Assessee Lawyers: SAHIL CHADHA LD

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, CHANDIGARH PHYSICAL HEARING BEFORE HON’BLE SHRI LALIET KUMAR, JM AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./ ITA No.832/CHANDI/2025 (िनधाŊरणवषŊ / Assessment Year: 2020-21) The Kasauli Club Upper Mall, Kasauli Club, Kasauli, Solan, Himachal Pradesh - 173204 बनाम/ Vs. ITO, Exemption Ward Solan (HP) - 173213 ̾थायीलेखासं./जीआइआरसं./PAN/GIR No. AABCT-6983-F (अपीलाथŎ/Appellant) : (ŮȑथŎ / Respondent) अपीलाथŎकीओरसे/ Appellant by : Sh. Sahil Chadha (Advocate) – Ld. AR ŮȑथŎकीओरसे/Respondent by : Dr. Ranjit Kaur (Addl. CIT) – Ld. Sr. DR सुनवाईकीतारीख/Date of Hearing : 20-11-2025 घोषणाकीतारीख /Date of Pronouncement : 20-11-2025 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2020-21 arises out of an order of learned Addl. / Joint Commissioner of Income Tax (Appeals), NFAC [CIT(A)] dated 23-04-2025 in the matter of an intimation issued by CPC u/s 143(1) on 18-12-2021 disallowing provision of gratuity for Rs.14,50,110/- u/s 40A(7) as reported by Tax Auditor. Having heard rival submissions, the appeal is disposed-off as under. Printed from counselvise.com 2 2. The assessee made provision for gratuity as per actuarial valuation. The CPC made the said disallowance as per reporting of Tax Auditor. Upon further appeal, Ld. CIT(A) upheld the disallowance on the ground that in terms of provisions of Sec.40A(7), any provision for payment of gratuity is not allowable as deduction. Aggrieved, the assessee is in further appeal before us. 3. It is undisputed fact that the assessee has made a mere provision for gratuity which is not allowable u/s 40A(7)(a). The clause (b) to s.40A(7) provide that clause (a) shall not apply in relation to any provisions as made by the assessee for the purposes of payment of a sum by way of an contribution towards an approved gratuity fund or for the purpose of any gratuity that has become payable during the previous year. Nothing has been established before us that the said provision is on account of contribution to approved gratuity fund. Therefore, the deduction could not be allowed to the assessee either under clause (a) or under clause (b). However, Ld. AR has made a limited prayer that the assessee has paid sum of Rs.2,52,710/- towards LIC premium and another amount of Rs.3,09.268/- has actually been paid on account of gratuity which has been debited to this provision. The Ld. AR has stated that the deduction to that extent could be allowed to the assessee. Considering the new plea of Ld. AR, we direct Ld. CIT(A) to adjudicate the issue of these two payments by considering the factual matrix with a direction to the assessee to plead and prove its case to that extent. For that limited purpose, the appeal Printed from counselvise.com 3 stand restored back to Ld. CIT(A) accordingly. The remaining disallowance as made by CPC stand confirmed. 4. The appeal stand partly allowed for statistical purposes. Order pronounced on 20th November, 2025. Sd Sd (LALIET KUMAR) (MANOJ KUMAR AGGARWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 20-11-2025 आदेश की Ůितिलिप अŤेिषत /Copy of the Order forwarded to : 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3. आयकरआयुƅ/CIT 4. िवभागीयŮितिनिध/DR 5. गाडŊफाईल/GF ASSISTANT REGISTRAR ITAT CHANDIGARH Printed from counselvise.com "