2013 (5) TMI 860 - AT - Income Tax

Summary

Issues involved:
The judgment involves the following Issues:
1. Whether the CIT erred in assuming jurisdiction u/s 263 of the Act.
2. Whether the CIT erred in holding that the contribution to unapproved gratuity fund was not an allowable expenditure u/s 36(1)(v) of the Act.

Issue 1: Jurisdiction u/s 263 of the Act
The assessee objected to the invocation of jurisdiction u/s 263 of the Act, suggesting that the issue could have been rectified u/s 154 or re-opened u/s 148. However, the objection was later withdrawn. The CIT, in a suo motu action, initiated revisional proceedings u/s 263, enhancing the income of the assessee. The appellate tribunal upheld the CIT's decision, citing the failure of the assessing officer to indicate the basis for granting deductions, as per the ruling in Infosys case. The tribunal concluded that the CIT was justified in invoking the provisions of s. 263 of the Act.

Issue 2: Contribution to Unapproved Gratuity Fund
The CIT had disallowed a contribution of &8377; 3,11,000 to an unapproved gratuity fund, adding it back to the total income of the assessee. The appellate tribunal, after considering relevant judicial precedents, held that the contribution was allowable as a deduction under section 37 of the Act. Citing the Karnataka Electricity Board case and the Punjab Financial Corporation Limited case, the tribunal emphasized that the expenditure was laid out wholly and exclusively for the purpose of business and was deductible. Consequently, the assessment order passed by the assessing officer was upheld, and the contribution to the unapproved gratuity fund was deemed allowable. As a result, the assessee's appeal was partly allowed.

This judgment by the Appellate Tribunal ITAT Bangalore addressed the issues of jurisdiction u/s 263 of the Act and the allowance of the contribution to an unapproved gratuity fund u/s 36(1)(v) of the Act. The tribunal upheld the CIT's decision on jurisdiction based on the assessing officer's failure to indicate the basis for deductions. Regarding the gratuity fund contribution, the tribunal allowed the deduction, citing relevant judicial precedents.