2013 (2) TMI 766 - AT - Income Tax

Summary

Issues involved: Appeals filed by the assessee against the order of CIT(A) for the assessment year 2007-08 and 2008-09.

Assessment Year 2007-08:
The assessee contested the disallowance of &8377; 75,616 for prior period expenses related to electricity and telephone bills. The Tribunal noted that the expenses were incurred in the last month of the financial year 2005-06 but paid in the financial year 2006-07. As the expenses were crystallized during the year under consideration and the genuineness of the expenditure was not in question, the disallowance was deemed unjustified.

Assessment Year 2007-08 (Continued):
The assessee also challenged the disallowance of &8377; 55 lakhs contribution to LIC under "Group Gratuity-cum Life Assurance Policy." The Assessing Officer disallowed the deduction citing non-approval of the gratuity fund. However, the Tribunal observed that the payment was a business deduction u/s 37, as it was a contractual payment made to safeguard the company from potential liabilities towards gratuity. Referring to a similar case, the Tribunal held that the disallowance was unwarranted, and the assessee was entitled to succeed on this point.

Assessment Year 2008-09:
In this year, the assessee's claim for a &8377; 65 lakhs contribution to LIC under the Group Gratuity-cum-Life Insurance Policy was also declined. Following the reasoning from the previous assessment year, the Tribunal directed the Assessing Officer to allow the claim.

In conclusion, both appeals of the assessee were allowed based on the above considerations, and the lower authorities' actions in declining the claims were deemed without merit.