2015 (1) TMI 1313 - AT - Income Tax

Addition of provision of gratuity - Held that - The relief has been granted by Ld. CIT(A) on the ground that the assessee has made the payment of impugned sum in subsequent year. Ld. AR of the assessee was required to refer to the documents on the basis of which such findings has been recorded by Ld. CIT(A). Ld. AR was not able to submit the relevant documents. In such circumstances, we are left with no alternative other than to restore this issue to the file of AO to verify such contention of the assessee and if it is found that the impugned amount is based upon the actuarial valuation report and it is paid in subsequent year then no disallowance on this account should be made. Deduction of depreciation u/s. 32 available to a charitable Trust - Held that - CIT(A) followed the decision of Hon ble Bombay High Court in assessee s own case for A.Y. 2003-04 2011 (2) TMI 1505 - BOMBAY HIGH COURT in holding that the assessee is entitled to depreciation and does not amount to double deduction - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of provision for gratuity
2. Disallowance of depreciation on fixed assets
3. Disallowance of deficit set off against income of the current year

Issue 1 - Disallowance of provision for gratuity:
The Revenue challenged the direction by the Ld. CIT(A) to allow provision for gratuity despite provisions not being claimable as expenses in the trust. The AO disallowed the provision as a contingent entry. However, the assessee argued that the provision was based on actuarial valuation and was an actual liability. The Ld. CIT(A) granted relief as the trust had paid the amount in the subsequent year. The ITAT decided to restore the issue to the AO for verification based on the lack of submitted documents by the assessee.

Issue 2 & 3 - Disallowance of depreciation on fixed assets and deficit set off:
The Revenue contended the allowance of depreciation on fixed assets and deficit set off would result in double deduction, contrary to legal precedents. The assessee cited a Bombay High Court decision in their favor for the assessment year 2003-04, stating that the issues were covered in their favor. The ITAT upheld the relief granted by the Ld. CIT(A) based on the previous court decision, dismissing the Revenue's appeal on these grounds.

Issue 4 - Disallowance of deficit set off against income:
The Revenue raised concerns regarding the deficit set off against the income of the current year, arguing it would lead to double exemption. Citing the Bombay High Court decision, the ITAT found that adjusting the excess expenditure of earlier years against subsequent year's income was permissible for charitable trusts. The ITAT dismissed the Revenue's appeal on this ground as well.

In conclusion, the ITAT partially allowed the Revenue's appeal for statistical purposes, upholding the relief granted by the Ld. CIT(A) on most issues. The judgment highlighted the importance of verifying claims, adherence to legal precedents, and the application of income for charitable purposes in trust assessments.