2013 (9) TMI 1174 - AT - Income Tax

Summary

Issues involved: Appeal against disallowance of provisions for salary settlement and gratuity, levy of surcharge, and interest u/s 234C for A.Y. 2008-09 and 2009-10.

Issue 1: Disallowance of provisions for salary settlement
In A.Y. 2008-09, the assessee, a cooperative bank, claimed provisions for gratuity, salary settlement, and Vetan Suraksha Kosh in the Return of Income. The Assessing Officer disallowed these provisions, adding them to the total income. The CIT(A) upheld the disallowance. The assessee appealed to the Appellate Tribunal challenging the disallowance of salary settlement provision of Rs. 11 lakhs. The Tribunal held that the liability for salary settlement accrues upon approval, not at the time of agreement execution. Citing relevant case laws, the Tribunal allowed the issue in favor of the assessee for both A.Y. 2008-09 and 2009-10.

Issue 2: Disallowance of provision for gratuity
The assessee claimed a deduction for provision towards an approved gratuity fund under an irrevocable trust. The Assessing Officer disallowed the deduction for lack of CIT approval, which was confirmed by the CIT(A). The Tribunal, after considering arguments from both sides, relied on a Supreme Court decision to allow the deduction for the Group Gratuity Scheme contribution made by the assessee directly to LIC. The additions made in both years were deleted in favor of the assessee.

Issue 3: Levy of surcharge and interest u/s 234C
For A.Y. 2009-10, additional grounds were raised regarding the levy of surcharge and interest u/s 234C. The Tribunal held that since the charging of interest and surcharge is mandatory, these grounds cannot be allowed.

In conclusion, the appeal for A.Y. 2008-09 was allowed, and for A.Y. 2009-10, it was partly allowed by the Appellate Tribunal. The order was pronounced on 20th September 2013.