2017 (5) TMI 1550 - HC - Income Tax

Addition on account of Gratuity payable - whether the gratuity fund of the assessee was unapproved and as per Section 40A(7), no provision can be made is allowable when such amount is kept in an unapproved fund? - Held that - The impugned balance of gratuity payable had been created in the assessment year 2008-09 and the same had been added back in the computation for the said assessment year. The current balance was only a brought forward balance and no such provision had been created during the year under consideration which meant that no such debit had been effected in the profit and loss account for the year under consideration. Thus, the addition made by the Assessing Officer was correctly directed to be deleted. The Tribunal correctly dismissed the appeal filed by the revenue. - Decided in favour of assessee.

Summary

Issues:
1. Whether the addition of Gratuity payable amounting to ?14,94,648 made by the Assessing Officer was justified under Section 40A(7) of the Income Tax Act, 1961?

Analysis:
The appellant-revenue filed an appeal under Section 260A of the Income Tax Act against the order of the Income Tax Appellate Tribunal (ITAT) regarding the addition of ?14,94,648 on account of Gratuity payable for the assessment year 2010-11. The Tribunal noted that the CIT(A) had observed that the impugned balance of gratuity payable was created in the assessment year 2008-09 and added back in the computation for that year. It was found that no provision had been created during the year under consideration, and the current balance was only a brought forward balance, with no debit in the profit and loss account for the relevant year. Consequently, the Tribunal concurred with the CIT(A) and dismissed the appeal filed by the revenue, stating that no substantial question of law arose.

The Tribunal's order highlighted that the gratuity payable amount in question related to the assessment year 2008-09 and had been added back in the computation for that year. The CIT(A) had made factual findings that no provision was created during the year under consideration, indicating that no debit was made in the profit and loss account for that year. The Tribunal emphasized that the learned counsel for the appellant-revenue failed to identify any errors in the findings of the Tribunal or the CIT(A), leading to the dismissal of the appeal. The Tribunal concluded that there was no infirmity in the order of the CIT(A) and upheld the decision to delete the addition of ?14,94,648 on account of Gratuity payable.