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Issues involved: Disallowance of gratuity payment u/s 36(1)(v) of the Act.
Summary: The appeal was filed against the CIT(A)'s order disallowing an amount towards gratuity payment to an employee. The Assessing Officer disallowed the claim as the contribution was not made to an approved fund. The CIT(A) upheld the disallowance stating that the payment was made directly to LIC. The assessee argued that the payment was made to an approved fund with LIC for the benefit of employees. The Departmental Representative contended that the deduction cannot be allowed as per section 36(1)(v) of the Act. The Tribunal noted that the assessee had an approved gratuity fund and regularly made payments to LIC for gratuity. Referring to a Supreme Court judgment, the Tribunal held that the contribution made to LIC for gratuity cannot be disallowed as the fund was created exclusively for employees' benefit. The Tribunal directed the Assessing Officer to allow the deduction, considering the consistency in previous assessments. In conclusion, the appeal of the assessee was allowed, and the payment towards gratuity to LIC was deemed an allowable deduction.
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