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2018 (12) TMI 1844 - AT - Income TaxDeduction of ex-gratia payment made by assessee to its employees - HELD THAT - Issue decided in own case 2017 (7) TMI 1372 - BOMBAY HIGH COURT Section 63 of the Act empowers the Board of Directors to approve payment of ex-gratia amount to its employees. It is also observed by the Tribunal that the assessee has been extending incentives to employees for the proceeding years and the subsequent years also and the same is accepted by the Revenue. Thus been held that ex-gratia payment made by the employer to its employees is on account of commercial expediency and hence allowable. Appeal filed by the Revenue is dismissed.
Issues:
Deduction of ex-gratia payment made by assessee to its employees. Analysis: The appeal was against the order of the CIT(A)-3, Mumbai for the A.Y 2014-15, which was directed against the order passed by the Assessing Officer under Sec. 143(3) of the IT Act, 1961. The Ld. CIT(A) decided the grounds raised by the assessee by following the order of a coordinate bench of ITAT in the assessee's own case for the A.Y 2007-08. The A.O had disallowed the deduction of ex-gratia payment made by the assessee to its employees. However, the coordinate bench of ITAT in the assessee's own case for the A.Y 2007-08 had decided a similar ground in favor of the assessee, which was also upheld by the Hon'ble Jurisdictional High Court. The High Court held that ex-gratia payment made by the employer to its employees is on account of commercial expediency and hence allowable. The Tribunal had also observed that the assessee had been extending incentives to employees in preceding and subsequent years, which was accepted by the Revenue. The Tribunal relied on previous judgments to support the allowance of ex-gratia payments. The matter was found to be squarely covered by the decision of the Coordinate Bench of ITAT in the assessee's own case, which was also upheld by the Hon'ble Bombay High Court in a similar case. Therefore, the issue was decided in favor of the assessee, and the appeal filed by the Revenue was dismissed.
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