2015 (7) TMI 1408 - AT - Income Tax

Disallowance of provision for Gratuity u/s 40(A)(7) - CIT-A by following his own order for the assessment year 2005-06, allowed the claim of the assessee - HELD THAT - It is not in dispute that the Gratuity fund is an approved one. The assessee also made provision for payment of Gratuity. Therefore, this Tribunal is of the considered opinion that Section 40A(7)(a) may not be applicable to the facts of the case. In fact, Section 40A(7)(b) of the Act would be applicable. By referring to Section 40A(7)(b) of the Act, this Tribunal, on identical set of facts, allowed the claim of the assessee for assessment years 2005-06 and 2008-09 by confirming an identical order of the CIT(Appeals). Therefore, this Tribunal do not find any infirmity in the order of the CIT(Appeals) and accordingly, the same is confirmed. - Decided against revenue.

Summary

Issues: Disallowance of provision for Gratuity under Section 40(A)(7) of the Income-tax Act, 1961 for assessment year 2007-08.

Analysis:
The appeal was against the order of the CIT(Appeals)-I, Chennai, related to the disallowance of the provision for Gratuity under Section 40(A)(7) of the Income-tax Act, 1961 for the assessment year 2007-08. The Revenue contended that the Assessing Officer disallowed the provision for Gratuity under Section 40(A)(7) of the Act. However, the CIT(Appeals) allowed the claim of the assessee by following his own order for the assessment year 2005-06. The Ld. D.R. argued that no provision shall be allowed in respect of payment of Gratuity as per Section 40A(7)(a) of the Act. The Ld. D.R. highlighted that the Gratuity fund was approved by the Commissioner and similar claims of the assessee were allowed in previous assessment years by the Tribunal.

The Ld. counsel for the assessee argued that for the assessment years 2005-06 and 2008-09, the Tribunal had allowed the claim of the assessee under Section 40A(7)(b) of the Act, confirming the order passed by the CIT(Appeals) for those years. The Tribunal had also confirmed the order for the assessment year 2005-06 by an order dated 03.07.2015 in I.T.A. Nos.2443 & 2444/Mds/2014. After considering the submissions and perusing the relevant material, the Tribunal noted that the Gratuity fund was approved and the assessee had made provisions for Gratuity. It was held that Section 40A(7)(a) may not be applicable, and Section 40A(7)(b) would be relevant. The Tribunal found no infirmity in the order of the CIT(Appeals) and confirmed the decision, dismissing the appeal of the Revenue.

In conclusion, the Tribunal upheld the decision of the CIT(Appeals) regarding the disallowance of the provision for Gratuity under Section 40(A)(7) of the Income-tax Act, 1961 for the assessment year 2007-08, based on the approval of the Gratuity fund and provisions made by the assessee. The appeal of the Revenue was dismissed, and the order was pronounced on 31st July 2015 at Chennai.