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2015 (7) TMI 1413 - AT - Income TaxDisallowance of provision made for payment of Gratuity - Since the payment was not made during the year under consideration AO disallowed the claim of the assessee - CIT(Appeals) found that the approved Gratuity Fund is covered under Section 40A(7)(b) - HELD THAT - It is not in dispute that the Gratuity Fund is an approved one. The assessee has also made a provision for payment. Since the provision was made for payment of Gratuity fund which is an approved one this Tribunal is of the considered opinion that Section 40A(7)(b) of the Act would come into operation. CIT(Appeals) has rightly allowed the claim of the assessee. This Tribunal do not find any infirmity in the order of the lower authority and accordingly the same is confirmed. - Decided against revenue.
Issues: Disallowance of provision made for payment of Gratuity.
In the judgment delivered by the Appellate Tribunal ITAT Chennai, the appeals of the Revenue were directed against the orders passed by the Commissioner of Income Tax (Appeals)-III for the assessment years 2005-06 and 2008-09. The common issue in both appeals was the disallowance of provision made for payment of Gratuity. The Departmental Representative argued that since the payment was not made during the relevant year, the Assessing Officer disallowed the claim. However, the CIT(A) allowed the claim citing Section 40A(7)(b) of the Income-tax Act, 1961. The Departmental Representative contended that without payment details, the claim cannot be allowed under Section 43B of the Act. On the other hand, the counsel for the assessee argued that under Section 40A(7)(b), a provision made for payment of Gratuity from an approved fund is an allowable expenditure. The Tribunal had previously ruled similarly in other cases. The Tribunal noted that the Gratuity Fund was approved, and since a provision was made for payment, Section 40A(7)(b) would apply, leading to the allowance of the claim. The Tribunal found no fault in the lower authority's decision and confirmed the allowance, dismissing the Revenue's appeals. The judgment was pronounced on 3rd July 2015 in Chennai.
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