2019 (5) TMI 1979 - AT - Income Tax

Addition u/s 37 (1) or 36(1)(v) - expenditure being the premises actually paid to LIC under Group Gratuity Scheme Cum Life Insurance Scheme - Principle of consistency - disallowance of gratuity expenses being claim of the assessee on the ground that the gratuity scheme was not approved as per the requirement of section 36(1)(v) and the assessee has failed to produce necessary certificate in support of the same - HELD THAT - It is just because the assessee is not able to prove the copy of the approval, the claim has been denied to the assessee. We are of the view that this claim of the assessee is allowable on the plea of consistency. As decided in the case of Radhasaomi Satsang Saomi Bagh 1991 (11) TMI 2 - SUPREME COURT held that the assessments are quasi-judicial and each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different A.Y. s has been found as a fact one way or the other and the parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. As the employer bank does not have any control over the funds of the irrevocable trust created exclusively for the benefit of the employees and that the assessee had absolutely no control over the fund created by the LIC for the benefit of the employees of the assessee and further all the contribution made by the assessee in the said fund ultimately came back to the Bank Employees Gratuity Fund. The assessee has also obtained the policy in favour of the bank - thus we hold that the assessee is entitled for deduction for payment of gratuity scheme to LIC. Non disclosure of income from interest from Bank - HELD THAT - We observe that the AO has asked the assessee vide order sheet noting to produce reconciliation of all income with its corresponding TDS. However, the assessee has only submitted details of interest receivables in which amount of Rs.12,12,500 from Union Bank of India and Rs. 20,14,546 was not reflected. Accordingly, the AO made addition of above sums and allowed credit of TDS deducted at Rs. 5,24,159. CIT (A), the appellant has failed to furnish any reconciliation of interest received and shown in the books of accounts. In view of this matter, we are not inclined to interfere with order of lower authorities. Accordingly, same is upheld. This ground of appeal is therefore, dismissed.

Summary

Issues Involved:
1. Sustained disallowance of expenditure paid to LIC under Group Gratuity Scheme.
2. Jurisdiction under section 147 and issuance of notice under section 148 of the Income Tax Act.
3. Addition of income due to alleged non-disclosure of interest income from banks.

Issue-wise Detailed Analysis:

1. Sustained Disallowance of Expenditure Paid to LIC Under Group Gratuity Scheme:

The primary issue in these appeals was the disallowance of the expenditure paid to LIC under the Group Gratuity Scheme, which the assessee claimed as fully allowable under section 37(1) of the Income Tax Act, 1961. The AO disallowed the claim, stating that the gratuity fund was not approved as per section 36(1)(v) of the Act. The CIT (A) upheld this disallowance, noting the absence of evidence of approval for the gratuity fund. The Tribunal, however, allowed the appeal, emphasizing that the scheme had been consistently allowed in the past and was managed by LIC under an irrevocable trust for the exclusive benefit of the employees. The Tribunal cited the principle of consistency and relevant case laws, including the Supreme Court's decision in Radhasaomi Satsang Saomi Bagh vs. CIT, to support its decision.

2. Jurisdiction Under Section 147 and Issuance of Notice Under Section 148 of the Income Tax Act:

The assessee challenged the jurisdiction of the DCIT Valsad Circle under section 147 and the issuance of notice under section 148 of the Act. However, since the Tribunal decided the main issue (disallowance of expenditure) in favor of the assessee, these grounds became academic and did not require specific adjudication.

3. Addition of Income Due to Alleged Non-disclosure of Interest Income from Banks:

For the assessment year 2011-12, the AO added Rs. 32,27,046 to the assessee's income, alleging non-disclosure of interest income from Bank of Baroda and Union Bank of India. The AO noted discrepancies in the interest income recorded and the TDS deducted by these banks. The CIT (A) upheld the addition, citing the assessee's failure to reconcile the interest income. The Tribunal also upheld the addition, agreeing with the lower authorities that the assessee did not provide satisfactory reconciliation of interest income and TDS.

Conclusion:

The Tribunal allowed the appeals for the assessment years 2007-08 and 2012-13, granting the deduction for the gratuity scheme payments to LIC. For the assessment year 2011-12, the Tribunal partly allowed the appeal, upholding the addition related to undisclosed interest income but allowing the deduction for the gratuity scheme payments to LIC. The Tribunal's decisions were pronounced in open court on 14.05.2019.