2018 (9) TMI 1408 - AT - Income Tax

Addition u/s 36(1)(v) r.w.s 40A(7) relating to the contribution to gratuity fund to Life Insurance Corporation of India - Held that - As in assessee s own case 2018 (4) TMI 553 - ITAT VISAKHAPATNAM and allowed the appeal of the assessee holding that the assessee is entitled for deduction for payment of gratuity to LIC on actual payment basis.

Summary

Issues: Disallowance of payment to gratuity fund by the Assessing Officer under sections 36(1)(v) and 40A(7) of the Income Tax Act for the assessment years 2012-13 and 2013-14.

Analysis:
1. Issue of Disallowance by AO: The Assessing Officer disallowed the payment of ?50,00,000 for the assessment years 2012-13 and 2013-14, stating that the payment made to LIC Group Gratuity fund was not approved by the Commissioner of Income Tax, making it non-allowable under section 36(1)(v) read with section 40A(7) of the Income Tax Act. The AO interacted with the AR of the assessee bank, emphasizing the non-allowability of the amount paid towards the unapproved Gratuity Fund set up with LIC of India. The AO's decision was based on the provisions of the Act, stating that no deduction is permissible for contributions made to an unapproved fund.

2. CIT(A) Decision: The assessee appealed to the CIT(A), who deleted the addition following a previous Tribunal order in the assessee's own case. The CIT(A) allowed the appeal, holding that the assessee was entitled to deduction for payment of gratuity to LIC on an actual payment basis. The CIT(A) referred to a specific ITAT order and held that the assessee had no control over the funds contributed to LIC for gratuity, and since the facts were identical to previous cases, the deduction was allowed. The CIT(A) directed the AO to delete the disallowance for both assessment years.

3. Tribunal's Decision: The Tribunal upheld the CIT(A)'s order, stating that since the facts were identical and the CIT(A) followed the Tribunal's previous decision in the assessee's case, the AO should allow the payment made to LIC gratuity fund on an actual payment basis. The Tribunal dismissed the appeal of the revenue and upheld the order of the CIT(A).

4. Cross Objections: The cross objections filed by the assessee in support of the CIT(A) order were dismissed as they were barred by limitation, and no petition for condonation was filed. Therefore, the cross objections were not considered, and both the appeals of the revenue and the cross objections of the assessee were dismissed.

In conclusion, the Tribunal affirmed the CIT(A)'s decision to allow the deduction for payment of gratuity to LIC on an actual payment basis, based on previous rulings and the lack of control by the assessee over the funds contributed. The disallowance by the AO was overturned, and both the revenue's appeals and the assessee's cross objections were dismissed.