9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (10) TMI 1079 - AT - Income TaxDisallowance u/s. 36(1)(v) on account of unapproved Gratuity Expenses - AO was of the view that in the assessee's case, the contribution is made to an unapproved Gratuity Fund, therefore deduction u/s. 36(1)(v) of the Act cannot be claimed - HELD THAT - Payment made by the assessee to the Life Insurance Corporation under Group Gratuity Scheme would be an allowable expenditure as held in the case of Shri Sajjan Mills 1985 (10) TMI 2 - SUPREME COURT therefore respectfully following above we allow ground no. 1 raised by the assessee. Disallowance u/s. 40(a)(ia) on account of non-deduction of TDS - scope of amendment - whether Disallowance should be restricted to 30% of the total disallowance as per amended provision of Income Tax Act? - whether insertion of second proviso to Sec. 40(a)(ia) is retrospective or prospective in nature? - HELD THAT - The said issue raised by the assessee is no longer res integra, recently in the case of Shree Choudhary Transport Company 2020 (8) TMI 23 - SUPREME COURT held that amendment in the second proviso to Sec. 40(a)(ia) is prospective in nature. Hence the amendment in the second proviso to Sec. 40(a)(ia) is prospective in nature therefore, disallowance should not be restricted to 30% of the total disallowance therefore we dismiss the ground raised by the assessee.
Issues Involved:
1. Disallowance of ?4,68,092/- under section 36(1)(v) on account of unapproved Gratuity Expenses. 2. Disallowance of ?16,22,702/- under section 40(a)(ia) on account of non-deduction of TDS. Issue-wise Detailed Analysis: 1. Disallowance of ?4,68,092/- under section 36(1)(v) on account of unapproved Gratuity Expenses: The first issue pertains to the disallowance of ?4,68,092/- under section 36(1)(v) of the Income Tax Act, 1961, on account of unapproved Gratuity Expenses. The assessee had contributed this amount to a Group Gratuity Scheme named "Mrinalini Biri Mfg. Co. (P) Ltd. Employees' Gratuity Fund," which was claimed as an expense under section 36(1)(v). However, the Assessing Officer (AO) disallowed this deduction because the gratuity fund was not approved by the Income Tax Department as required by Rule 2(2) of Part C of the Fourth Schedule of the Act. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision. Upon appeal, the Tribunal examined the issue of whether the contribution to the group gratuity scheme made to Life Insurance Corporation of India (LIC) is an allowable expenditure. The Tribunal referred to the Supreme Court's judgment in the case of Shri Sajjan Mills Ltd. vs. CIT, which clarified that contributions made to an approved gratuity fund are deductible. The Tribunal also referenced the Karnataka High Court's decision in Chief Commissioner vs. Karnataka Electricity Board, which supported the assessee's claim that contributions to a group gratuity scheme are allowable as business expenses. Based on these precedents, the Tribunal concluded that the payment made by the assessee to LIC under the Group Gratuity Scheme is an allowable expenditure. Consequently, the Tribunal allowed the assessee's appeal on this ground. 2. Disallowance of ?16,22,702/- under section 40(a)(ia) on account of non-deduction of TDS: The second issue involves the disallowance of ?16,22,702/- under section 40(a)(ia) of the Act due to the non-deduction of TDS on payments made for Label Printing. The AO disallowed the entire expense of ?17,47,505/- incurred towards Label Printing because the assessee did not deduct TDS on these payments. The CIT(A) upheld this disallowance. In the appeal before the Tribunal, the assessee argued that the disallowance should be restricted to 30% of the total disallowance, i.e., ?4,86,811/- (30% of ?16,22,702/-), based on the amendment made by the Finance Act, 2014, which they claimed should be applied retrospectively. The Tribunal, however, noted that the Supreme Court in Shree Choudhary Transport Company Vs. Income Tax Officer held that the amendment to the second proviso to section 40(a)(ia) is prospective in nature and not retrospective. The Tribunal summarized the Supreme Court's findings, which emphasized that the provisions of section 40(a)(ia) are intended to enforce compliance with the Act's requirements and ensure proper tax collection. The Supreme Court also clarified that the benefit of the 2014 amendment is not available retrospectively. Therefore, the Tribunal concluded that the disallowance should not be restricted to 30% of the total disallowance and dismissed the assessee's appeal on this ground. Conclusion: The Tribunal partly allowed the appeal, granting relief on the first issue concerning the disallowance of gratuity expenses but upheld the disallowance on the second issue regarding non-deduction of TDS. The order was pronounced in the Court on 16.09.2020.
|
