2021 (3) TMI 392 - AT - Income Tax

Disallowance u/s. 36(1)(v) - contribution made to LIC as unrecognized fund - HELD THAT - As in the light of finding of this Tribunal in assessee s own case for A.Y. 2012-13 we hold that the assessee is entitled to claim deduction and accordingly, the AO is directed to allow the claim made by the assessee for the year under consideration. Thus, the ground raised by the assessee is allowed.

Summary

Issues involved:
Whether the disallowance made under section 36(1)(v) of the Act is justified.

Detailed Analysis:

Issue 1: Disallowance under section 36(1)(v) of the Act

The case involved an appeal by the assessee against the order passed by the Commissioner of Income Tax (Appeals) for the assessment year 2011-12. The primary issue was whether the disallowance made under section 36(1)(v) of the Act was justified. The assessee, a private limited company engaged in manufacturing steel flanges, had paid a sum to LIC Gratuity Fund, which the Assessing Officer (AO) treated as an unrecognized fund due to the absence of approval by the CIT. Consequently, the deduction was denied. The CIT(A) upheld the AO's decision.

The assessee argued that they had applied for approval in 2008, and the approval was granted in 2017, emphasizing that the delay in approval was not their fault. The Tribunal referred to a similar case for the assessment year 2012-13 where it was held that once the application was complete and in compliance with the law, the approval should have been granted within a reasonable time. The Tribunal criticized the delay in granting approval, attributing it to the Revenue's inaction, and ruled that the deduction under section 36(1)(v) of the Act cannot be denied due to such delays. The Tribunal directed the AO to allow the deduction claimed by the assessee for the relevant year.

Based on the precedent set in the assessee's own case for the assessment year 2012-13, the Tribunal concluded that the assessee was entitled to claim the deduction. Therefore, the appeal of the assessee was allowed, and the AO was directed to permit the deduction claimed by the assessee for the relevant year. The order was pronounced in the open court on 5th February 2021.