9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (1) TMI 20 - AT - Income TaxAssessment of trust - Disallowance of provision comprising of provision of gratuity and provision of leave encashment as application of income - DR submitted that there is no scientific basis for the estimate of the provisions made by the assessee for gratuity and leave encashment thus AO has rightly made the disallowance as the amounts in question represented unascertained liability - HELD THAT - CIT(A) considered the above submission of the assessee and placing reliance on the decision of National Association of Software and services Companies 2012 (5) TMI 204 - DELHI HIGH COURT Birla Janhit Trust 1990 (8) TMI 5 - CALCUTTA HIGH COURT Trustees of H.E.H the Nizam s Charitable Trust 1981 (1) TMI 52 - ANDHRA PRADESH HIGH COURT and the decision of the Tribunal in assessee s own case 2019 (3) TMI 2009 - ITAT DELHI deleted the impugned disallowance. There is no substance in the contention of the Ld. DR that there is no scientific basis for the impugned provisions for gratuity and leave encashment which were made on the basis of actuarial valuation. No infirmity in the order of the Ld. CIT(A) who has applied the ratio decidendi of the decisions (supra) to the facts of the assessee s case. We therefore confirm his findings in the absence of anything brought on record by the Revenue to enable us to take a different view. Appeal of the Revenue is dismissed.
Issues:
Disallowance of provisions related to gratuity and earned leave as application of income. Analysis: 1. The appeal by the Revenue challenged the order of the Ld. Commissioner of Income Tax (Appeals) regarding the disallowance of provisions for gratuity and earned leave as application of income for the assessment year 2016-17. 2. The Revenue contended that the provisions made by the assessee for gratuity and leave encashment were mere estimates of liabilities and should not be treated as application of income. 3. The Ld. CIT(A) deleted the disallowance after considering the submissions of the appellant and relying on various legal precedents. The CIT(A) observed that provisions for gratuity and leave encashment, being employee benefits, are allowable as application of income based on commercial principles. 4. The Ld. CIT(A) referred to decisions such as DIT (E) vs. NASSCOM, CIT vs. Birla Janhit Trust, and CIT vs. Trustees of H.E.H. the Nizam's Charitable Trust to support the allowance of such provisions as application of income for charitable purposes. 5. The Tribunal noted that the provisions for gratuity and leave encashment were made on a scientific basis and were based on actuarial valuation. The Tribunal upheld the CIT(A)'s decision, emphasizing that the provisions were made in accordance with commercial principles and were for meeting the ascertained liabilities likely to be incurred. 6. The Tribunal highlighted the importance of considering provisions made for employee benefits as part of the income available for charitable purposes, especially when such provisions are made in good faith and are supported by actual liabilities or actuarial valuations. 7. The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s findings and confirming that the provisions for gratuity and leave encashment were allowable as application of income for the charitable trust. This detailed analysis of the judgment showcases the legal reasoning behind the decision to allow the provisions related to gratuity and earned leave as application of income for the charitable trust. The judgment relied on commercial principles, legal precedents, and the scientific basis of the provisions to support the decision in favor of the assessee.
|
