2023 (12) TMI 630 - AT - Income Tax

Disallowing expenditure on account of gratuity representing amount actual paid to an approved gratuity fund of employer's contribution - assessee s case is that an amount has been paid as gratuity before the due date in filing of return of income to approved gratuity fund accordingly the said amount was allowable u/s 36(1)(v) r.w.s 43B - HELD THAT - As per clause (b) of section 40A(7) of the Act allows deduction any provision made by assessee/employees for the purpose of payment of a sum by way of contribution towards and Approved Gratuity Fund. It is noted that assessee s case is that it has made contribution towards approved gratuity fund and therefore prima-facie the claim of the assessee need to be allowed since there is no fetter u/s 40A(7). DR brought to our notice that no verification of the fact has been under-taken by AO as to whether the assessee has made the actual payment on or before the due date of filing of return of income as well as whether the assessee has made payment to the approved gratuity fund which need to be verified by the AO. Thus we set aside the impugned order of Ld. CIT(A) and restore this issue back to the file of AO for the limited purpose of verification whether sum paid to the approved gratuity fund on or before the due date of filing of return; and the AO after verification find the claim to be correct to allow it. Disallowing deduction u/s 80G - CSR expenditure - HELD THAT - Since the facts have not been verified by the AO (whether donees enjoyed certificate u/s 80G of the Act, the amount of donation etc need to be verified), the AO to do so and after the ratio of the aforesaid judicial precedent (supra) is applied to the facts of the case, to allow the same in accordance to law. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues Involved:
1. Disallowance of Gratuity Expenses
2. Disallowance of Deduction under Section 80G for CSR Expenditure

Summary:

Disallowance of Gratuity Expenses:
The assessee contested the CIT(A)'s decision not to allow a deduction for Rs.83,69,981/- paid towards an approved gratuity fund, arguing that it was allowable under Section 43B of the Income-tax Act, 1961. The assessee had made this claim in a revised return, which the AO rejected based on the Supreme Court's decision in Goetze (India) Ltd. Vs. CIT, stating that new claims must be made through a revised return. The CIT(A) also denied the claim, misinterpreting the provisions of Section 40A(7). The Tribunal noted that the claim should be allowable under Section 36(1)(v) r.w.s. Section 43B if verified that the payment was made before the due date for filing the return. The Tribunal remanded the matter back to the AO for verification of the payment to the approved gratuity fund.

Disallowance of Deduction under Section 80G for CSR Expenditure:
The assessee also challenged the CIT(A)'s disallowance of a deduction under Section 80G amounting to Rs.22,75,000/-, which was part of CSR expenditure. The CIT(A) had denied this claim based on Explanation-2 to Section 37(1), which states that CSR expenses are not deemed to be for business purposes. The Tribunal, however, cited various case laws to assert that while CSR expenses are not deductible as business expenses under Section 37(1), they can still qualify for deduction under Section 80G if they meet the criteria set out in that section. The Tribunal directed the AO to verify the facts, including whether the donees had valid certificates under Section 80G, and to allow the deduction if the conditions are met.

Conclusion:
The appeal was allowed for statistical purposes, with directions for the AO to verify specific facts and allow the claims as per the legal provisions.