1980 (1) TMI 130 - AT - Income Tax

Summary

Issues:
1. Deduction of provision for gratuity in computing total income.
2. Allowance of donations in kind as a deduction under section 80G.
3. Granting interest under section 214 of the IT Act, 1961 for payments made beyond due dates.

Analysis:

1. The first issue in this case pertains to the deduction of provision for gratuity in computing the total income for the assessment year 1972-73. The Revenue contended that the CIT (A) erred in directing the ITO to deduct the incremental liability for gratuity. The ITO had disallowed the deduction, citing the absence of an approved gratuity fund under an irrevocable trust. However, the CIT (A) allowed the deduction based on the judgment of the Bombay High Court in a similar case. The ITAT, after considering the arguments, upheld the CIT (A)'s decision, citing precedents from the Madras High Court and the Tribunal, indicating that the deduction for incremental liability to gratuity is permissible.

2. The second issue revolves around the allowance of donations in kind as a deduction under section 80G of the IT Act. The assessee claimed relief under section 80G for donations made to various charitable institutions. The ITO disallowed the claim, asserting that section 80G applies only to cash donations. However, the CIT (A) accepted the assessee's claim, relying on a ruling of the Madras High Court. The ITAT, after hearing both parties, upheld the CIT (A)'s decision, emphasizing that the market value of the donated items should be considered as the donation amount, not just the cost. The ITAT found the Madras High Court's decision binding and rejected the Revenue's contentions.

3. The final issue concerns the direction to grant interest under section 214 of the IT Act for payments made beyond the due dates specified under section 211. The ITO had not allowed interest on excessive advance-tax claimed by the assessee, but the CIT (A) directed the ITO to consider all payments made during the financial year for calculating interest. The ITAT, after considering arguments from both sides, upheld the CIT (A)'s decision, citing precedents from the Madras Bench "C" of the Tribunal and rulings from the Gujarat High Court. The ITAT found that the Gujarat High Court's decision on interest payable under section 217(1A) also applied to section 214, supporting the assessee's position.

In conclusion, the ITAT dismissed the appeal, upholding the decisions of the CIT (A) on all three issues raised by the Revenue.