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TMI Blog2017 (6) TMI 869X X X X Extracts X X X X X X X X Extracts X X X X ..... oner of Income Tax (Appeals) rejected the claim of the assessee with respect to contribution towards unapproved gratuity fund. Thus, in view of the subsequent order passed u/s. 154 of the Act, ground have become infructuous. Disallowance of legal and professional charges - Held that:- The expenditure has been incurred by the assessee for the efficient conduct of its present business with more awareness of the competitors, new markets and the source of procurement of product in which the assessee is already dealing. The expenditure was not incurred for opening any new line of business hence, the expenditure incurred is not capital in nature. Disallowance of contribution made towards payments of premium of group gratuity fund with Life Insurance Corporation of India - Held that:- As in the case of Commissioner of Income Tax Vs. Jaipur Thar Gramin Bank (2016 (11) TMI 794 - RAJASTHAN HIGH COURT ) has held that once the assessee fulfills the condition laid down for approval after having created a trust with Life Insurance of India and the assessee has been regularly contributing towards the said fund, the claim of the assessee cannot be rejected on the ground that the Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment order dated 29-12-2011, the assessee filed appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) granted part relief to the assessee by restricting the addition in respect of under valuation of inventory to ₹ 3,64,990/-, allowing entire amount of ₹ 41,74,500/- paid as legal and professional charges to SRG Consultant by the assessee and by deleting some other minor additions made by Assessing Officer during the course of scrutiny assessment. The Commissioner of Income Tax (Appeals) initially deleting the addition made in respect of assessee s contribution to group gratuity scheme. However, in subsequent rectification order passed u/s. 154 rejected the claim of assessee. Against the findings of Commissioner of Income Tax (Appeals), now, both the Department and the assessee are in appeal before the Tribunal. 3. The Department has raised following grounds of appeal : 1. Whether on the facts and in the circumstances of the case, the ld.CIT(A) was justified in restricting the addition to ₹ 3,64,990/- being 10% of the difference of valuation of closing stock as on 31.03.2009 and opening stock as on 1.4.2008 when C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase and as per provisions scheme of the Act it be held that, the disallowance of ₹ 7,59,685/- on account of premium paid to LIC under Group gratuity scheme u/s. 40A(7)/36(1)(V) is not in accordance with the provisions of the Act. The additions so made be deleted. Just a proper relief be granted to the appellant on this score. 2. The appellant prays to e allowed to add, amend, modify, rectify, delete, raise any grounds of appeal at the time of hearing. 5. Shri R.G. Nahar appearing on behalf of the assessee submitted that the assessee had made application to the concerned Commissioner of Income Tax for approval of group gratuity scheme with LIC on 15-02-2000. The ld. AR pointed that the copy of letter vide which the application was made for approval of gratuity scheme is at pages59 to 61 of the paper book. The assessee has been regularly depositing premium in group gratuity scheme. However, the Commissioner of Income Tax (Appeals) neither rejected the aforesaid application of the assessee nor granted approval to the scheme. The assessee in its return of income has been regularly claiming the benefit of contribution towards the said group gratuity scheme and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck. In the Auditor s report some of the items have been mentioned as non-movable in the inventory and not obsolete items while valuing the stock. Whether the items are slow moving or fast moving, their value has to be taken while determining closing stock. The Commissioner of Income Tax (Appeals) in his impugned order has in principle rejected the method followed by the assessee for valuation of stock. However, by applying the ratio of judgment rendered by the Hon ble Bombay High Court in the case of Alfa Laval India Ltd. Vs. Deputy Commissioner of Income Tax reported as 186 CTR 390 has granted relief to the assessee. The ratio of said judgment does not apply in the case of assessee. The ld. DR submitted that the Commissioner of Income Tax (Appeals) has granted relief to the assessee without examining the details of stock. The ld. DR prayed for restoring the matter back to the file of Assessing Officer for detailed examination of the stock. 6.2 With respect to ground No. 4 raised in the appeal, the ld. DR submitted that from perusal of the agreement under which the payments have been made to M/s. SRG Consultant Pvt. Ltd., it is clearly evident that the payments are made in relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Commissioner of Income Tax (Appeals) has rightly followed the law laid down by the Hon ble Bombay High Court in the case of Alfa Laval India Ltd. Vs. Deputy Commissioner of Income Tax (supra) while granting relief to the assessee. 7.2 In respect of ground No. 4 raised in appeal by the Department, the ld. AR submitted that assessee had engaged the services of M/s. SRG Consultant Pvt. Ltd. to conduct study to improve profitability, knowledge of the market/competitors for the growth of business of the assessee. The agreement was entered into by the assessee with M/s. SRG Consultant Pvt. Ltd. for expanding the market in existing line of the business including growth of business, exploring acquisition of phosphorous producer and development of toll manufacturing arrangement for existing producers. 94% of the total output of the assessee is exported out of India. The expenditure was not incurred to establish new line of business, therefore, the said expenditure is not capital in nature. 8. We have heard the submissions made by the representatives of rival sides and have perused the orders of the authorities below. In ground No. 1 of the appeal, the Department has assailed the fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e do not find merit in the submissions of the ld. DR. No useful purpose would be served by remitting the issue back to the file of Assessing Officer. The Assessing Officer has accepted the method of valuation of closing stock during scrutiny assessment proceedings in the preceding and the succeeding assessment years. The Assessing Officer should have been consistent in determining the value of closing stock. No material has been placed on record to show any change in facts and circumstances to take a different view in the impugned assessment year. Lacking merit in the submissions of the ld. DR on the issue, we dismiss ground No. 1 raised in appeal by the Department. 9. Ground Nos. 2 and 3 in appeal by the Department relates to disallowance of amount contributed by the assessee towards unapproved gratuity fund. The Commissioner of Income Tax (Appeals) had initially deleted the said addition. Subsequently, vide rectification order dated 09-11-2015 passed u/s. 154 of the Act, the Commissioner of Income Tax (Appeals) rejected the claim of the assessee with respect to contribution towards unapproved gratuity fund. Thus, in view of the subsequent order passed u/s. 154 of the Act, grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax neither rejected the application of the assessee nor issued any letter communicating approval of the fund. In the meantime the assessee started contributing towards the said group gratuity fund with LIC. The Assessing Officer granted the benefit of contribution towards the said fund in the assessments made u/s. 143(3) of the Act in the earlier assessment years. It was only in the assessment year under appeal that the contribution made by the assessee towards the said ground gratuity fund was disallowed by the Assessing Officer. The ld. DR informed the Bench that the Commissioner of Income Tax (Appeals) has now approved the group gratuity scheme floated by the assessee. 12. The Hon ble Rajasthan High Court in the case of Commissioner of Income Tax Vs. Jaipur Thar Gramin Bank (supra) has held that once the assessee fulfills the condition laid down for approval after having created a trust with Life Insurance of India and the assessee has been regularly contributing towards the said fund, the claim of the assessee cannot be rejected on the ground that the Commissioner of Income Tax (Appeals) has not approved the fund. The assessee should not suffer for inaction of the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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