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TMI Blog2021 (6) TMI 252X X X X Extracts X X X X X X X X Extracts X X X X ..... should not have any control on the fund created for the welfare of the employees. In the case on hand, there is no ambiguity that there was no control of the assessee of whatsoever on the funds created by it for the welfare of the employees as the fund was invested with the LIC of India and LIC was directly paying amount to the employee on occasion of retirement. As relying on M/S TEXTOOL CO. LTD. [ 2009 (9) TMI 66 - SUPREME COURT] and PRAKASH SOFTWARE SOLUTION PVT LTD [ 2018 (1) TMI 956 - ITAT AHMEDABAD] there is hardly any doubt regarding allowability of deductions for any contributions made to an approved gratuity fund established under an irrevocable trust. Further, no deduction shall be allowed to an organization of any provision for payment of gratuity. Appeal of the revenue is dismissed. - ITA No. 1851/AHD/2018 - - - Dated:- 31-5-2021 - Shri Waseem Ahmed, Accountant Member And Ms Madhumita Roy, Judicial Member For the Assessee : Shri Nikunj Bagadiya, A.R For the Revenue : Shri L.P. Jain, Sr. D.R ORDER The captioned appeal is filed at the instance of Revenue against the order of the Learned Commissioner of Income Tax (Appeals)-10 Ahmedabad, [Ld. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om department. On enquiry in the year 2016 it was learnt that the document were misplaced by the department therefore the assessee filed fresh application dated 08-03-2016. The learned CIT approved the scheme w.e.f. 01-04-12. The assessee in support of its claim submitted copy of application filed with department dated 25-11-1985 and other relevant document. The assessee further submitted that gratuity trust is independent from its control and its business. The trust and LIC is independently managing the fund of gratuity. As such the assessee has no control or lien on such fund created for the benefit of employees. The assessee further claimed that the fact of its case is fully covered by the judgment of the Hon ble Supreme Court in case of CIT vs. Textool Co. Ltd reported in 35 taxmann.com 639. 4.1 However the AO disallowed the claim of the assessee by holding that the Trust of the assessee is not recongnised trust under the Act. Though the learned CIT granted approval of the trust but the same is w.e.f. 1st April 2012, therefore the year under consideration is not cover under the approval. Further the case law relied by the assessee is factually not applicable as in such case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not made any application prior to 31st May, 2016. The documents submuitted by Appellant clearly shows that Appellant has made application for approval of graturity fund in 1985 and nothing was brought on record by AO that such application was rejected subsequently. The Hon ble Jaipur ITAT in the case of Man Structure Pvt. Limited V/s ACIT (ITA No.63 to 65/JP/2016 dated 16th August, 2016) has held that once the revenue is accepting the status of Assesee being approved gratuity fund and has been extended the benefit of gratuity fund after the application was initially filed on 13th May, 1996, now the Revenue cannot deny the benefit merely on the basis of non-grant of approval by Authorities. For the non-action of the Revenue, the Assesse cannot be denied with the benefit of the pendency of deduction on account of above contribution made to gratuity fund. 6. Being aggrieved by the order of the learned CIT (A) the Revenue is in appeal before us 7. The learned DR before us contended that the gratuity fund for the year under consideration was not approved under the Act. Therefore any contribution made by the assessee to such unapproved fund cannot be allowed as deduction. 8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporation of India [Sec 4A(1)] or (b) Establish an approved gratuity fund [Sec 4A(2)]. 9.2 Now coming to the deduction available to the assessee on account of the gratuity liability as provided under section 36(1)(v) of the Act. The provisions states that the assessee an employer shall be allowed a deduction of any sum paid by way of contribution towards an approved gratuity fund created by him for the exclusive benefit of his employees under an irrevocable trust. Thus, the Income Tax Act envisages to allow deduction of contributions made only to an approved gratuity fund. 9.3 The provisions of Section 2(5) of Income Tax Act defines an approved gratuity fund as a gratuity fund which has been and continues to be approved by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner of Income Tax in accordance with the rules contained in Part C of the Fourth Schedule. Such a fund must be created as an irrevocable trust i.e. contributions once made to the fund shall never be under the control of the employer organization. 9.4 Undoubtedly, the gratuity fund created by the assessee was not approved by the Commissioner of income tax und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of any particular provision of the Act. (See : Shree Sajjan Mills Ltd. v. CIT [1985] 156 ITR 585/23 Taxman 37 (SC). From a bare reading of Sectin 36(1)(v) of the Act, it is manifest that the real intention behind the provision is that the employer should not have any control over the funds of the irrevocable trust created exclusively for the benefit of the employees. In the instant case, it is evident from the findings recorded by the Commissioner and affirmed by the Tribunal that the assessee had absolutely no control over the fund created by the LIC for the benefit of the employees of the assessee and further all the contribution made by the assessee in the said fund ultimately came back to the Textool Employees Gratuity Fund, approved by the Commissioner with effect from the following previous year. Thus, the conditions stipulated in Section 36(1)(v) of the Act were satisfied. Having regard to the facts found by the Commissioner and affirmed by the Tribunal, no fault can be found with the opinion expressed by the High Court, warranting our interference. 9.7 We also find that the Hon ble coordinate bench of this tribunal in the case of Prakash Software Solution (P.) Ltd vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f approval being later than the date on which the fund is created. In a situation in which the terms and conditions of the fund, established under the irrevocable trust, are the same as the terms and conditions on the basis of which such a fund was set up, there cannot be, in our humble understanding, any justification for the effective date of approval being a date later than the date on which the said fund was set up. 9.8 In the light of the above judgements, there is hardly any doubt regarding allowability of deductions for any contributions made to an approved gratuity fund established under an irrevocable trust. Further, no deduction shall be allowed to an organization of any provision for payment of gratuity. 9.9 In view of the above and after considering the facts in totality, we do not find any reason to disturb the finding of the learned CIT (A). Accordingly we uphold the same. Consequently the AO is directed to delete the addition made by him. Hence the ground of appeal of the revenue is dismissed. 10. In the result the appeal filed by the Revenue is dismissed. Order pronounced in the Court on 31/05/2021 at Ahmedabad. - - TaxTMI - TMITax - Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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