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TMI Blog2024 (5) TMIX X X X Extracts X X X X X X X X Extracts X X X X ..... mployees have also received payments from LIC for their gratuity as and when the occasion arose. Similar claim has been allowed by Ld. CIT(A) in AY 2011-12 not contested by the Department before the Tribunal. Part C of the 4th Schedule relating to Approved Gratuity Fund, we note that Rule 5 provides for treating gratuity fund to an employee during his lifetime as salary paid to the employee for the purpose of this Act. As undisputed fact that assessee had applied for the approval of the Gratuity Fund in the year 2002 which remained pending by the Department without any justifiable reasons. The approval has been granted by the Ld. Pr. CIT recently vide order dated 04.10.2023 which also states that the approval takes effect from 03.01.2023. The assessee cannot be put to an adverse situation when it has taken all the required steps for the compliance prescribed under the Act and the Rules. LIC has paid gratuity fund to the employees of the assessee in the past. We also note that in the preceding AY 2011-12, ld. CIT(A) has dealt with the same issue in para 4.1 in its order and has allowed the claim of the assessee. Accordingly, applying principles of reasonable construction for giving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over the fund contribution to the LIC towards gratuity. Assessee receives the gratuity payment from the LIC as per the scheme which is paid directly to the employees as and when the occasion arises. According to the assessee, even if the deduction is not allowable u/s. 36(1)(v) but is a permissible deduction u/s. 37(1) of the Act as on the fund maintained by LIC, assessee has no control and the fund is credited exclusively for the benefits of its employees. 4.1. After considering the submissions made by the assessee, Ld. CIT(A) noted that assessee had not provided any proof regarding the approval given by the Administrative Commissioner of Income Tax to the gratuity fund which availed the group gratuity scheme of LIC. In the absence of evidence of having approval of the prescribed authority, it was held that the gratuity fund of the assessee is not an approved one. He thus, confirmed the disallowance made by the Ld. AO u/s. 36(1)(v). On the alternate claim made by the assessee that it is an allowable deduction u/s. 37(1), Ld. CIT(A) referred to several judicial precedents to dislodge the claim of the assessee. He placed reliance on the decision of the jurisdictional High Court of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch has been granted now cannot be back dated since the approval granted vide order dated 04.10.2023 is prospective which takes effect from 03.01.2023 and cannot be considered for the purpose of allowing the claim in the impugned assessment year 2014-15. He placed strong reliance on the decision of the Hon ble jurisdiction High Court of Calcutta in the case of Brook Bond India Ltd. (supra) which squarely covered the case of the assessee against it. 7. We have heard rival contentions and perused the material available on record. It is a fact on record that assessee had made an application for approval of gratuity fund long back i.e. on 10.12.2002. Assessee had also entered into an agreement with LIC by obtaining Master Policy as stated above which was effective from 01.11.2002. Payment made to LIC towards group gratuity schme are also not in dispute. Order granting approval to the gratuity fund issued by the office of Ld. Pr. CIT is dated 04.10.2023 wherein it is stated that the approval takes effect from 03.01.2023. 7.1. We fail to understand for such a prolonged delay in disposing the application of the assessee without any fault at its end in granting the said approval. During all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d below: (i) Sec. 2(5) which defines approved gratuity fund. The said section is reproduced as under: (5) approved gratuity fund means a gratuity fund has been and continues to be approved by the [Principal Chief Commissioner or] Chief Commissioner of [Principal Commissioner or] Commissioner] in accordance with the rules contained in Part C of the Fourth Schedule. (ii) Application for approval of gratuity fund is prescribed in Rule 109 of the Income Tax Rules, 1962 (hereinafter referred to as the Rules ), the same is extracted as under: Application for approval. 109. (1) The application for approval of a gratuity fund under sub-rule (1) of rule 4 of Part C of the Fourth Schedule shall contain the following information :- (a) Name of employer and address, his business, profession, etc., also his principal place of business. (b) Classes and number of employees entitled to admission to the fund (i) in India ; (ii) outside India. (c) Place where the accounts of the fund are or will be maintained. (d) If the fund is already in existence, the details of investment of the fund. (2) A verification in the following form shall be annexed to the application : FORM OF VERIFICATION We/I, the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mployed in India ; (b) the fund shall have for its sole purpose the provision of a gratuity to employees in the trade or undertaking on their retirement at or after a specified age or on their becoming incapacitated prior to such retirement or on termination of their employment after a minimum period of service specified in the rules of the fund or to the widows, children or dependants of such employees on their death ; (c) the employer in the trade or undertaking shall be a contributor to the fund ; and (d) all benefits granted by the fund shall be payable only in India. Application for approval. 4.(1) An application for approval of a gratuity fund shall be made in writing by the trustees of the fund to the 4 [Assessing Officer], by whom the employer is assessable and shall be accompanied by a copy of the instrument under which the fund is established and by two copies of the rules 5 [and, where the fund has been in existence during any year or years prior to the financial year in which the application for approval is made, also two copies of the accounts of the fund relating to such prior year or years (not being more than three years immediately preceding the year in which the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lars or information, as the 6 [Assessing Officer] may require.] Provisions relating to rules. 9.(1) In addition to any power conferred in this Part, the Board may make rules (a) prescribing the statements and other information to be submitted along with an application for approval; (b) limiting the ordinary annual and other contributions of an employer to the fund; [(bb) regulating the investment or deposit of the moneys of an approved gratuity fund: Provided that no rule made under this clause shall require the investment of more than fifty per cent of the moneys of such fund in Government securities as defined in section 2 of the Public Debt Act, 1944 (18 of 1944);] (c) providing for the assessment by way of penalty of any consideration received by an employee for an assignment of, or the creation of a charge upon, his beneficial interest in an approved gratuity fund; (d) providing for the withdrawal of the approval in the case of a fund which ceases to satisfy the requirements of this Part or the rules made thereunder; and (e) generally, to carry out the purposes of this Part and to secure such further control over the approval of gratuity funds and the administration of gratuit ..... 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