The assessee's contribution to the Employees Group Gratuity ...

Gratuity Fund Deduction Allowed After Name Change; Transfer Pricing Adjustment on Receivables Rejected Due to Higher Margin.

October 7, 2024

Case Laws     Income Tax     AT

The assessee's contribution to the Employees Group Gratuity Scheme was disallowed solely due to it being paid to an unapproved Gratuity Fund. However, it was held that the approval granted to the erstwhile company's Gratuity Fund automatically vested with the assessee upon the change of name. Therefore, the assessee was entitled to deduct the expenditure towards the contribution made to the Employees Gratuity Fund. Regarding the transfer pricing adjustment on interest on outstanding receivables from Associated Enterprises (AEs), it was held that the ratio laid down in the Delhi Tribunal case applied. The assessee's margin being significantly higher than the comparables, the adjustment had no basis. The argument that interest on outstanding receivables cannot be considered an international transaction was dismissed due to the amendment in Explanation 1(c) of Section 92B. Consequently, the ground raised by the assessee was allowed.

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