M/S. MAASS FLANGE INDIA PVT.LTD,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE - 14, PUNE

This appeal by the assessee against the order dated 25-09-2018 passed by the Commissioner of Income Tax (Appeals)-7, Pune [„CIT(A)‟] for assessment year 2011-12.

The only issue is to be decided is as to whether the CIT(A) justified in confirming the order of AO that disallowance made u/s. 36(1)(v) of the Act.

The brief facts are that the assessee is a private limited company engaged in the business of manufacturing of steel flanges. The assessee filed return of income declaring the total income of Rs.74,21,008/- and the AO determined the same at Rs.4,23,67,790/- vide its order dated 17-03- 2015 passed u/s. 143(3) r.w.s. 144C(13) of the Act. During the course of assessment proceedings, the AO found that the assessee paid Rs.4,75,338/- to LIC Gratuity Fund. The AO requested the assessee to produce copy of approval by the CIT and it was explained that the assessee applied for the approval but till date no approval has been granted by the CIT. For not producing the approval, the AO treated the contribution made to LIC as unrecognized fund and denied deduction. The ld. CIT(A) confirmed the order of AO.

The ld. AR, Shri Kishor Phadke drew our attention to the page No. 56 of the paper book and submitted that the assessee made an application dated 14-08-2008 to the CIT, Pune Circle, Pune for approval of Gratuity Scheme and we find at page No. 98 of the paper book that the Pr. CIT, Pune passed order dated 06-03-2017 granting approval for Employee‟s Group Gratuity Cum Life Assurance Scheme w.e.f. 06-03-2017. The contention of ld. AR is that though the application made in the year 2008 and the approval was granted on 06-03-2017 for no fault of assessee, the deduction was denied.

The ld. AR also referred to page No. 100 of the paper book and submitted on similar issue based on identical facts this Tribunal held the assessee is entitled to claim deduction. On perusal of para No. 4 of the said order for A.Y. 2012-13 in assessee‟s own case we find this Tribunal considered the issue in detail and held that the assessee is entitled to claim deduction for A.Y. 2012-13. The same are reproduced here-in-below for ready reference : “4. We have heard the rival contentions and perused the material available on record. It is an admitted fact that the assessee had made particular application for granting of approval on 14.08.2008. However, the approval was only granted by the Pr. CIT on 06.03.2017. It is not the case of Ld. CIT(Appeals) that the application filed by the assessee on 14.08.2008 was incomplete, inadequate or not maintainable or the assessee was in fault for prosecuting the application. In our opinion, once the application filed by the assessee was fully completed in accordance with law and then the approval should have been granted by the Ld. Pr. CIT with a reasonable period of time. However, in the present case, Ld. Pr. CIT has taken almost 9 years to grant approval, in our view by any stretch of reasoning, the time taken for granting the approval cannot be justified by the Revenue. Further, we are of the opinion that lapse/delay on the part of the Pr.CIT for not deciding the approval application of the assessee within a stipulated period of time, cannot be the ground for not allowing the claim of deduction u/s.36(1)(v) of the Act to the assessee. The assessee should not suffer loss on account of inaction and lethargic attitude of the Revenue in granting the approval. Hence, the deduction u/s.36(1)(v) of the Act cannot be denied on account of failure or delay in passing order of the application of the assessee on 14.08.2008. In our view, though the order of granting approval was passed on 06.03.2017, the same should have made effective from the date of 14.08.2008 or at least effective from 01.04.2009 because in our view 6 months time is sufficient for considering process of application for approval u/s.36(1)(v) of the Act.”

Thus, in the light of finding of this Tribunal in assessee‟s own case for A.Y. 2012-13 we hold that the assessee is entitled to claim deduction and accordingly, the AO is directed to allow the claim made by the assessee for the year under consideration. Thus, the ground raised by the assessee is allowed.

In the result, the appeal of assessee is allowed.