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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI LALIET KUMAR, JM
आदेश / ORDER PER LALIET KUMAR, JM :
This appeal preferred by the assessee emanates from the order of the Ld. CIT(Appeals)-8, Pune dated 03.08.2019 for the assessment year 2012-13 as per the following grounds of appeal on record:
“1. The learned AO as well as learned CIT(A)-8, Pune erred in law and on facts in disallowing the payment made to gratuity fund u/s.36(1)(v) amounting to Rs.4,23,004/- for the reason that the gratuity fund was unapproved by the Learned Pr. CIT. The I.T Authorities ought to have appreciated that the appellant has applied for approval of the Gratuity Fund Scheme on 14th August 2008 and got approval from the learned Pr. CIT on 6th March, 2017 and delay was not attributable to the appellant.
2. The learned AO as well as the Ld. CIT(A)-8, Pune ought to have appreciated that payment made to gratuity fund cannot be denied simply because there was delay on part of concern authority in provision of statutory approval required under the IT Act, 1961 though application for approval was made well within time.
3. Alternative and without prejudice to the ground No.1 and 2 above, the learned AO as well as learned CIT(A)-8 failed to appreciate that amount paid towards an unapproved gratuity fund can be eligible for deduction u/s.37 of the I.T Act, 1961, if not under section 36(1)(v) of the IT Act, 1961.
4. Appellant craves to add/modify/amend/delete all/any of the grounds of appeal.”
The Ld. AR of the assessee has drawn our attention to the order passed by the Ld. CIT(Appeals) wherein the Ld. CIT(Appeals) at Para 6.6 has noted as under:
“6.6 During the assessment proceedings, the AO noted that the assessee has claimed deduction of Rs.4,23,004/- towards contribution to gratuity fund. The AO disallowed the claim as the assessee have not received approval from the CIT. During appellate proceedings the appellant submitted that Rs.4,23,004/- has been paid to LIC based gratuity fund. The appellant claims that application for approval was submitted before the Pr.CIT on 14.08.2008 and obtained approval on 06.03.2017. Ostensibly, the appellant has paid Rs.4,23,004/- to LIC based gratuity fund. The appellant also submitted copy of deed of variation dated 17.11.2014 for making variation in trust deed dated 23.07.2008. The appellant also submitted approval from the PCIT-6, Pune as additional evidence that has been accepted. The approval dated 06.03.2017 of the PCIT-6, Pune clearly shows that effective date is from 06.03.2017. The force of the approval dated 06.03.2017 cannot be changed. Further, it for appellant to demonstrate before PCIT that even in FY 2012-12 the appellant has complied with provisions of section 2(5) of the IT Act 1961. Under these circumstances ground No.1 of the appeal is dismissed.”
On the basis of the order of the Ld. CIT(Appeals), the Ld. AR of the assessee submitted that the assessee has applied for approval to the Pr. CIT on 14.08.2008. However, the same was approved by Pr CIT only on 06.03.2017. Despite acknowledging the decision of the Pr.CIT to this effect, the Ld. CIT(Appeals) has not allowed the claim of the assessee u/s.36(1)(iv) of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟) as the order passed by the authority was w.e.f 06.03.2017 only .
2.1 The Ld.AR of the assessee relied on the decision of the Hyderabad Bench of the Tribunal in the matter of Sponge Iron India Ltd Vs. Deputy Commissioner of Income Tax in for assessment year 2004-05 to the following effect:
8. We have heard the rival contentions and perused the material on record. We have also applied our mind to the decisions cited before us. Undisputedly, the assessee has an approved gratuity fund. It is also not in dispute that the assessee is regularly making payments towards gratuity of the employees in a gratuity scheme created with the LIC. The CIT(A) has disallowed the deduction claimed towards payment of gratuity only on the ground that the payment has not been made to the gratuity fund approved by the CIT, but, has been paid directly to the LIC. From the receipt obtained from LIC it is relevant to note that the amount of Rs.1,75,81,818/- was paid as premium to the GGPE Scheme held in the name of the trustees of Sponge Iron India Ltd. employees gratuity fund, Hyderabad. Therefore, it has to be considered that the assessee has made contribution of the aforesaid amount towards payment of gratuity of the employees. The Hon’ble Supreme Court while considering a case of similar nature in CIT V/s. M/s Textools Co. Ltd. (supra) held in the following manner: “Having considered the matter in the light of the background facts, we are of the opinion that there is no merit in the appeal. True that a fiscal statute is to be construed strictly and nothing should be added or subtracted to the language employed in the section, yet a strict construction of a provision does not rule out the application of the principles of reasonable construction to give effect to the purpose and intention of any particular provision of the Act. (See: Shri Sajjan Mills Ltd. Vs. CIT, M.P. & Anr., [1985] 156 ITR 585). From a bare a reading of section 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.
In the appeal before us, there is no dispute to the fact that the contribution towards payment of gratuity of the employees has been made to LIC, over which the assessee has absolutely no control. It is also not the case of the Department that the gratuity fund created with the LIC is not for the benefit of the employees. Further, Rule 101 of the IT Rules, 1962 authorizes making contribution under Group Gratuity Scheme entered with LIC. Therefore, considered in the light of the ratio laid down by the Hon’ble Supreme Court in case of Textools Co. Ltd. (supra) the contribution made towards gratuity of the employees cannot be disallowed on the ground that it has not been paid to the approved gratuity fund but has been directly paid to the LIC. It is further pertinent to mention here that though the assessee has been regularly making payment to LIC towards gratuity of the employees, the same has never been disallowed by the department in the earlier assessment year as well as in the subsequent AY i.e. 2005-06. Though principles are resjudicata does not apply to a taxing statute but nevertheless rule of consistency is also required to be maintained. In the aforesaid view of the matter, we hold that the payment of Rs. 1,82,22,000/- to LIC towards gratuity of the employees is an allowable deduction and accordingly direct the Assessing Officer to allow the same. The ground raised by the assessee is allowed.”
2.2 During the course of argument, the Ld. AR of the assessee has also drawn our attention to the decisions of Hon‟ble Rajasthan High Court in the matter of Commissioner of Income Tax Vs. Jaipur Thar Gramin Bank (2017) 81 taxmann.com 126 (Rajasthan) and in the matter of Principal Commissioner of Income Tax Vs. Rajasthan State Seed Corporation Ltd (2017) 88 taxmann.com 445 (Rajasthan). In both these decisions by the Hon‟ble Rajasthan High Court, it was held that where there is no default on the part of the assessee, deduction u/s.36(1)(v) of the Act cannot be denied by the Ld. CIT(Appeals) when admittedly the order of approval was not passed by the Pr. CIT under the Act within the reasonable time.
2.3 The Ld. AR of the assessee had further submitted that though the approval was granted prospective however, it should be applied retrospectively from the date of making the application by the assessee i.e. 14.08.2008 as there was no default of the assessee in making the application.
3. The Ld. DR had submitted that the order of approval was issued by the Pr. CIT on 06.03.2017 and it was prospective in nature. Therefore, benefit of approval granted on 06.03.2017 cannot be allowed to the assessee.
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.
In view of the above facts, we deem it appropriate to allow the ground raised by the assessee. The Revenue is directed to give effect the benefit of the approval for the assessment year under consideration also.
In the result, appeal of the assessee is allowed.
Order pronounced on 10th day of February, 2020.
Sd/- Sd/- D. KARUNAKARA RAO LALIET KUMAR ACCOUNTANT MEMBER JUDICIAL MEMBER ऩुणे / Pune; ददनाांक / Dated : 10th February, 2020. SB आदेश की प्रनिलऱपप अग्रेपषि / Copy of the Order forwarded to : अऩीऱाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2.
The CIT(Appeals)-8, Pune.