M/S RAJASTHAN RAJYA SAHKARI UPHBHKTA SANGH LTD,JAIPUR vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-6, JAIPUR

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ITA 1152/JPR/2019Status: DisposedITAT Jaipur28 November 2019AY 2014-154 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal noted that the assessee has since obtained approval for the scheme from the Principal CIT with retrospective effect. Therefore, the Tribunal directed the AO to consider this approval and allow the claim.

What were the facts?

The assessee claimed an expense of Rs. 1,10,00,000/- towards contribution to an LIC Group Gratuity Scheme. The AO disallowed this claim as the scheme was not approved by the competent authority. The CIT(A) upheld the disallowance.

What were the issues?

Whether the disallowance of gratuity contribution is justified when the scheme was not approved at the time of assessment but subsequently received approval.

Which sections of the Income-tax Act were involved?

Section 40A(7)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, JAIPUR BENCH ‘B’, JAIPUR

Before: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 1152/JP/2019

fu/kZkfjrh dh vksj ls@Assessee by : Shri Rohit Badaya (CA) jktLo dh vksj ls@ Revenue by : Shri Man Mohan Kandpal (ACIT) lquokbZ dh rkjh[k@ Date of Hearing : 27.11.2019. ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 29/11/2019. vkns'k@ ORDER PER VIJAY PAL RAO, J.M. This appeal by the assessee is directed against the order dated 26th July, 2019 of ld. CIT (A)-2, Jaipur for the assessment year 2014-15. The assessee has raised the solitary ground as under :-

“ On the facts and in the circumstances of the case, the ld. CIT (A) erred in partly upholding the order of the AO, by adding back Rs. 1,10,00,000/- in the Income, considering the expenses of Contribution of Gratuity in LIC Group Gratuity Scheme.”

2.

The assessee is a Government owned Cooperative Society engaged in the business of trading of Grocery items, furniture, clothes and medicines etc. through Cooperative Stores. The assessee is providing necessary consumer items to the general public on reasonable prices. During the course of assessment proceedings, the AO noted that the assessee has claimed expenses towards Contribution of Gratuity in LIC Group Gratuity Scheme of Rs. 1,10,00,000/-. The AO noted that since the said Scheme was not approved by the competent authority, therefore, the he has disallowed the claim by invoking the provisions of section 40A(7) of the IT Act. The assessee challenged the action of the AO before the ld. CIT (A) and submitted that the assessee has filed an application in requisite form on 2nd February, 1998 for approval of the Group Gratuity Scheme to the ld. CIT, however, till date no response was received by the assessee from the department. When the department has not rejected the application, therefore, it was contended that it is presumed that the department has approved the Scheme. The ld. CIT (A) did not accept this contention of the assessee and upheld the disallowance made by the AO.

3.

Before the Tribunal, the ld. A/R of the assessee has submitted that after the impugned order of the ld. CIT (A), the Principal CIT has granted approval vide order dated 4th September, 2019 with effect from 01.04.2012. He has filed the copy of the approval granted by the Pr. CIT along with an application for admitting the additional evidence. Thus the ld. A/R has contended that once the approval was granted by the Pr. CIT to the employees Group Gratuity Scheme of LIC, then the disallowance made by the AO and confirmed by the ld. CIT (A) is liable to be deleted.

4.

On the other hand, the ld. D/R has submitted that since this alleged approval is after the impugned order of the ld. CIT (A) and has not been approved by the authorities below, therefore, the AO be directed to verify the said approval and then consider the claim of the assessee.

5.

Having considered the rival submissions as well as the relevant material on record, we note that the AO has disallowed the claim of the assessee for contribution to LIC Group Gratuity Scheme on the ground that the Scheme has not been approved by the competent authority. The ld. CIT (A) has also confirmed the said addition in para 2.3 as under :-

“ 2.3. I have perused the facts of the case, the assessment order and the submissions of the appellant. Assessing Officer disallowance claim of contribution to LIC, group gratuity scheme of Rs. 1,10,00,000/- by holding that Group Gratuity Scheme is not approved. Authorized Representative argued that assessee paid to LIC for this scheme. Assessee applied for approval of scheme with application of LIC dated 02.02.1998. This application was not rejected by department and Authorized Representative stated that it should be treated as payment to approved gratuity fund and for this he relied on various cases. On perusal of overall facts, I find that there’s no dispute on fact that Group Gratuity Scheme is not approved. Simply because assessee filed application for approval, this scheme cannot be said to be approved. Provisions of section 40A(7) clearly provide that gratuity provisions is applicable only for approved gratuity fund. Thus disallowance made by Assessing Officer is confirmed. This ground of appeal is dismissed.”

Thus the sole ground of denial of claim of deduction on account of contribution to LIC Group Gratuity Scheme is non approval of the Scheme by the Competent 4 M/s. Rajasthan Rajya Sahkari Uphbhota Sangh Ltd., Jaipur. Authority. Now the assessee has filed the approval by the Pr. CIT vide order dated 4th September, 2019 with effect from 01.04.2012, therefore, prima facie the claim of the assessee is allowable. However, since the alleged approval was subsequent to the impugned orders passed by the authorities below, therefore, in the facts and circumstances of the case and in the interest of justice, we direct the AO to consider the approval granted by the Pr. CIT and then allow the claim of the assessee.

6.

In the result, appeal of the assessee is allowed for statistical purposes.

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