DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-1(1), JABALPUR vs. M/S MADHYANCHAL GRAMIN BANK PODDAR COLONY, SAGAR

Shri U.B. Mishra, ld. Departmental Representative (DR) for the revenue argued that the case virtually sitting at Mumbai and submitted that the only issue arises for consideration is the addition of Rs. 17,41,82,013/- deleted by the CIT(A) towards the payment to an unapproved gratuity fund. According to the ld. DR, the payment made to approved gratuity fund alone has to be allowed under section 36(1)(v) of the Income Tax Act, 1961 (‘the Act’). In this case, the payment was made to an unapproved fund, therefore, it cannot be allowed. On a query from the bench, what is the nature of the fund and who is managing the fund, the ld. DR submitted that the assessee itself is managing the fund, therefore, it cannot be allowed.

On the contrary, Shri M.K. Shah, the ld. Representative for the assessee submitted that the gratuity funds were managed by LIC and other third parties, therefore, it is not correct to say that the assessee is managing the gratuity fund. The ld. Representative also submitted that the money were gone out of the hands of the assessee and the same would not come back to the assessee in any event, therefore, it has to be allowed under section 37(1) of the Act, if it could not be allowed under section 36(1)(v) of the Act. The ld. Representative also submitted that right from 2013, this Tribunal allowed a similar payment to the gratuity fund and CIT(A) by following the order of this Tribunal deleted the addition made by & C.O. 04/JAB/2020 Madhyanchal Gramin Bank 3 Assessing Officer. Therefore, there is no substance in the appeal filed by the revenue.

We have considered the rival submission on either side and also perused the material available on record. From the assessment order itself, it appears that the payments were made to SBI Life Insurance, Life Insurance Corporation and Star Union Diachi. These funds were managed by third parties and not by the assessee. This is obvious from the assessment order itself, therefore, the contention of the DR that the funds were managed by the assessee itself is contrary to the facts on record.

Now the question arises for consideration is when the assessee paid gratuity funds to SBI Life Insurance, Life Insurance Corporation and Star Union Diachi, whether such payment can be allowed or not? It is not in dispute that the assessee has actually paid the money. In other words, the money has actually gone out from the hands of the assessee. Therefore, that the money paid towards the gratuity fund would not come to the assessee at any event. Hence, this Tribunal is of the considered opinion that the CIT(A) has rightly deleted the addition made by the Assessing Officer. Moreover, this Tribunal in dated 30.09.2013 allowed similar claim of the assessee for Assessment Year 2007-08. By following the same order, the claim of the assessee for Assessment Year 2008-09 and 2011-12 was allowed. The CIT(A) by & C.O. 04/JAB/2020 Madhyanchal Gramin Bank 4 following the order of this Tribunal, has allowed the claim of the assessee.

Now coming to the C.O. of the assessee, the same filed only to support the order of CIT(A). Since, this Tribunal upheld the order of CIT(A) on merit, the C.O. become infructuous.

In the result, both the appeal of the revenue and C.O. of the assessee stands dismissed.