MAKCUR LABORATORIES LIMITED,GANDHINAGAR vs. THE INCOME TAX OFFICER,WARD-1,, GANDHINAGAR

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE DR. B.R.R. KUMAR, VICE-PRESIDENT MS. SUCHITRA KAMBLE, JUDICIAL MEMBER (Assessment Year: 2019-20) Makcur Laboratories Limited, The Income-Tax Officer, Vs. 46/5-6-7, Zak Ind. Estate, Ward 1, Dehgam Road, Post: ZAK, Gandhinagar Gandhinagar-382325 [PAN : AABCM 0523 C] (Appellant) .. (Respondent) Appellant by : Shri Rupesh R. Shah, AR Respondent by: Shri Kavan Limbasiya, Sr DR Date of Hearing 11.03.2025 Date of Pronouncement 08.04.2025 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:-

This appeal has been filed by the Assessee against the order of the learned ADDL/JCIT(A), Indore (in short ‘the CIT(A)’) dated 24.06.2024 passed under Section 250 of the Income-tax Act, 1961 [hereinafter referred to as "the Act" for short], for Assessment Year (AY) 2019-20. 2. The Assessee has taken following grounds of appeal:-

“1. Both the lower authorities have erred in confirming the disallowance of Rs. 17,99,901/- under S.438 while passing an intimation u/s.143(1) of the Income-tax Act, 1961 though it is not an adjustment as prescribed u/s. 143(1)(a) of the Act and it is a Makcur Laboratories Ltd Vs. ITO Asst. Year : 2019-20 - 2– debatable issue on the facts and circumstances of the case and in law.

“Ground No. 1 is related to addition of Rs. 17,79,491/- on account of disallowance of provision for unfunded gratuity. I have carefully considered Statement of Facts, Grounds of Appeal and submissions furnished by the appellant and observed that the appellant's matter falls under provision of 40A(7) and 43B of the Act Appellant's matter is different from the matters of Case Law cited by him as appellant's provision for gratuity is unfunded, therefore cited case law is not applicable in this case Section 40A(7) of the Act is reproduced for ready reference: Makcur Laboratories Ltd Vs. ITO Asst. Year : 2019-20 - 3– "(7)(a)(Subject to the provisions of clause (b), no deduction shall be allowed in respect of any provision (whether called as such or by any other name) made by the assessee for the payment of gratuity to his employees on their retirement or on termination of their employment for any reason (2)Nothing in clause (a) shall apply in relation to any provision made by the assessee for the purpose of payment of a sum by way of any contribution towards an approved gratuity fund, or for the purpose of payment of any gratuity, that has become payable during the previous year Explanation. - For the removal of doubts, it is hereby declared that where any provision made by the assessee for the payment of gratuity to his employees on their retirement or termination of their employment for any reason has been allowed as a deduction in computing the income of the assessee for any assessment year, any sum paid out of such provision by way of contribution towards an approved gratuity fund or by way of gratuity to any employee shall not be allowed as a deduction in computing the income of the assessee of the previous year in which the sum is so paid.] From the above provision of Section 40A(7)(b) of the Act, it can be observed that if "purpose" of payment of gratuity is established then deduction of such provision of gratuity can be allowed. In other words, if intention of the assessee is established that it has made provision of gratuity for actually paying it to the eligible employees, then deduction of such provision of gratuity can be allowed. But, in present case, the appellant has not shown such intention or purpose. The appellant has made provision in form of unfunded Gratuity. It has created provision of gratuity without earmarking separately the funds for gratuity payment Therefore, provision in form of unfunded Gratuity does not fall under Section 40A(7) (b) of the Act Moreover, the appellant has not actually paid the amount in any gratuity fund as it was unfunded, therefore it is rightly disallowed by the AO U/s 43B(b) of the Act. In view of above facts and circumstances, I am of the view that appellant's matter is related the provision for unfunded Gratuity which falls under Section 40A(7)(a) and 43B(b)of the Act and AO has correctly disallowed the same. Thus, Ground No. 1 is dismissed.” Makcur Laboratories Ltd Vs. ITO Asst. Year : 2019-20 - 4–

5. Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal.

6. We find that the assessee has added amount disallowable u/s 40A of Rs.17,99,901/- to the net profit being the provision for unfunded gratuity. At page no. 42 of the paper-book the same has been shown at Column No. 9 of the return. The same has been disallowed at Column No. 11(h) at page no. 133 of the paper-book. Hence, the Assessing Officer is directed to consider the all the three documents mentioned hereinabove and see that no double disallowance is made in respect of the same amount.