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Facts
The appellant, a company providing digital cable TV and broadband internet services, filed a return of nil income after setting off brought forward losses for AY 2017-18. The Assessing Officer (AO) disallowed a provision for gratuity of Rs. 5,75,04,368/-. The CIT(A) confirmed the disallowance, holding that the claim was not made in the return.
Held
The Tribunal held that the CIT(A) ought not to have declined the claim on a technical ground. Citing jurisdictional High Court decisions, the Tribunal found that an assessee can make a fresh claim during assessment proceedings even if not made in the original return, provided necessary facts are on record. The provision for gratuity to an approved gratuity fund is allowable as a deduction under Section 40A(7) of the Act.
Key Issues
Whether the disallowance of provision for gratuity payable to an approved gratuity fund on the ground that the claim was not made in the return of income is sustainable.
Sections Cited
40A(7), 43B
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI SOUNDARARAJAN K, JM
O R D E R Per: Inturi Rama Rao, AM These appeals filed by the assessee are directed against separate orders of the National Faceless Appeal Centre, Delhi [CIT(A)] dated 22.04.2025 for Assessment Years (AY) 2017-18 & 2018-19 respectively 2. Since identical facts and issues involve in these appeals, these appeals heard together and disposed of vide this common order.
are stated herein.
Brief facts of the case are that the appellant is a company incorporated under the provisions of Companies Act, 1956. It is engaged in the business of service provider for digital cable TV and broadband internet services. The return of income for the A.Y. 2017-18 was filed on 26/10/2017 declaring nil income after set off of brought forward losses. Against the said return of income, the Assessing Officer (AO) made several additions. The disallowance interalia includes disallowance of claim for deduction of provisions for gratuity payable to approved gratuity fund made during the course of assessment proceedings placing reliance on the decision of Hon'ble Supreme Court in the case of Goetze (India) Ltd. vs. CIT (2006) 284 ITR 323 (SC).
Being aggrieved by the above order, an appeal was filed before the CIT(A), who vide the impugned order confirmed the disallowance of provision fund of Rs. 5,75,04,368/- by holding that the appellant had not made the claim in their return of income placing reliance on the following decisions:-
(i) Wipro Finance Ltd. vs. CIT (2022) 212 DTR (SC) 369 (ii) CIT vs. Mr. P. Firm, Muar (1965) 56 ITR 67 (SC) (iii) CIT vs. Malayala Manorama Co. Ltd. (2018) 409 ITR 358 (Ker. – HC) (iv) CIT vs. Bharat Aluminium Co. Ltd. (2007) 163 taxman 430 (Del. – HC)
& 475/Coch/2025 Asianet Satellite Communications Ltd.. (v) DCIT vs. Lab India Instruments (P.) Ltd. (2005) 93 ITD 120 (Pune ITAT) (vi) Chicago Pneumatic India Ltd. vs. DCIT (2007) 15 SOT 252 (Mumbai ITAT) 6. Being aggrieved by the order of learned CIT(A), the assessee company is in appeal before this Tribunal in the present appeal.
It is submitted that that it is always open for the appellant to make fresh claim during the course of assessment proceedings and in any event, there is no bar on the jurisdiction of appellate authorities to entertain new claim placing reliance on CIT vs. Pruthvi Brokers & Shareholders [2012] 349 ITR 336 (Bom.) and Hon’ble Delhi High Court in the case CIT vs. Parabolic Springs Ltd. [2008] 306 ITR 42 (Del.). On merits, he submits that notwithstanding the provisions of section (43B), the provisions of gratuity payable to approved gratuity fund is allowable as deduction u/s. 40A(7) of the Act as held by the Hon'ble Kerala High Court in the case of CIT vs. Common Welfare Trust (P.) Ltd. [2004] 269 ITR 290 (Ker.).
On the other hand, ld. Sr. DR submits that in absence of claim made in the return of income, the additional claim made as a deduction cannot be allowed.
We have heard rival submissions and perused the material on record. The issue in the present appeal relates to the allowability of deduction of provision of gratuity payable to approved gratuity fund.
& 475/Coch/2025 Asianet Satellite Communications Ltd.. The AO as well as learned CIT(A) disallowed claim solely on the ground that the appellant had not made this claim in its return of income nor filed a revised return of income in accordance with the Act placing reliance on the decision of Hon'ble Supreme Court in Goetze (India) Ltd. (supra). The reasoning of the learned CIT(A) cannot be upheld as it is settled position of law that an assessee can make a claim not made in the return of income by placing necessary facts on record during the course of assessment proceedings. In any event, there is no bar on the powers of the appellate authorities to entertain the new claim provided necessary facts already on record. Reliance in this regard can be placed on the decision of Hon'ble Bombay High Court in the case of CIT vs. Pruthvi Brokers & Shareholders [2012] 349 ITR 336. (Bom) and National Thermal Power Co. Ltd. vs CIT [1998] 229 ITR 383 (SC) even the jurisdictional High Court in the case of CIT vs. CIT v. Malayala Manorama Co. Ltd. (2018) 409 ITR 358 (Ker.) wherein it has been held as under:-
“14. On the questions of law, we are of the opinion that the Assessing Officer cannot allow a claim for deduction, afresh raised; unless there is a revised return made in accordance with the act as has been held in Goetze (India) Ltd.'s case (supra) Merely for reason that the Assessing Officer had disallowed the claim for the technical reason of the assessee having not filed a revised return, the assessee cannot be disabled from raising the very same claim before the appellate authorities as has been held in NTPC Ltd.'s case (supra). Following NTPC Ltd.'s case (supra) it has also to be found that the necessary facts for claiming a deduction if available in the return filed; an erroneous claim on figures or even a wrong claim under a provision could be entertained even by the Assessing Officer, as in the present & 475/Coch/2025 Asianet Satellite Communications Ltd.. case. Here the assessee claimed business expenditure under Section 37; which, as held by this Court in a similar matter, was not allowable. The assessee then claimed before the A.O that there was yet another provision under the Act, under which the deduction could be allowed. This was submitted before the Assessing Authority, who declined it on merits for reason of no evidence produced. Before the First Appellate Authority also the claim was made, which stood allowed; which decision was affirmed by the Tribunal.”
Respectfully following the jurisdictional High Court, we hold that the learned CIT(A) ought not to have declined the claim on technical ground. On merits, we find that the issue stands covered in favour of the assessee by the decision of Hon'ble Jurisdictional High Court in the case of Commonwealth Trust (P.) Ltd. (supra) wherein it has been held as under:-
“As already noted, section 40A(7), clause (b), particularly sub-clause (i) thereof is a special provision in regard to a claim for deduction based on a provision made for payment towards an approved gratuity fund. Going by the principles laid down by the Supreme Court in the decisions discussed above, we are of the view that there is no clear inconsistency between the two provisions, viz., section 40A(7) and section 43B. Section 40A(7) is in negative terms and section 43B is in positive terms, the effect of both these provisions is that in order to claim deduction in respect of payment to a gratuity fund there must be actual payment and that deduction cannot be allowed on the basis of any provision. The only exception to the above rule is with regard to the provision for payment to an approved gratuity fund. It cannot be interpreted that the later provision in section 43B by introducing the non obstante clause would abrogate the special provision with regard to the provision made for payment to an approved gratuity fund contained in section 40A(7)(b)( i). This is all the more so since no patent conflict or inconsistency can be spelt out. Both the provisions can cot-exist. A harmonious construction of the aforesaid two provisions would clearly indicate that the Legislature never intended to take away the benefit conferred under clause (b) of section 40A(7) by the provisions of section 43B(b) of the Act.”
& 475/Coch/2025 Asianet Satellite Communications Ltd.. 11. Respectfully following the above decision of jurisdictional High Court, we direct the AO to allow deduction of provision for gratitude fund of Rs. 5,75,04,368/-. Thus, the grounds of appeal raised by the assessee stand allowed.
12. In the result, the appeal filed by the assessee stands allowed.
13. Our findings in the above appeal in also. Order pronounced on 08th August, 2025 under Rule 34 of The Income Tax (Appellate Tribunal) Rules, 1963.