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Income Tax Appellate Tribunal, “A” BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI S. JAYARAMAN
आदेश/ O R D E R
PER S. JAYARAMAN, ACCOUNTANT MEMBER:
The assessee filed this appeal against the order of the Commissioner of Income Tax (Appeals)-15, Chennai in dated 28.12.2017 for assessment year 2007-08.
M/s. Sundaram Infotech Solutions Limited, the assessee, is engaged in the business of software development and implementation, purchases and sales of software licences and software IT solutions. While making the assessment for assessment year 2007-08, the Assessing Officer, inter alia, disallowed the assessee’s claim at Rs. 1,18,732/- made towards contribution to gratuity fund which is not an approved fund. Aggrieved, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) did not accept the assessee’s submissions and held that for claiming the deduction towards gratuity fund, it should be approved by the competent authority. Since, the said gratuity fund was not approved, he dismissed the assessee’s grounds.
Aggrieved, the assessee filed this appeal pleading that the Ld. CIT(A) ought to have appreciated that Non-approval of the gratuity fund by the CIT could not be made basis for disallowance under section 40A(7) of the Act as this was not a mere provision within the meaning of Section 40A(7), he ought to have followed the ratio of the decision in CIT vs M/s. Textool Co. Ltd., 216 Taxman 327 wherein the Supreme Court has held that merely because the payments were made directly to the LIC the company could not be denied the benefit under section 36(1)(v), and ought to have followed the decision of the Chennai ITAT in Narasu’s Spinning Mills vs. ACIT (2016) 157 ITD 512 wherein the ITAT held
“ Where assessee paid amount towards Employees Group Gratuity Fund to LIC and application made by assessee was still pending before Commissioner for :- 3 -: LIC for benefit of its employees, disallowance u/s. 36(1)(v) was not be made.” and the assessee also relied on the decision of the ITAT Jodhpur in Jaisalmer Central Co-operative Bank Ltd. vs JCIT (2013) 158 TTJ 0001 wherein the Hon’ble Tribunal relying on the decision in CIT vs Textool Co. Ltd. (SC) held that payment made by assessee company directly to LIC towards Group Gratuity Fund is allowable even though the same is not yet approved by the CIT. Per contra, the Ld. DR supported the orders of the lower authorities.
We heard the rival submissions and find merit in the grounds advanced, supra, by the assessee. Since, the assessee had no control over the fund created by LIC for the benefit of its employees, disallowance u/s. 36(1)(v) was not to be made and hence, we allow the assessee’s grounds of appeal.
In the result, the assessee’s appeal is allowed.
Order pronounced on Tuesday, the 25th day of September, 2018 at Chennai.