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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI R.S.SYAL & SHRI CHANDRA MOHAN GARG
आदेश / ORDER PER CHANDRA MOHAN GARG JM:
These two appeals filed by the assessee are directed against the different orders of the Ld. CIT(Appeals)-7, Pune dated 31.08.2018 for the assessment years 2013-14 & 2014-15 as per the following common grounds of appeal:
“1.The learned AO as well as learned CIT(A)-7, Pune erred in law and on facts in disallowing the payment made to gratuity fund u/s.36(1)(v) amounting to Rs.5,88,972/- for the reason that the gratuity fund was unapproved by the Learned Pr. CIT. The I-T Authorities ought to have appreciated that the appellant has applied for approval of the Gratuity Fund Scheme on 14th August, 2008 and got approval from the learned Pr. CIT on 06th March 2017 and delay was not attributable to the appellant.
2. The learned AO as well as learned CIT(A)-7, Pune ought to have appreciated that payment made to gratuity fund cannot be denied simply because there was delay on part of concern authority in provision of statutory approval required under the Income Tax Act, though application for approval was made well within time.
3. Alternative and without prejudice to the ground No.1 & 2 above, the learned AO as well as learned CIT(A)-7 failed to appreciate that amount paid towards an unapproved gratuity fund can be eligible for deduction u/s.37 of the I.T. Act 1961, if not under section 36(1)(v) of the Income Tax Act, 1961.
4. Appellant craves leave to add/modify/amend/delete all /any of the grounds of appeal.”
At the very outset, the Ld. Authorized Representative (AR) drew attention towards Pages 45 to 51 and 52 to 55 of the paper book and submitted that the sole issue raised in both these appeals is covered by the order of the Tribunal in assessee‟s own case passed for assessment years 2011-12 & 2012-13 dated 05.02.2021 & 10.02.2020 respectively.
Replying to the above, the Ld. CIT-DR supported the orders of the Authorities below. However, at the same time, he candidly admitted that the sole issue raised in both these appeals have been decided by the Tribunal for the assessment years 2011-12 & 2012-13 vide order dated 05.02.2021 & 10.02.2020 (supra.).
4. On careful consideration of the above submissions, we are of the view that the same issue was placed for adjudication before the Pune Bench of the Tribunal, “B” Bench for the assessment year 2012-13 in and the same was decided in favour of the assessee by observing as follows:
2.1 The Ld.AR of the assessee relied on the decision of the Hyderabad Bench of the Tribunal in the matter of Sponge Iron India Ltd Vs. Deputy Commissioner of Income Tax in for assessment year 2004-05 to the following effect: “8. We have heard the rival contentions and perused the material on record. We have also applied our mind to the decisions cited before us. Undisputedly, the assessee has an approved gratuity fund. It is also not in dispute that the assessee is regularly making payments towards gratuity of the employees in a gratuity scheme created with the LIC. The CIT(A) has disallowed the deduction claimed towards payment of gratuity only on the ground that the payment has not been made to the gratuity fund approved by the CIT, but, has been paid directly to the LIC. From the receipt obtained from LIC it is relevant to note that the amount of Rs.1,75,81,818/- was paid as premium to the GGPE Scheme held in the name of the trustees of Sponge Iron India Ltd. employees gratuity fund, Hyderabad. Therefore, it has to be considered that the assessee has made contribution of the aforesaid amount towards payment of gratuity of the employees. The Hon’ble Supreme Court while considering a case of similar nature in CIT V/s. M/s Textools Co. Ltd. (supra) held in the following manner: “Having considered the matter in the light of the background facts, we are of the opinion that there is no merit in the appeal. True that a fiscal statute is to be construed strictly and nothing should be added or subtracted to the language employed in the section, yet a strict construction of a provision does not rule out the application of the principles of reasonable construction to give effect to the purpose and intention of any particular provision of the Act. (See: Shri Sajjan Mills Ltd. Vs. CIT, M.P. & Anr., [1985] 156 ITR 585). From a bare a reading of section 36(1)(v) of the Act, it is manifest that the real intention behind the provision is that the employer should not have any control over the funds of the irrevocable trust created exclusively for the benefit of the employees. In the instant case, it is evident from the findings recorded by the Commissioner and affirmed by the Tribunal that the assessee had absolutely no control over the fund created by the LIC for the benefit of the employees of the assessee and further all the contribution made by the assessee in the said fund ultimately came back to the Textool Employees Gratuity Fund, approved by the Commissioner with effect from the following previous year. Thus, the conditions stipulated in section 36(1)(v) of the Act were satisfied. Having regard to the facts found by the Commissioner and affirmed by the Tribunal, no fault can be found with the opinion expressed by the High Court, warranting our interference.
In the appeal before us, there is no dispute to the fact that the contribution towards payment of gratuity of the employees has been made to LIC, over which the assessee has absolutely no control. It is also not the case of the Department that the gratuity fund created with the LIC is not for the benefit of the employees. Further, Rule 101 of the IT Rules, 1962 authorizes making
contribution under Group Gratuity Scheme entered with LIC. Therefore, considered in the light of the ratio laid down by the Hon’ble Supreme Court in case of Textools Co. Ltd. (supra) the contribution made towards gratuity of the employees cannot be disallowed on the ground that it has not been paid to the approved gratuity fund but has been directly paid to the LIC. It is further pertinent to mention here that though the assessee has been regularly making payment to LIC towards gratuity of the employees, the same has never been disallowed by the department in the earlier assessment year as well as in the subsequent AY i.e. 2005-06. Though principles are resjudicata does not apply to a taxing statute but nevertheless rule of consistency is also required to be maintained. In the aforesaid view of the matter, we hold that the payment of Rs. 1,82,22,000/- to LIC towards gratuity of the employees is an allowable deduction and accordingly direct the Assessing Officer to allow the same. The ground raised by the assessee is allowed.”
2.2 During the course of argument, the Ld. AR of the assessee has also drawn our attention to the decisions of Hon’ble Rajasthan High Court in the matter of Commissioner of Income Tax Vs. Jaipur Thar Gramin Bank (2017) 81 taxmann.com 126 (Rajasthan) and in the matter of Principal Commissioner of Income Tax Vs. Rajasthan State Seed Corporation Ltd (2017) 88 taxmann.com 445 (Rajasthan). In both these decisions by the Hon’ble Rajasthan High Court, it was held that where there is no default on the part of the assessee, deduction u/s.36(1)(v) of the Act cannot be denied by the Ld. CIT(Appeals) when admittedly the order of approval was not passed by the Pr. CIT under the Act within the reasonable time. 2.3 The Ld. AR of the assessee had further submitted that though the approval was granted prospective however, it should be applied retrospectively from the date of making the application by the assessee i.e. 14.08.2008 as there was no default of the assessee in making the application.
3. The Ld. DR had submitted that the order of approval was issued by the Pr. CIT on 06.03.2017 and it was prospective in nature. Therefore, benefit of approval granted on 06.03.2017 cannot be allowed to the assessee.
We have heard the rival contentions and perused the material available on record. It is an admitted fact that the assessee had made particular application for granting of approval on 14.08.2008. However, the approval was only granted by the Pr. CIT on 06.03.2017. It is not the case of Ld. CIT(Appeals) that the application filed by the assessee on 14.08.2008 was incomplete, inadequate or not maintainable or the assessee was in fault for prosecuting the application. In our opinion, once the application filed by the assessee was fully completed in accordance with law and then the approval should have been granted by the Ld. Pr. CIT with a reasonable period of time. However, in the present case, Ld. Pr. CIT has taken almost 9 years to grant approval, in our view by any stretch of reasoning, the time taken for granting the approval cannot be justified by the Revenue. Further, we are of the opinion that lapse/delay on the part of the Pr.CIT for not deciding the approval application of the assessee within a stipulated period of time, cannot be the ground for not allowing the claim of deduction u/s.36(1)(v) of the Act to the assessee. The assessee should not suffer loss on account of inaction and lethargic attitude of the Revenue in granting the approval. Hence, the deduction u/s.36(1)(v) of the Act cannot be denied on account of failure or delay in passing order of the application of the assessee on 14.08.2008. In our view, though the order of granting approval was passed on 06.03.2017, the same should have made effective from the date of 14.08.2008 or at least effective from 01.04.2009 because in our view 6 months time is sufficient for considering process of application for approval u/s.36(1)(v) of the Act.
In view of the above facts, we deem it appropriate to allow the ground raised
by the assessee. The Revenue is directed to give effect the benefit of the approval for the assessment year under consideration also.
6. In the result, appeal of the assessee is allowed.”
5. On being asked by the Bench to both the parties, it was submitted that the facts and circumstances of assessment years 2011-12 & 2012-13 and the present appeals pertaining to assessment years 2013-14 & 2014-15 are identical and similar and there is no deviation in the facts and circumstances of these four appeals on this issue. From the copies of the order available at Pages 52 to 55 dated 05.02.2021 for the assessment year 2011-12, we also observe that the Tribunal by following the order of for assessment year 2012-13 (supra.) has granted relief to the assessee directing the Assessing Officer to allow the claim made by the assessee pertaining to disallowance made u/s.36(1)(v) of the Income Tax Act, 1961 ( in short „the Act‟).
In view of foregoing discussion, we have no valid reason or cause to take different or deviate view on the issue which has already been decided by the Tribunal in favour of the assessee by the orders dated 10.02.2020 and 05.02.2021 (supra.) in assessee‟s own case. Consequently, respectfully following the earlier orders of the Tribunal in assessee‟s own case, on the similar issue, we allow the grounds of appeal of the assessee for both the assessment years. Accordingly, both the appeals of the assessee for the assessment years 2013-14 and 2014-15 are allowed.
In the result, both the appeals of the assessee are allowed.
Order pronounced on 10th day of November, 2021. Sd/- Sd/- R.S.SYAL CHANDRA MOHAN GARG VICE PRESIDENT JUDICIAL MEMBER पुणे / Pune; ददनांक / Dated : 10th November, 2021. SB आदेश की प्रधतधलधप अग्रेधषत / Copy of the Order forwarded to : अपीलाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2.
3. The CIT(Appeals)-7, Pune.