Held, allowing the appeal, that during all these years, that the assessee had been making payments to the Life Insurance Corporation of India towards group gratuity scheme and claimed it as deduction. Its employees also received payments from the Life Insurance Corporation for their gratuity as and when the occasion arose. Rule 5 of Part C of the Fourth Schedule to the Income-tax Act, 1961 provides for treating gratuity fund to an employee during his lifetime as salary paid to the employee for the purpose of this Act. It was an undisputed fact that the assessee had applied for the approval of the gratuity fund in the year 2002 which remained pending with the Department without any justifiable reasons. The approval had been granted by the Principal Commissioner by order dated October 4, 2023 with effect from January 3, 2023. The assessee could not be put to an adverse situation when it had taken all the required steps for the compliance prescribed under the Act and the Rules. The Life Insurance Corporation had paid gratuity fund to the employees of the assessee in the past. In the preceding assessment year 2011-12, the Commissioner (Appeals) dealt with the same issue and allowed the assessee’s claim. Accordingly, on the facts of the case, applying the principles of reasonable construction for giving effect to the purpose and intention of the provisions of the Act, coupled with rule 5 of Part C of the Fourth Schedule wherein gratuity was treated as salary which was an allowable expense under section 37(1) of the Act, it was proper to allow the claim of the assessee.(AY. 2014-15)
Twinings P. Ltd. v. Dy. CIT (2024) 109 ITR 74 (SN) (Kol)(Trib)
S. 37(1) : Business expenditure-Contribution to Gratuity Fund 1Payments to Life Insurance Corporation of India towards Group Gratuity Scheme and Employees receiving payments from Life Insurance Corporation for their Gratuity as and when occasion arose 1Payments from Gratuity Fund to employee during his lifetime treated as salary 1Application for approval of Gratuity Fund made in 2002-Approval granted by order dated 4-10-2023 with effect from 3-1-2023 —Allowable as deduction. [S.36(1)(v), Form No 3CD]
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