Disallowing the deduction claimed as amount paid towards gratuity fund for which approval from the concerned CIT is pending

IN THE INCOME TAX APPELLATE TRIBUNAL

DELHI BENCH ‘D’: NEW DELHI

BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER &

SHRI K.D. RANJAN, ACCOUNTANT MEMBER

ITA No. 4331/Del/2009

Assessment Year: 2004-05

M/s. Jones Lang LaSalle Property

Consultants India Pvt. Ltd.,

1108-1110, Ashoka Road,

Barakhamba Road,

New Delhi

Appellant

Vs.

Income Tax Officer,

Ward – 4(1),

C.R. Building,

New Delhi

PAN: AACL 2089 B

Respondent

Appellant by: Shri Anjani Kumar Pandey, Exe. Finance

Respondent by: Shri B.K. Gupta, Sr. DR

O R D E R

PER: C.L. SETHI, J.M.

The assessee is in appeal against the order dated 16.09.2009 passed by the ld. CIT(A) in the matter of an assessment made by the AO u/s. 143(3) of the Income Tax Act, 1961, (“the Act”) for the A.Y. 2004-05.

2. The ground of appeal raised by the assessee is as under:

“Under the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in confirming the action of Learned Assessing Officer (“Ld. AO’) in disallowing the deduction amounting to Rs. 1,523,120/- claimed by the appellant as amount paid towards gratuity fund for which approval from the concerned CIT is pending.”

3. The assessee filed its return of income declaring total income at Rs. 1,02,29,000/- as per normal computation of income under the Act, and has also shown book profit u/s. 115JB at Rs. 6,43,48,183/-. The case was selected for scrutiny and assessment was finally completed u/s. u/s. 143(3) of the Act on 26.12.2006. While computing the total income under normal provisions of the Act, the AO disallowed the provisions of gratuity amounting to Rs. 15,23,120/- by observing that the assessee’s claim towar4ds provisions for gratuity cannot be allowed in the absence of approval of gratuity fund. The assessee contended before the AO that the assessee has applied for approval of the gratuity scheme vide its application dated31.03.2004 before the CCIT, Range 11, Banagalore. But this contention of the assessee was not accepted by the AO by observing that the assessee company is assessed in the charge of CIT, Delhi - II, New Delhi, and it is not clear why the application for approval of the gratuity scheme was filed with the CCIT, Range - 11, Banagalore. The AO treated the application filed for approval of fund to be beyond jurisdiction and non-est.

4. Being aggrieved, the assessee had taken up the matter before the ld. CIT(A).

5. The CIT(A) upheld the order of the AO by observing that unless the assessee fulfills all the conditions laid down in section 40A(7) for gratuity fund, the provisions made for gratuity cannot be allowed.

6. Hence, the assessee is in appeal before the Tribunal.

7. We have heard the ld. DR, and the employee present for the assessee company, who is the Executive Finance.

8. On perusal of the AO’s order, it is seen that the assessee made an application for approval before the CCIT, Range - 11, Banagalore. The AO has stated that the assessee should have filed application for approval within the range of CIT, Delhi. It is not clear what is the outcome of the assessee’s application for approval of gratuity filed before the CCIT, Range - 11, Banagalore. It is not clear whether the CCIT, Range 11, Banagalore has transferred the assessee’s application to CCIT, Delhi. It has been explained by the assessee since the assessee have had business at both the places, i.e., Delhi and Banagalore, the assessee filed application for approval before the CCIT, Range - 11, Banagalore. Be that as it may, it is not in dispute that the assessee made an application for approval of gratuity fund, vide application dated 31.03.2004. Under these peculiar circumstances of the case, we, therefore, restore the matter back to the file of the AO for his fresh adjudication for ascertaining as to whether the assessee has in the meantime granted approval with regard to the gratuity fund u/s. 40A(7) of the Act. It will be undoubtedly a duty of the assessee to produce before the AO, the necessary approval of gratuity fund, granted by the CIT or CCIT and shall submit before the AO the necessary details and particulars as to the outcome of the assessee’s application made u/s. 40A(7) for approval of gratuity fund in respect of which the provisions has been made. In case, the assessee fails to produce before the AO any letter of approval granted by the competent authority u/s. 40A(7) as to the gratuity fund, the AO shall in that case be justified to decide the matter as per law. The all other contentions available under the law to both the parties shall remain open while deciding the matter afresh as per law. The AO shall give further opportunity of hearing to the assessee. We order accordingly.

9. In the result, the appeal filed by the assessee is treated to be allowed for statistical purpose.

10. This decision is pronounced in the open court on 6th May, 2010.

(K.D. RANJAN) (C.L. SETHI)

ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: 6th May, 2010

*Nitasha

Copy to:

1. Appellant

2. Respondent

3. CIT

4. CIT(A)

5. DR, ITAT, New Delhi.

By Order

Deputy Registrar