In a major relief to Andaman & Nicobar State Corporation Bank, the Income Tax Appellate Tribunal, Kolkata bench has held that deduction is allowable on the payment towards LIC Group Gratuity Scheme under section 37 of the Income Tax Act, 1961.
The assessee, Andaman & Nicobar State Corporation Bank is a State Cooperative Bank returned an income of Rs. 6,84,00,990/-. During the scrutiny, the AO found that the assessee has debited in its profit and loss account of Rs. 66,74,983/- as gratuity expenses which was payment made as subscription to LIC towards its Group Gratuity Scheme. The contention of the assessee that the deduction is sought under section 37 of the Income Tax Act, 1961 is rejected by the Assessing Officer.
A bench consists of Shri A. T. Varkey, JM and Shri Rajesh Kumar, AM noted that the assessee neither exercised any control or influence over the management of the funds nor did it have any say in the matters relating to payments of the benefits arising or accruing there from which was due to the Members/ Employees.
“So by relying on the ratio of the Hon’ble Supreme Court in CIT vs. Text Tool (supra) wherein it was held that, the intention of Section 36(1)(v) of the Act, is that the employer should not have control over the funds of the irrevocable trust created exclusively for the benefit of the employees of the assessee and the Hon’ble Allahabad High Court decision in M/s Scooters India Ltd. (supra) which decision is on identical issue, we hold that the assessee is entitled for the deduction of the payments made to LIC towards the group gratuity scheme, so we are inclined to allow the claim of the assessee. Accordingly, we set aside the orders of the lower authorities and allow the appeal of the assessee. However, the AO is directed to verify the actual payment made by the assessee towards the gratuity scheme to LIC of India since there is confusion in the order of Ld. CIT(A) on this issue. With the aforesaid observation, the claim of the assessee is allowed,” the Tribunal held while allowing relief to the assessee.
Shri Akkal Dudhwewala appeared for the assessee.
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