The Pune bench of the Income Tax Appellate Tribunal (ITAT) has held that the amount of ex-gratia payment to the prematurely retiring employees can be allowed as a deduction under the provisions of Income Tax Act even though there is no such scheme providing the same.
After the conclusion of the assessment proceedings, the Assessing Officer was of the view that in the absence of any scheme formulated by the assessee bank, the amount paid as ex-gratia to prematurely retiring employees was not to be allowed as deduction.
The assessee, on the other hand, has held that the said payment was made in recognition of long term and meritorious services of the employees. The assessee had claimed the said expenditure as ex-gratia payment as in the nature of profits and in lieu of salary, and on the same, TDS was also deducted.
However, the Assessing Officer disallowed the said expenses in view of section 35DDA of the Act and also held that they were not allowed as a deduction under section 37(1) of the Act. The CIT(A) allowed the claim of assessee following the order of Tribunal in the case of another bank.
Relying on its earlier order in the case of assessees’ own matter, the Tribunal found that this issue also arose before the Tribunal in assessee’s own case in the assessment year 2011-12 and the Tribunal vide paras 9 to 14 had decided the issue and allowed the claim of the assessee.
“Accordingly, we find no merit in the ground of appeal No.2 raised by the Revenue and the same is dismissed,” the Tribunal said.
Subscribe Taxscan Premium to view the Judgment
