The Income Tax Appellate Tribunal (ITAT), Chennai Bench, has recently in an appeal filed before it, held that gratuity is entitled for deduction under section 36(1) (va) of the Income tax Act.
The aforesaid observation was made by the Tribunal when an appeal was preferred before it by the appellant M/s. Athenahealth Technology Pvt. Ltd., as against the order of Commissioner of Income Tax (Appeals)-1, Chennai, in Appeal No.123/CIT(A)/2019-20 dated 07.09.2020, wherein the Assessment was framed by Dy. Commissioner of Income Tax, Centralized Processing Center, Bengaluru, for the relevant Assessment Year 2018-19 vide intimation dated 24.11.2019 under section 143(1) of the Income Tax Act, 1961.
The issue in the assessee’s appeal being regards to the order of Commissioner of Income Tax (Appeals) confirming the action of the A.O in disallowing the claim of deduction of ESI and PF claimed u/s. 36(1) (va) of the Income tax Act, hearing the opposing contentions of the assessee as was submitted by Shri Sumeet Khurana, FCA and that of the respondent as was submitted by Shri P. Sajit Kumar, JCIT, the Tribunal consisting of G. Manjunatha, the Accountant Member and Mahavir Singh, the Vice President, observed as follows:
“We note that the assessee has claimed deduction for an amount of Rs. 42,36,722/- being payment made for gratuity to the employees during the year as per s.40A(7) r/w s. 37 of the Act and that the same was disclosed at Sr. No.10B of the Income Tax Return i.e., Page No.30 of Income Tax Return under section 43B of the income tax Act, in the absence of specific field for disclosure in the Income Tax Return. It was claimed that the payment made for gratuity during the A.Y 2017-18 was not disclosed in the tax audit report in the clause for reporting as per s. 43B of the income tax Act.”
“We are of the view that this position led to inconsistency in the column as per Income Tax Return and the tax audit report that the amount disallowed u/s. 43B of the income tax Act in any preceding previous year, but allowable during the previous year. The assessee also submitted the additional evidence before us along with supporting documentary evidences i.e., extract from the books of accounts to further substantiate his claim”, they added
Thus, allowing the assessee’s appeal, the Tribunal ruled:
“In view of the above, we are of the view that the deduction of gratuity is available in substantive law and it cannot be disallowed merely by the reference of inconsistent entries in explanation of s. 143(1)(a) of the income tax Act being a procedural provision swhich shall not take away the right confirmed in s. 37 r/w s. 40A(7) and s. 36(1)(v) of the income tax Act. We direct the A.O to delete this disallowance.”
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