The Bengaluru Bench of the Income Tax Appellate Tribunal (ITAT), restored matter on disallowance of contribution towards gratuity funds, thereby granting relief to M/s. Astra Zeneca Pharma India Ltd, the assessee.
The assessee incurred Rs.4 crores towards contribution to gratuity fund and paid to the said fud before the due date for filing return of income. The same was also disclosed in the tax audit report. It was therefore submitted that the entire amount is eligible for deduction u/s. 36(1)(va) of the Income Tax Act.
However, the assessee by inadvertence claimed only Rs.3 crores while filing the return which was rectified by filing revised return where the entire amount of Rs.4 crores was claimed as a deduction.
The AO noted that Rs.72 lakhs pertaining to contribution towards gratuity fund has not been specifically disclosed in the tax audit report and accordingly disallowed the same. The DRP directed that amount paid before the due date for filing the return was allowable deduction. The AO, however, upheld the disallowance on the ground that no further enquiry can be made by the AO in view of section 144C(8) of the Income Tax Act.
The Counsel for the assessee submitted that pursuant to the DRP directions, the assessee placed all the evidence before the AO and revised computation of income. The contribution was made before the due date for filing the return and hence the entire amount was an allowable deduction as per the Supreme Court decision in the case of Goetze (India) Ltd. v. CIT.
The Bench comprising Beena Pillai, Judicial Member and Padmavathy S, Accountant Member noted that “The AO has made disallowance considering the provisions of Section 144C(8) of the Act and sustained the disallowance. Since the AO has not verified the details of gratuity based on the details furnished by the assessee, we remit the issue back to the AO with a direction to examine the details of payment of gratuity and decide the allowability accordingly.”
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