23. Business expenditure – Gratuity – Sections 36(1)(v), 40A(9) – A. Ys. 2007-08 to 2009-10 – Application by assessee for approval of scheme neither approved nor rejected by Competent Authority – Finding that assessee complied with conditions stipulated for approval – Assessee entitled to allowance

CIT vs. Jaipur Thar Gramin Bank; 388 ITR
228 (Raj):

The assessee is a co-operative society doing
banking business. For the A. Ys. 2007-08 to 2009-10, it claimed deduction u/s.
36(1)(v), of the sum paid on account of employer’s contribution to the gratuity
scheme created by it exclusively for the benefit of its employees under an
irrevocable trust. It claimed that it had filed an application to the competent
authority for approving the gratuity scheme. The  Assessing Officer disallowed the expenditure
on the ground that formal order had been passed by the competent authority. The
Commissioner (Appeals) and the Tribunal allowed the claim for deduction.

On appeal by the Revenue, the Rajasthan High
Court upheld the decision of the Tribunal and held as under:

“i)  The assessee could not be
made to suffer for the inaction of the authorities and the Assessing Officer
ought not to have disallowed the claims of contribution to gratuity scheme
merely because the Commissioner had not granted approval to the gratuity
scheme.

ii)  The assessee was sponsored
by the UCO bank, a Government of India undertaking and held duly complied with
the conditions laid down for approval u/s. 36(1)(a) of the Act.

iii)  Both the appellate
authorities had found the expenses allowable based on material and evidence on
record. The assessee had fulfilled the condition laid down for approval having
created a trust with the Life Insurance Corporation of India and had deposited
the amount.

iv) The Tribunal was justified
in holding that the claims were proper and allowable. No question of law
arose.”