True Sparrow Systems Pvt. Ltd Vs DCIT (ITAT Ahmedabad)
Gratuity Actually Paid Allowable u/s 43B — Disallowance Deleted Despite Accounting Through Salary Payable Ledger
The Ahmedabad ITAT (C Bench) allowed the assessee’s appeal for AY 2021-22 and deleted the disallowance of ₹11,84,163 made under section 43B in respect of gratuity actually paid to two employees on their discontinuation. The Tribunal held that the lower authorities misread the accounting entries and wrongly concluded that no evidence of gratuity payment was furnished. On facts, the assessee had consistently followed a policy of creating actuarially determined gratuity provision, adding back the provision in computation, and claiming deduction only on actual payment basis as mandated by section 43B(b). The ITAT noted that audited financial statements, AS-15 disclosures, gratuity provision ledger, salary vouchers, and employee ledgers clearly established that the amounts of ₹6,39,490 and ₹5,44,673 were paid as gratuity during the year. Merely because the final settlement entries were routed through the salary payable ledger did not alter the nature of payment. Consequently, the AO was directed to delete the disallowance and the appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The present appeal has been filed by the Assessee against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (hereinafter referred to as “NFAC”), Delhi (hereinafter referred to as “CIT(A)”) dated 26.06.2025 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2021-22.
