Sarvodaya Nagrik Sahakari Bank Ltd. Vs PCIT (ITAT Ahmedabad)
Ahmedabad ITAT Quashes Section 263 Revision; Contribution to Approved LIC Gratuity Fund Not Restricted to 8.33% of Salary
The Ahmedabad ITAT allowed the assessee’s appeal and quashed the Principal Commissioner of Income Tax’s revision order passed under Section 263 of the Income-tax Act for AY 2022-23. The PCIT had held that deduction for contribution to an approved LIC Group Gratuity Scheme should be restricted to 8.33% of employees’ salary under Rule 103 of the Income-tax Rules and directed fresh assessment. The Tribunal noted that the assessee had contributed ₹33,53,965 to an approved LIC Group Gratuity Scheme pursuant to LIC’s demand based on actuarial valuation and that the Assessing Officer had examined and accepted the claim during assessment. Relying on judicial precedents cited before it, the Tribunal held that payment to an approved gratuity fund was allowable even if it exceeded 8.33% of employees’ salaries, and found that the assessee had rightly claimed the deduction. It concluded that the assessment order was neither erroneous nor prejudicial to the interests of the revenue and accordingly quashed the revision order passed under Section 263.
The Ahmedabad ITAT quashed the revision order passed u/s 263, holding that the Assessing Officer had rightly allowed deduction for contribution made to an approved LIC Group Gratuity Scheme. The PCIT had invoked section 263 on the ground that the assessee-bank had contributed ₹33.54 lakh to the gratuity scheme and claimed excess deduction of ₹17.49 lakh, allegedly in violation of Rule 103, which limits annual contributions to 8.33% of employees’ salary.
The Tribunal observed that the gratuity scheme was duly approved by the Commissioner of Income-tax and that the contribution had been made strictly in accordance with the actuarial valuation and demand raised by LIC. Relying on the Supreme Court’s decision in CIT v. Textool Co. Ltd. and the judgments of the Calcutta and Madras High Courts, it held that once the payment is made to an approved gratuity fund over which the employer has no control, deduction cannot be denied merely because the contribution exceeds 8.33% of employees’ salary. The Tribunal further held that Rule 103 had no application in such circumstances.
The Tribunal also noted that the issue had been specifically examined by the AO during the original assessment and the claim was found to be in order. Since the assessment order was in consonance with settled judicial precedents, it could not be regarded as erroneous and prejudicial to the interests of the Revenue. Accordingly, the assumption of jurisdiction by the PCIT u/s 263 was held to be unsustainable, the revision order was quashed, and the assessee’s appeal was allowed.
Cases Discussed:
- CIT Vs. Standard Chartered Grindlays Ltd. (ITA 388/2019)
- CIT Vs. Textool Co. Ltd. (2013) 263 CTR 257 (SC)
- CIT Vs. Premier Cotton Spg. Mills Ltd. (2002) 258 ITR 253 (Mad)
- CIT Vs. Rayalaseema Passenger & Goods Transports Pvt. Ltd. (1997) 230 ITR 332 (Mad)
- CIT Vs. Eastern Equipment & Sales Ltd. (1993) 201 ITR 858 (Cal)
- Triplicane Permanent Fund Ltd. Vs. CIT (1989) 179 ITR 492 (Mad)
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
