Thiruvalla East Co-operative Bank Ltd. Vs ITO (ITAT Cochin)
Conclusion: Disallowance under section 43B could not be done in respect of provision for gratuity made for the benefit of the retired employees on the reason that no actual payment was made.
Held: AO disallowed the provisions made by assessee towards gratuity, leave salary, bonus and medical aid of retired staff on the ground that such sums were allowable only in the year of payment.It was concluded under section 43B, the Legislature has specifically mentioned about the fund. Therefore, the meaning as given in section 43B cannot be said to be the same as in section 40A(7)(b)(i). Thus, in this case, provision was made for payment of gratuity to retiring employees in respect of the previous year, it was not necessary that actual payment had to be made. If such amount was earmarked for payment of gratuity, i.e., provision was made for payment of gratuity, the amount had to be allowed for deduction.
FULL TEXT OF THE ITAT JUDGMENT
This appeal filed by the assessee is directed against the order of the CIT(A), Kottayam dated 24/07/2018 and pertain to the assessment years 2013-14.
2. The only issue raised in this appeal is with regard to disallowance of provisions made by the assessee towards gratuity.
3. The facts of the case are that the Assessing Officer disallowed the provisions made by the assessee towards gratuity, leave salary, bonus and medical aid of retired staff during the period May, 2010 to January, 2012 on the ground that such sums are allowable only in the year of payment.
4. On appeal, the CIT(A) observed that the provisions were created only to meet the guidelines issued by RBI. The CIT(A) observed that the Ld. AR could not produce any evidence to prove that these provisions for gratuity represents the ascertained liability during the FY 2012-13. In view of the same, it was held that the provisions created by the assessee cannot be allowed as deduction during the AY 2013-14. Hence, the CIT(A) upheld the disallowance made by the Assessing Officer of provisions towards gratuity.
5. Against this, the assessee is int appeal before us. The Ld. AR submitted that during the year, the assessee bank had claimed the following provision for expenses in its accounts:
