Case Law Details
Twinings Private Ltd. Vs DCIT (ITAT Kolkata)
In a significant decision, the Income Tax Appellate Tribunal (ITAT) Kolkata, in the case of Twinings Private Ltd. Vs DCIT, has ruled that delay in the approval of a gratuity fund cannot lead to the disallowance of gratuity contributions. This ruling marks a departure from the conventional interpretation of tax laws and underscores the importance of fair treatment to taxpayers in matters concerning employee welfare schemes.
The case revolved around the disallowance of a gratuity contribution made by Twinings Private Ltd. to the LIC Group Gratuity Scheme (LICGGS). The Assessing Officer disallowed the claim under section 36(1)(v) of the Income-tax Act, 1961, on the grounds that the gratuity fund had not received approval from the Commissioner of Income Tax. Despite the submission of evidence by the assessee, including a copy of the Master Agreement with LIC and proof of payments, the claim was rejected.
In the subsequent appeal before the CIT(A), the disallowance was upheld, citing the absence of approval for the gratuity fund. Furthermore, the CIT(A) dismissed the alternate claim for deduction under section 37(1) of the Act, relying on judicial precedents that emphasized strict adherence to statutory conditions for deductions.
However, the ITAT Kolkata took a different view, highlighting the unjustified delay in the approval process. The tribunal noted that the assessee had diligently applied for approval of the gratuity fund in 2002, and all contributions to the LICGGS were undisputed. Despite the pending application, the assessee had consistently honored its commitments to employees, with gratuity payments being made through LIC.
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