Now Reading: ITAT allows gratuity deduction denied due to ITR error
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ITAT allows gratuity deduction denied due to ITR error
A corporate taxpayer won its appeal before the Income Tax Appellate Tribunal (ITAT) Chennai on June 24, 2026, against the disallowance of a Rs 79.25 lakh gratuity deduction. The taxpayer had filed…
The Story in Brief
A corporate taxpayer won its appeal before the Income Tax Appellate Tribunal (ITAT) Chennai on June 24, 2026, against the disallowance of a Rs 79.25 lakh gratuity deduction. The taxpayer had filed its ITR on December 18, 2020, showing total income of Rs 38.1 lakh, but the CPC Bengaluru revised it to Rs 1.18 crore and disallowed the gratuity because it was not reported in the tax audit report (Form 3CD). The taxpayer admitted an inadvertent error in classifying the claim and submitted revised documents, but all were rejected. The ITAT ruled in its favour, allowing the deduction.
The Indian Opinion
The ITAT ruling underscores a familiar pitfall for Indian companies: a minor classification error can trigger a massive tax demand even when the payment is genuine. While the department has a duty to check claims, rejecting a revised return and rectification request despite clear evidence of payment seems overly rigid. The real test will be whether the tax department appeals this decision to a higher court, forcing small businesses to fight expensive legal battles for honest mistakes.
Source: economictimes.indiatimes.com
This story was synthesised by AI from the source linked above.
