Now Reading: ITAT Chennai allows Rs 79.25 lakh gratuity deduction despite ITR error
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ITAT Chennai allows Rs 79.25 lakh gratuity deduction despite ITR error
ITAT Chennai has allowed a corporate taxpayer a Rs 79.25 lakh gratuity deduction that was denied because the claim was classified under the wrong section in its income tax return. The company…
The Story in Brief
ITAT Chennai has allowed a corporate taxpayer a Rs 79.25 lakh gratuity deduction that was denied because the claim was classified under the wrong section in its income tax return. The company had filed its ITR for FY 2020-21 declaring total income of Rs 38.1 lakh. The CPC revised this to Rs 1.18 crore, disallowing the gratuity under Section 43B on the ground that it was not reported in the tax audit report (Form 3CD).
The taxpayer argued the gratuity had actually been paid during the year and the error was inadvertent. It filed a revised return and a rectification application under Section 154, both rejected. The CIT(A) upheld the disallowance. On June 24, 2026, the ITAT bench of Manu Kumar Giri and Manoj Kumar Aggarwal ruled in favour of the taxpayer, holding that the deduction could not be denied when the payment was genuine and the error was one of classification.
The Indian Opinion
This ruling corrects a common but lazy narrative that taxpayers always game the system. Here, the company actually paid the gratuity, the Revenue lost nothing. Yet the taxman clung to a classification slip. Some will say the assessee should have filed correctly, but the law exists to tax real income, not penalise honest errors. The real test now is whether the department will appeal or, better, issue a circular allowing rectification under Section 154 for such genuine classification mistakes.
Sources (2): economictimes.indiatimes.com, livemint.com
This story was synthesised by AI from the 2 sources linked above.
Updated: this story now draws on 2 sources.
