JUDGMENT By the Court.—These two appeals have been filed under Section 260A of Income Tax Act, 1961 (hereinafter referred to as ‘Act, 1961)’ arising from judgment and order dated 24.7.2014 passed by Income Tax Appellate Tribunal, Lucknow Bench ‘A’ Lucknow (hereinafter referred to as the “Tribunal”) in Income Tax Appeal No. 384/LKW/2011 and Income Tax Appeal No. 540/LKW/2011 with respect of Assessment Year 2006-07 and Assessment Year 2005-06 respectively. 2. Substantial questions of law arising in both the appeals in our view are as under : “(i) Whether the Tribunal is justified in disallowing deduction of actual payment made to Life Insurance Corporation of India under Group Gratuity Insurance Scheme, on the ground that such scheme was not specifically approved by concerned Commissioner of Income Tax though carried under general approval of Central Government. (ii) Whether the payment made to LIC by way of premium on Insurance Policy under Group Gratuity Insurance Scheme was liable to be treated as payment made to a fund which is deemed to have been approved by the CIT by the reason of efflux of time. (iii) Whether at an any rate actual payment made to the retiring employees, through the mechanism of Insurance Policy issued under Group Gratuity Insurance Scheme launched by Life Insurance Corporation of India should have been considered and allowed as deduction under Section 37 read with Section 43B of the Act ?” (iv) Whether addition of amount being 5% of premium collected by Assessee and forfeiture of earnest money/premium is vitiated due to non-consideration of principle governing accrual of income and other material/information placed on record. (v) Whether the Tribunal was legally justified in upholding taxbility of 5% premium collected by Assessee in its hand without considering obligation/liabilities of overriding nature, attached to the receipts in question. (vi) Whether the Tribunal was justified after holding premium as taxable and then not directing Assessing Officer to allow deduction under Section 80IA of Act, 1961 being the same as part of eligible profits. (vii) Whether ITAT was legally correct in holding that interest on premium payable by the allottees of industrial sites as financed by the appellant as an accredited financial corporation did not form part of the income qualifying for exemption under Section 80IA of the Act? 3. (vii) Whether ITAT was legally correct in holding that interest on premium payable by the allottees of industrial sites as financed by the appellant as an accredited financial corporation did not form part of the income qualifying for exemption under Section 80IA of the Act? 3. Assessing Officer made addition/disallowance in respect of Assessment Years 2005-06 and 2006-07 as under: Assessment Year 2005-06 : S. No. Particulars Amount (Rs.) Reasons, in brief, for disallowance/additions (A) Payment made to LIC on a policy taken for the Group Gratuity Scheme 5,16,27,653/- Reasons, in brief, for disallowance/additions (B) 5% of Premium received during the year in relation to industrial sites allotted to entrepreneurs 5,16,27,653/- The sum in question was represented income from purchase and sale of land and the Revenue’s stand in this respect stood upheld both at the level of CIT (A) and ITAT. (C) Short dis-allowance of deduction under Section 80 IA 1,54,09,286/- On the ground that the profit declared by the appellant included receipts aggregating Rs. 1,54,09,286/- which did not have direct nexus with the running and management of technical parks. Assessment Year 2006-07 : S. No. Particulars Amount (Rs.) Reasons, in brief, for disallowance/additions (A) Payment made to LIC on a policy taken for the Group Gratuity Scheme 46,16,743/- On the ground that the Group Gratuity Scheme was not approved by the Commissioner of Income Tax. (B) 5% of Premium received during the year in relation to industrial sites allotted to entrepreneurs 5,12,92,142/- The sum in question was represented income from purchase and sale of land and the Revenue’s stand in this respect stood upheld both at the level of CIT (A) and ITAT. (C) Short dis-allowance of deduction under Section 80 IA 4,04,63,639/- On the ground that the profit declared by the appellant included receipts aggregating Rs. 4,04,63,639/- which did not have direct nexus with the running and management of technical parks. 4. Assessee preferred an appeal where Commissioner of Income Tax (Appeals) (hereinafter referred to as ‘’CIT (Appeals)’) not only upheld dis-allowance but enhanced assessed income by taking a view that eligible profit for the purposes of computation of relief under Section 80IA deserved to be reduced by the amount of interest received on unpaid installments of premium from income disclosed by the Tronica City Industrial Model Town Loni, Ghaziabad and Greater Noida Export Promotion Industrial Park etc. with regard to Assessment Year 2006-07. with regard to Assessment Year 2006-07. Assessee and Revenue both filed appeals i.e. I.T.A. No. 384 of 2011 by Assessee and I.T.A. No. 398 of 2011 by Revenue. Similarly for Assessment Year 2005-06, Revenue filed I.T.A. No. 560 of 2011 and Assessee filed I.T.A. No. 540 of 2011. Revenue’s appeals for Assessment Years 2005-06 and 2006-07 have been dismissed while Assessee’s appeals for Assessment Year 2005-06 is partly allowed but that of Assessment Year 2006-07 is dismissed. 5. With regard to dis-allowance of payment of Life Insurance Corporation of India (hereinafter referred to as ‘LIC’) under Group Gratuity Insurance Scheme the only reason followed by authorities below is that scheme was not approved by Commissioner of Income Tax (hereinafter refereed to as ‘’CIT’) and since it was covered by Section 36(1)(v), hence Section 37(1) cannot be applied. It has also been held that amount was paid directly to LIC and not to approved fund, therefore, deduction was not allowable. 6. It is argued that premium claimed as deduction was an actual payment and not provisional, therefore, Section 40A(7) was not applicable. Section 40A talks of expenses of payment not deductible and sub-section (1) declares that provisions of Section 40A shall have effect notwithstanding anything contrary contained in any other provision of Act, 1961 relating to computation of income under the head “profits and gains of business or profession”. Sub-section (7) as available during the course of concerned relevant years reads as under : “(7) (a) Subject to the provisions of clause (b), no deduction shall be allowed in respect of any provision (whether called as such or by any other name) made by the assessee for the payment of gratuity to his employees on their retirement or on termination of their employment for any reason. (b) Nothing in clause (a) shall apply in relation to any provision made by the assessee for the purpose of payment of a sum by way of any contribution towards an approved gratuity fund, or for the purpose of payment of any gratuity, that has become payable during the previous year. (b) Nothing in clause (a) shall apply in relation to any provision made by the assessee for the purpose of payment of a sum by way of any contribution towards an approved gratuity fund, or for the purpose of payment of any gratuity, that has become payable during the previous year. Explanation.—For the removal of doubts, it is hereby declared that where any provision made by the assessee for the payment of gratuity to his employees on their retirement or termination of their employment for any reason has been allowed as a deduction in computing the income of the assessee for any assessment year, any sum paid out of such provision by way of contribution towards an approved gratuity fund or by way of gratuity to any employee shall not be allowed as a deduction in computing the income of the assessee of the previous year in which the sum is so paid.” 7. It is admitted by learned counsel appearing for Revenue that the amount claimed to be paid by Assessee under Group Gratuity Insurance Scheme is the actual payment made to LIC and not something which can be said to be a provision made by Assessee for payment of gratuity. Deduction towards gratuity fund is permitted under Section 36(1)(v) which reads as under : “any sum paid by the assessee as an employer by way of contribution towards an approved gratuity fund created by him for the exclusive benefit of his employees under an irrevocable trust; “ 8. The term “approved gratuity” fund is defined in Section 2(v) as under : “approved gratuity fund” means a gratuity fund which has been and continues to be approved by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner in accordance with the rules contained in Part C of the Fourth Schedule;” 9. It is not in dispute that no gratuity fund constituted by Assessee has not been approved by Commissioner or Principal Commissioner till date but it is also proved that amount towards gratuity payable to employee has gone out of hands of Assessee having been deposited with LIC and, therefore, it is a case where expenses have actually been incurred by Assessee for benefit of its employees which is connected with the purposes of business or profession being carried by Assessee. If the terminology by itself is not relevant and if Revenue thinks that deposit made with LIC, on account of lack of approval by CIT, did not qualify for deduction under Section 36(v), even then expenditure incurred by Assessee, not in the nature of capital expenditure or personal expenses should have been allowed under Section 37. Moreover, review application with regard to the matter of approval was admittedly pending with Commissioner and if that be so Tribunal ought to have asked Commissioner to decide the same and thereafter this issue should have been decided, for the reason that in case review is allowed, approval shall relates back, in that event, technical reason for not attracting Section 36(v) would disappear. 10. However, from record we also find that Tribunal and other authorities have committed manifest error in treating the fund as non approved on the basis of order dated 25.6.2012 passed by Commissioner and disregarding specific requirement of law under Section 12AA(2) of Act, 1961. A perusal of order dated 25.6.2012 shows that application was submitted by Assessee for registration on 16.6.2011. No order was passed by Commissioner during six months from the end of month of receipt of said application. Section 12AA thus automatically comes into operation and therefore by operation of legal fiction, approval is deemed to have been granted. The view we have taken is fortified by judgment in Society For the Promotion of Education Adventure Sport & Conservation of Environment v. Commissioner of Income Tax and others, (2008) 216 CTR(Alld) 167. Therein also an application was submitted by Assessee on 24.6.2003 but no order was passed before expiry of six months from the end of month, in which, application was received. In the present case order has been passed after more than one year from the date, application was received. This Court held that non-consideration of registration application within time fixed by Section 12AA would result in deemed registration. In paras 17 and 18 the Courts said as under : “17. Considering the pros and cons of the two view, we are of the opinion that by far the better interpretation would be to hold that the effect of non consideration of the application for registration within the time fixed by Section 12AA(2) would be a deemed grant of registration. Considering the pros and cons of the two view, we are of the opinion that by far the better interpretation would be to hold that the effect of non consideration of the application for registration within the time fixed by Section 12AA(2) would be a deemed grant of registration. We do not find any good reason to make the assessee suffer merely because the IT Department is not able to keep it officers under check and control, so as to take timely decisions in such simple matters such as consideration of applications for registration even within the large six month period provided by s. 12AA(2) of the Act. 18. We accordingly direct the respondents, subject to any order which may be passed under s. 12AA(3), to treat the petitioner society as an institution duly approved and registered under s. 12AA and to recomputed its income by applying the provision of s. 11 of the Act. Accordingly, a formal certificate of approval will be issued forthwith to the petitioner by the respondent Nos. 2. The writ petition is allowed to the above extent” 11. In this view of the matter, gratuity fund of Assessee stood deemed to have been registered and that being so subsequent order passed by CIT(Appeals) had no consequence or illegal effect. Hence, Assessee was entitled to claim deduction under Section 36(v). The view taken otherwise in impugned orders, therefore, is illegal, and contrary to law and observing to be set aside. 12. Coming to the question of 5% income in term of premium received during concerned assessment years and deduction under Section 80IA and applicability of provision. It is said that there is no justification for presuming income of 5% as total premium received by Assessee, for the reason that premium received is nothing but allotment of land to entrepreneur and facility of returning expenses incurred by Assessee for development of such industrial land and there is no concept of profit or loss in such determination. Amount paid by allottees represents lease rent etc. and hence assumption of 5% income on such premium is without any basis. 13. Similarly for interest received by Assessee on delayed payment of installment of premium or lease rent etc, Tribunal has held that it is not income of eligible business for the purpose of computation of deduction under Section 80IA. Amount paid by allottees represents lease rent etc. and hence assumption of 5% income on such premium is without any basis. 13. Similarly for interest received by Assessee on delayed payment of installment of premium or lease rent etc, Tribunal has held that it is not income of eligible business for the purpose of computation of deduction under Section 80IA. We find that Tribunal has completely erred in law inasmuch as a finding of fact was recorded by CIT in para 10.3.5 that interest earned by Assessee on installments granted in respect of premium payable, and other income etc. receipts may have some link with the business of appellant and having said so, still it has reversed order of Assessing Authority to the extent, it has allowed deduction under Section 80IA on such ‘interest’ and Tribunal has erred in law in failing to appreciate this finding of Commissioner of Income Tax (Appeals) and without reversing the same, has dismissed Assessee’s appeal. 14. In view thereof the questions formulated above are answered by observing that Assessee was entitled for deduction towards payment of group gratuity insurance paid to LIC by treating fund as any approved fund. 5% of premium collected by Assessee and forfeiture of earnest money/premium has been added illegally based on conjuncture and surmises. Since the nature of functioning of Assessee has not been examined looking to the public nature of its functioning for development of industries in the State, such addition, therefore, is not justified in law. 15. With regard to applicability of Section 80IA, without reversing findings of CIT(Appeals), that such interest received may have some link with the business of appellant and once that is so, to hold that deduction under Section 80IA is not admissible is per se contradictory and hence is not correct and in accordance with Law. 16. On the aforesaid aspects, impugned judgment of Tribunal dated 24.7.2014 is hereby set aside and the matter is remanded back. Appeal is partly allowed. Tribunal shall pass a fresh order on the aforesaid aspects in the light of law, discussed above.