Deputy Commissioner of Income Tax Circle-1(1), Jabalpur V. M/s Madhyanchal Gramin Bank Poddar Colony, Sagar

ITA 137/JAB/2018

• Counselvise Citation: [2020] 109 COUNSELVISE.COM (IT) 9367 (ITAT-JABALPUR)
• Duration Of Justice: 2 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Appeal Filed On: 14-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M.K. SHAH
• Keywords: Competent authority
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JABALPUR BENCH, JABALPUR BEFORE SHRI NRS GANESAN, JUDICIAL MEMBER & SANJAY ARORA, ACCOUNTANT MEMBER ITA NO.137/JAB/2018 ASSESSMENT YEAR 2015-16 DCIT CIRCLE-1(1), JABALPUR. VS. MADHYANCHAL GRAMIN BANK, PODDAR COLONY, TILI ROAD, SAGAR, MADHYA PRADESH. (PAN : AAAJ M1901A) (APPELLANT ) (RESPONDENT) C.O. NO.4/JAB/2020 ASSESSMENT YEAR 2015-16 MADHYANCHAL GRAMIN BANK, PODDAR COLONY, TILI ROAD, SAGAR, MADHYA PRADESH. (PAN : AAAJM 1901A) VS. DCIT CIRCLE-1(1), JABALPUR. (APPELLANT ) (RESPONDENT) APPELLANT BY SHRI U.B. MISHRA, C.I.T.-DR, JOIN VIRTUAL HEARING FROM BHOPAL. RESPONDENT BY SHRI M.K. SHAH, C.A. DATE OF HEARING 30/12/2020 DATE OF PRONOUNCEMENT 31/12/2020 ORDER PER NRS GANESAN, JM: THIS APPEAL OF THE REVENUE AND CROSS APPEAL BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOM E TAX (APPEALS)-1, JABALPUR [FOR SHORT, THE CIT(A)] AND PERTAINS TO AS SESSMENT YEAR 2015-16. ITA NO. 137/JAB/18 & C.O. 04/JAB/2020 MADHYANCHAL G RAMIN BANK 2 2. SHRI U.B. MISHRA, LD. DEPARTMENTAL REPRESENTATIV E (DR) FOR THE REVENUE ARGUED THAT THE CASE VIRTUALLY SITTING AT M UMBAI AND SUBMITTED THAT THE ONLY ISSUE ARISES FOR CONSIDERATION IS THE ADDI TION OF RS. 17,41,82,013/- DELETED BY THE CIT(A) TOWARDS THE PAYMENT TO AN UNA PPROVED GRATUITY FUND. ACCORDING TO THE LD. DR, THE PAYMENT MADE TO APPROVED GRATUITY FUND ALONE HAS TO BE ALLOWED UNDER SECTION 36(1)(V) OF THE INCOME TAX ACT, 1961 (THE ACT). IN THIS CASE, THE PAYMENT WA S MADE TO AN UNAPPROVED FUND, THEREFORE, IT CANNOT BE ALLOWED. O N A QUERY FROM THE BENCH, WHAT IS THE NATURE OF THE FUND AND WHO IS MA NAGING THE FUND, THE LD. DR SUBMITTED THAT THE ASSESSEE ITSELF IS MANAGING T HE FUND, THEREFORE, IT CANNOT BE ALLOWED. 3. ON THE CONTRARY, SHRI M.K. SHAH, THE LD. REPRESE NTATIVE FOR THE ASSESSEE SUBMITTED THAT THE GRATUITY FUNDS WERE MAN AGED BY LIC AND OTHER THIRD PARTIES, THEREFORE, IT IS NOT CORRECT TO SAY THAT THE ASSESSEE IS MANAGING THE GRATUITY FUND. THE LD. REPRESENTATIVE ALSO SUBM ITTED THAT THE MONEY WERE GONE OUT OF THE HANDS OF THE ASSESSEE AND THE SAME WOULD NOT COME BACK TO THE ASSESSEE IN ANY EVENT, THEREFORE, IT HA S TO BE ALLOWED UNDER SECTION 37(1) OF THE ACT, IF IT COULD NOT BE ALLOWE D UNDER SECTION 36(1)(V) OF THE ACT. THE LD. REPRESENTATIVE ALSO SUBMITTED T HAT RIGHT FROM 2013, THIS TRIBUNAL ALLOWED A SIMILAR PAYMENT TO THE GRATUITY FUND AND CIT(A) BY FOLLOWING THE ORDER OF THIS TRIBUNAL DELETED THE AD DITION MADE BY ITA NO. 137/JAB/18 & C.O. 04/JAB/2020 MADHYANCHAL G RAMIN BANK 3 ASSESSING OFFICER. THEREFORE, THERE IS NO SUBSTANCE IN THE APPEAL FILED BY THE REVENUE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSION ON EITHE R SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. FROM THE ASSESSMENT ORDER ITSELF, IT APPEARS THAT THE PAYMENTS WERE MADE TO SBI LIFE INSURANCE, LIFE INSURANCE CORPORATION AND STAR UNION DIACHI. THESE FUNDS WERE MANAGED BY THIRD PARTIES AND NOT BY THE ASSESSEE. THIS IS O BVIOUS FROM THE ASSESSMENT ORDER ITSELF, THEREFORE, THE CONTENTION OF THE DR THAT THE FUNDS WERE MANAGED BY THE ASSESSEE ITSELF IS CONTRARY TO THE FACTS ON RECORD. 5. NOW THE QUESTION ARISES FOR CONSIDERATION IS WHE N THE ASSESSEE PAID GRATUITY FUNDS TO SBI LIFE INSURANCE, LIFE INSURANC E CORPORATION AND STAR UNION DIACHI, WHETHER SUCH PAYMENT CAN BE ALLOWED O R NOT? IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS ACTUALLY PAID THE MON EY. IN OTHER WORDS, THE MONEY HAS ACTUALLY GONE OUT FROM THE HANDS OF THE A SSESSEE. THEREFORE, THAT THE MONEY PAID TOWARDS THE GRATUITY FUND WOULD NOT COME TO THE ASSESSEE AT ANY EVENT. HENCE, THIS TRIBUNAL IS OF T HE CONSIDERED OPINION THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION MA DE BY THE ASSESSING OFFICER. MOREOVER, THIS TRIBUNAL IN ITA NO. 50/JAB/ 2012 DATED 30.09.2013 ALLOWED SIMILAR CLAIM OF THE ASSESSEE FO R ASSESSMENT YEAR 2007-08. BY FOLLOWING THE SAME ORDER, THE CLAIM OF THE ASSESSEE FOR ASSESSMENT YEAR 2008-09 AND 2011-12 WAS ALLOWED. TH E CIT(A) BY ITA NO. 137/JAB/18 & C.O. 04/JAB/2020 MADHYANCHAL G RAMIN BANK 4 FOLLOWING THE ORDER OF THIS TRIBUNAL, HAS ALLOWED T HE CLAIM OF THE ASSESSEE. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE THE ORDER OF CIT(A). ACCORDINGLY, THE SAME IS UPHELD. 6. NOW COMING TO THE C.O. OF THE ASSESSEE, THE SAME FILED ONLY TO SUPPORT THE ORDER OF CIT(A). SINCE, THIS TRIBUNAL U PHELD THE ORDER OF CIT(A) ON MERIT, THE C.O. BECOME INFRUCTUOUS. 7. IN THE RESULT, BOTH THE APPEAL OF THE REVENUE AN D C.O. OF THE ASSESSEE STANDS DISMISSED. SD/- (A/W MY SEPARATE ORDER) SD/- (SANJAY ARORA) (N.R.S.GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER 8. IN CONTINUATION TO THE ORDER PROPOSED BY MY LD. BROTHER, WITH WHICH I AGREE, I WISH TO ADD FURTHER FOR THE SAKE OF CLARIT Y, BESIDES THE SAME ALSO INFORMING AND EXPLAINING MY DECISION. THE APEX COUR T IN CIT V. TEXTOOL CO. LTD . [2013] 216 TAXMAN 327 (SC), ALSO REFERRED TO BY T HE REVENUE AUTHORITIES, APPLYING THE RATIO LAID DOWN BY IT IN SHREE SAJJAN MILLS LTD. V. CIT [1985] 156 ITR 585 (SC), I.E., THAT THE PRINCIPLE OF STRICT CONSTRUCTION, APPLICABLE TO TAXING STATUTES, YET DOES NOT OUST A REASONABLE CONSTRUCTION, INTERPRETING SEC. 36(1)(V) OF THE ACT, HELD THAT IT WAS MANIFEST FROM A BARE READING THEREOF THAT THE REAL INTENTION BEHIND THE PROVISION WAS THAT THE EMPLOYER SHOULD NOT HAVE CONTROL OVER THE FUNDS OF THE IRREVOCABLE TRUST CREATED EXCLUSIVELY FOR THE BENEFIT OF THE EMPLOYEE S, UPHOLDING THE DECISION REPORTED AT [2002] 257 ITR 39 (MAD). THE A SSESSING OFFICER, ON THIS DECISION BEING CITED BEFORE HIM, STATES, WITHO UT POINTING OUT THE REASON/S THEREFOR, THAT THE SAME IS NOT SQUARELY AP PLICABLE TO THE ASSESSEE, MAKING HIS ORDER, TO THAT EXTENT, VAGUE. THE LD. CI T(A), IN APPEAL, ALSO ITA NO. 137/JAB/18 & C.O. 04/JAB/2020 MADHYANCHAL G RAMIN BANK 5 DOES NOT DWELL ON THE SAID FINDING BY THE AO. THE F UNDS, EVEN AS NOTED IN THE EARLIER PART OF THIS ORDER, STAND GIVEN BY THE ASSESSEE, FOR MANAGEMENT, TO THREE SEPARATE REPUTED FUNDS, INCLUDING LIC OF I NDIA, WHICH WAS ALSO THE FUND MANAGER IN TEXTOOL CO. LTD . (SUPRA). THAT THE TRUST IS IRREVOCABLE, AND EXCLUSIVELY FOR THE ASSESSEES EMPLOYEES, IS NOT IN DISPUTE. RATHER, AS IT APPEARS FROM THE ASSESSEES PLEADINGS BEFORE THE FI RST APPELLATE AUTHORITY, IT HAS NOT BEEN COMMUNICATED THE REASONS FOR THE NON-A PPROVAL OF THE GRATUITY FUND BY THE COMPETENT AUTHORITY, PENDING W ITH IT FOR LONG. THOUGH THAT COULD NOT BE CONSTRUED AS, AS STATED, DEEMED A PPROVAL, IT YET CAUSES A SERIOUS PREJUDICE TO THE ASSESSEE IF ITS CLAIM U/S . 36(1)(V) IS, FOR THAT REASON, NOT ALLOWED. THERE IS NOTHING ON RECORD TO SUGGEST THAT THE SAID REASON/S HAS BEEN CONVEYED. IT IS ONLY THIS REASON/ S, WHERE SO, THAT WOULD ENABLE THE ASSESSEE TO MAKE SUITABLE AMENDMENT/S, A SSUMING SO, IN THE TRUST DEED, AS ALSO IMPACT DETERMINATION OF THE MAT TER IF THE SAME IMPINGE ADVERSELY ON THE BASIC ELEMENTS OF S. 36(1)(V) AFOR E-NOTED, AND WHICH ARE APPARENTLY MET. IT WAS UNDER THE CIRCUMSTANCES, INC UMBENT ON THE REVENUE TO BRING FORTH THE SUBSTANTIAL REASONS FOR THE NON- GRANT OF APPROVAL AND, IN CONSEQUENCE, DISALLOWANCE U/S. 36(1)(V), WHICH IT H AS ABYSMALLY FAILED TO. THERE IS, THEREFORE, ON THE BASIS OF THE MATERIAL O N RECORD, NO REASON TO WITHHOLD THE ALLOWANCE OF THE DEDUCTION TO THE ASSE SSEE QUA THE IMPUGNED SUM, WHICH IS ALSO IN AGREEMENT WITH THE CONSISTENT STAND OF THE TRIBUNAL IN THE MATTER. I DECIDE ACCORDINGLY, WITH THE RESULT REMAINING UNC HANGED. SD /- (SANJAY ARORA) DATE: DECEMBER 31, 2020 AM, JABALPUR BENCH ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST DECEMBER 2020. DATED: 31/12/2020 //TRUE COPY// SK/ P.S.