DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-IV, JALANDHAR V. M/S PUNJAB GRAMNI BANK, KAPURTHALA

ITA 151/ASR/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7117 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 21-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DHEERAJ GARG LD
• Assessee Lawyers: P N ARORA LD
• Section: 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. VIKRAM SINGH YADAV , ACCOUNTANT MEMBER AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER ITA NOS.150,151,152 & 153(ASR)/ 2018 ASSESSMENT YEARS:2009-10, 2010-11, 2011-12 & 201 2-13 DY. CIT CIRCLE-IV, JALANDHAR VS. M/S. PUNJAB GRAMIN BANK, JALANDHAR RAOD, KAPURTHALA. [PAN:AAALP 0309F] (APPELLANT) (RESPONDENT) APPELLANT BY: SH. DHEERAJ GARG (LD. DR ) RESPONDENT BY: SH. P.N.ARORA (LD. ADV. ) DATE OF HEARING: 26.07.2019 DATE OF PRONOUNCEMENT: 26.07.2019 ORDER PER N.K.CHOUDHRY, JM: THESE APPEALS HAVE BEEN PREFERRED BY THE REVENUE DEPARTMENT AGAINST THE SEPARATE ORDERS DATED 15/01/20 18 RELEVANT FOR THE ASST. YEARS 2009-10 TO 2012-13 RESPECTI VELY PASSED BY THE LD. CIT(A)-2, JALANDHAR, U/S 250(6) OF T HE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT') WHEREBY THE LD. CIT(A) DELETED THE ADDITION QUA PREMIUM PAID TO LIC ON ACCOUNT OF PROVISION FOR GROUP LEAVE ENCASHMENT SCHEME. 2. THE ONLY ISSUE IN ALL THE APPEALS INVOLVED THE DISALLOW ANCE QUA PREMIUM PAID TO LIC ON ACCOUNT OF PROVISION OF GRO UP LEAVE ENCASHMENT SCHEME. THEREFORE FOR THE SAKE OF BREVITY AND CONVENIENCE THE FACTS AND ORDER OF THE ITA NO.150/ASR/20 18 ITA NOS.150 TO 153/ASR/2018 (A. YS.2009-10 TO 2012-13) DCIT VS. PUNJAB GRA MIN BANK 2 HAVE BEEN TAKEN INTO CONSIDERATION AND RESULT OF THE SA ME SHOULD ALSO BE APPLICABLE MUTATIS MUTANDIS TO THE OTHER APPEALS. 3. IN THE INSTANT CASE, THE ASSESSING OFFICER WHILE PASSING AN ORDER U/S 147/143(3) OF THE ACT, DISALLOWED THE AMOUNT OF RS.1 CRORE PREMIUM PAID TO LIC ON ACCOUNT OF PROVISION FOR GROUP LEAVE ENCASHMENT SCHEME OF THE EMPLOYEES. ON CHALLENGE BEFORE THE LD. CIT(A) THE SAID DISALLOWANCE WAS DELETED BY THE LD. CIT(A) WHILE HOLDING AS UNDER: 3.6 HAVING CONSIDERED THE JUDICIAL DECISIONS CITED BY THE APPELLANT, I FIND THAT FACTS OF THE PRESENT CASE AR E IDENTICAL TO THE FACTS OF THE CASE CONSIDERED BY THE HONBLE KER ALA HIGH COURT- HINDUSTAN LATEX LIMITED. IN THIS CASE IT IS NOT DISPUTED THAT A GROUP INSURANCE LEAVE ENCASHMENT POLICY HAS BEEN TAKEN BY THE APPELLANT FOR WHICH A PREMIUM HAS BEEN PAID. THIS IS ALSO NOT DISPUTED BY THE AO THAT PREMIUM HAS BEEN P AID DURING THE YEAR RATHER THE GROUND FOR DISALLOWANCE WAS THA T IT IS A CONTINGENT LIABILITY AND THEREFORE NOT ALLOWABLE AS AN EXPENSE U/S 37(1) OF THE IT ACT. CIT(A) HAD HOWEVER CONFIRM ED THE DISALLOWANCE U/S 43B(F) OF THE IT ACT, WHICH IN THE PRESENT CASE IS NOT APPLICABLE AS THE PAYMENT OF PREMIUM BY THE APPELLANT DURING THE YEAR UNDER CONSIDERATION IS NOT DISPUTED . IT IS CLEAR FROM THE JUDICIAL DECISIONS THAT PAYMENT OF PREMIUM FOR GROUP INSURANCE LEAVE ENCASHMENT POLICY IS AN ALLOWABLE E XPENSE U/S 37(1) OF THE IT ACT. FURTHER, I FIND THAT INTEREST ACCRUED ON GLES POLICY HAS NOT BEEN DEBITED IN THE P&L ACCOUNT AND STANDS REINVESTED IN THE POLICY AND THEREFORE, CANNOT BE A DDED AS INCOME OF THE APPELLANT. EVEN IF IT IS CREDITED AS INCOME AND THEN IT WOULD BE ELIGIBLE FOR CORRESPONDING DEDUCTI ON AS HAVING BEEN REINVESTED IN THE GLES POLICY. 3.7 RESPECTFULLY FOLLOWING THE DECISIONS CITED ABOV E, I DIRECT THE AO TO DELETE THE ADDITIONS MADE BY THE AO ON AC COUNT OF PROVISION FOR LEAVE ENCASHMENT AND ALSO THE BALANCE AMOUNT OF ADDITIONS ON ACCOUNT OF INTEREST ACCRUED ON GLES PO LICY (IF APPLICABLE) AS THIS AMOUNT STANDS REINVESTED IN THE POLICY. ITA NOS.150 TO 153/ASR/2018 (A. YS.2009-10 TO 2012-13) DCIT VS. PUNJAB GRA MIN BANK 3 4. THE REVENUE DEPARTMENT IS IN APPEAL AGAINST THE ORDER OF THE LD. CIT(A). 5. HAVING HEARD THE PARTIES AT LENGTH AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE REALIZED THAT SIMIL AR ADDITION HAS BEEN DELETED BY THE CO-ORDINATE BENCH, AT JALANDH AR IN THE CASE OF ASSESSEES ITSELF RELEVANT FOR ASST. YEAR:2014-15. F OR READY REFERENCE, THE RELEVANT PART OF THE ORDER IS RE PRODUCED HEREIN BELOW. 9. WE SHALL NOW ADVERT TO THE APPEAL OF THE REVENU E. THE REVENUE HAS ASSAILED THE DELETION BY THE CIT(A) OF AN ADDITION OF RS. 1,99,19,242/- THAT WAS MADE BY THE A.O ON ACCOU NT OF PROVISION FOR LEAVE ENCASHMENT AND INTEREST ACCRUED ON PREVIOUS INVESTMENTS. ON A PERUSAL OF THE ORDER OF THE A.O, IT STANDS REVEALED THAT THE LATTER AFTER CONSIDERING THE PAYMENT MADE BY THE ASSESSEE FOR LEAVE ENCASHMENT TO THE INSURANCE COMPANY AND ADDING THE INTEREST ACCRUED ON THESE DEPOSITS M ADE EARLIER AND DEDUCTING THEREFROM THE AMOUNT ACTUALLY PAID AS LEAVE ENCASHMENT DURING THE YEAR UNDER CONSIDERATION, HAD MADE AN ADDITION OF RS. 1,99,19,242/-. IT IS THE CLAIM OF T HE A.O THAT AS ONLY A PAYMENT OF RS. 15,64,932/- HAD ACTUALLY BEEN MADE TO THE EMPLOYEES ON ACCOUNT OF LEAVE ENCASHMENT, THERE FORE, ONLY THIS AMOUNT CAN BE SAID TO HAVE BEEN INCURRED AND T HEREIN ALLOWABLE AS A DEDUCTION DURING THE YEAR UNDER CONS IDERATION. INSOFAR THE EXPENSES OF RS. 45,53,677/- CLAIMED BY THE ASSESSEE AS AN EXPENSE ON ACCOUNT OF PREMIUM PAID T O INSURANCE COMPANY UNDER GROUP LEAVE ENCASHMENT SCHE ME IS CONCERNED, THE SAME WE FIND HAD BEEN DISALLOWED ON THE GROUND THAT ANY PROVISION MADE FOR THE PURPOSE OF ANY FUTU RE LIABILITY IS NOT TO BE ALLOWED AS A DEDUCTION UNDER SEC 37(1) OF THE IT ACT, AS THE SAID STATUTORY PROVISION TAKES WITHIN ITS SW EEP DEDUCTION OF ONLY THOSE EXPENDITURES WHICH HAD BEEN LAID DOWN OR INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OF AN ASSESSEE. APART THERE FROM, THE A.O HAD MADE A FURTHER ADDITION OF RS. 1,53,65,565/- ON ACCOUNT OF INTERES T ACCRUED ON PREVIOUS INVESTMENTS MADE UNDER GROUP LEAVE ENCASHM ENT SCHEME POLICY. ITA NOS.150 TO 153/ASR/2018 (A. YS.2009-10 TO 2012-13) DCIT VS. PUNJAB GRA MIN BANK 4 10. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ISSUE PERTAINING TO THE DISALLOWANCE OF THE PROVISIONS FO R LEAVE ENCASHMENT AND ADDITION OF THE INTEREST ACCRUED ON THE PREVIOUS INVESTMENTS MADE BY THE A.O, WHICH THEREAFTER HAD B EEN VACATED BY THE CIT(A). INSOFAR THE PROVISIONS OF SE C. 43B(F) OF THE IT ACT ARE CONCERNED, WE ARE IN AGREEMENT WITH THE VIEW TAKEN BY THE CIT(A) THAT AS THE ACTUAL PREMIUM HAS BEEN P AID BY THE ASSESSEE, THEREFORE, THE SAID STATUTORY PROVISION W HICH COMES INTO PLAY ONLY WHERE THE ACTUAL PREMIUM HAS NOT BEE N PAID BUT A DEDUCTION HAS BEEN CLAIMED, WOULD HOWEVER NOT BE AP PLICABLE IN THE PRESENT CASE AS THE AFORESAID PREMIUM HAS BEEN PAID BY THE ASSESSEE. ADMITTEDLY, THE ASSESSEE HAD PAID A PREMI UM OF RS. 45,53,677/- FOR TAKING THE GROUP INSURANCE LEAVE EN CASHMENT SCHEME POLICY DURING THE YEAR. IN OUR CONSIDERED VI EW, AS OBSERVED BY THE HONTILE SUPREME COURT IN THE CASE O F BHARAT EARTH MOVERS VS. CIT (2000) 245 ITR 428 (SC), IF A BUSINESS LIABILITY ARISES IN THE ACCOUNTING YEAR, THEN THE D EDUCTION HAS TO BE ALLOWED THOUGH THE LIABILITY MAY HAVE TO BE QUAN TIFIED AND DISCHARGED AT A FUTURE DATE. RATHER, WHAT WOULD BE RELEVANT IS THE CERTAINTY 7 IN RESPECT OF THE INCURRING OF THE LIABILITY WHILE CONSIDERING ITS ALLOWABILITY AS A DEDUCTION DURING THE YEAR UNDER CONSIDERATION. IN FACT, AS OBSERVED BY THE CIT(A) T HE HONBLE HIGH COURT OF KERALA IN THE CASE OF CIT, THIRUVANAN THAPURAM VS. HINDUSTAN LATEX LTD. (ITA NO. 64 OF 2012) HAS H ELD THAT INSURANCE PREMIUM PAID FOR GROUP LEAVE ENCASHMENT S CHEME POLICY IS ALLOWABLE AS AN EXPENDITURE UNDER SEC. 37 (1) OF THE IT ACT. WE THUS FINDING OURSELVES TO BE IN AGREEMENT W ITH THE VIEW TAKEN BY THE CIT(A) WHO HAD DELETED THE ADDITION OF RS. 45,53,677/- MADE BY THE A.O ON ACCOUNT OF PROVISION S FOR LEAVE ENCASHMENT, UPHOLD HIS ORDER TO THE SAID EXTENT. IN SOFAR THE ADDITION OF RS. 1,53,65,565/- ON ACCOUNT OF INTERES T ACCRUED ON GROUP LEAVE ENCASHMENT SCHEME POLICY IS CONCERNED, WE ARE IN AGREEMENT WITH THE VIEW TAKEN BY THE CIT(A) THAT NO ADDITION AS REGARDS THE SAID AMOUNT COULD HAVE BEEN MADE, AS TH E SAME REPRESENTS THE ACCRETION TO THE POLICY AMOUNT WHICH HAD BEEN REINVESTED IN THE POLICY ITSELF AND THUS TO THAT EX TENT REDUCED THE AMOUNT OF POLICY PREMIUM PAYABLE BY THE ASSESSEE BA NK. IN FACT, AS THE AFORESAID INTEREST ACCRUED ON GROUP LE AVE ENCASHMENT SCHEME POLICY HAD NOT BEEN DEBITED IN TH E PROFIT AND LOSS ACCOUNT AND STANDS REINVESTED IN THE POLIC Y, THEREFORE, THE SAME CANNOT BE ADDED AS THE INCOME OF THE ASSES SEE. IN CASE IF THE AFORESAID INTEREST WOULD HAVE BEEN CRED ITED AS ITA NOS.150 TO 153/ASR/2018 (A. YS.2009-10 TO 2012-13) DCIT VS. PUNJAB GRA MIN BANK 5 INCOME OF THE ASSESSEE, THEN THE SAME WOULD HAD ALS O BEEN ELIGIBLE FOR A CORRESPONDING DEDUCTION AS HAVING BE EN REINVESTED IN THE SAID POLICY, THEREIN RESULTING TO NO ADDITIO N ON THE SAID COUNT IN THE HANDS OF THE ASSESSEE. WE THUS FINDING NO INFIRMITY IN THE ORDER OF THE CIT(A) WHO HAD RIGHTLY DELETED THE ADDITION OF RS. 1,53,65,565/- ON ACCOUNT OF INTEREST ACCRUED ON THE GROUP LEAVE ENCASHMENT SCHEME POLICY, UPHOLD HIS ORDER TO THE SAID EXTENT. THE GROUNDS OF APPEAL NO. 1 TO 3 RAISED BY THE REVENUE ARE DISMISSED. PERUSING THE ORDER PASSED BY THE CO-ORDINATE BENCH, WE DO NOT HAVE ANY HESITATION TO HELD THAT THE ISSUE UND ER CONSIDERATION IS SQUARELY COVERED BY THE DECISION OF THE C O- ORDINATE BENCH (SUPRA), HENCE, WE ARE INCLINED TO DISMISS THE APPEAL OF THE REVENUE DEPARTMENT, WHILE RESPECTFULLY FOLLOWING THE JUDGMENT OF THE CO-ORDINATE BENCH. IN THE RESULT, APPEAL I.E. ITA NO.150/ASR/2018 STANDS DISMISSED. 6. IN VIEW OF THE ORDER PASSED IN ITA NO.150/ASR/2018 TH E OTHER APPEALS I.E. ITA NO.151, 152 & 153/ASR/2018 ALSO STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26.07.201 9. SD/- SD/- ( VIKRAM SINGH YADAV ) (N.K.CHOUDHRY) ACCOUNTANT MEMBER J UDICIAL MEMBER DATED:26.07.2019 /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) MS. PUNJAB GRAMIN BANK, JALANDHAR ROAD, KAPURTHAL A. (2) THE DY. CIT, CIRCLE, JALANDHAR (3) THE CIT(A)-2, JALANDHAR (4) THE CIT CONCERNED (5) THE SR DR, I.T.A.T., AMRITSAR TRUE COPY BY ORDER