ESTWHILE RAJASTHAN GRAMIN BANK, Ajmer V. DCIT, Alwar

ITA 169/JPR/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5595 (ITAT-JAIPUR)
• Duration Of Justice: 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 23-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA-@ ITA NO.169/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2010-11 . ERSTWHILE RAJASTHAN GRAMIN BANK, ALWAR. C/O BARODA RAJASTHAN KSHETRIYA GRAMIN BANK, AJMER. CUKE VS. THE DCIT, CIRCLE-1, ALWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAAAR 4349 E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY S BY : SHRI AJAY SOMANI (C.A.) JKTLO DH VKSJ LS@ REVENUE BY : SHRI KALIKA SINGH (CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 0 1.01.2016. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 8/01/2016. VKNS'K@ ORDER PER SHRI LALIET KUMAR, J.M. THE APPEAL FILED BY THE ASSESSEE IS ARISING FROM T HE ORDER DATED 05.12.2014 PASSED BY THE LEARNED CIT (A) ALWAR FOR THE A.Y. 2 010-11. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- THAT HE LD. COMMISSIONER OF INCOME TAX (APPEALS) AL WAR HAS ERRED IN LAW AND THE FACTS IN ENHANCING THE DISALLOWANCE OF RS. 14 LACS (MADE BY DCIT, CIRCLE-1, ALWAR) TO RS. 140 LACS BY DISALLOWING THE ENTIRE AMOUNT OF 2 ITA NO. 169/JP/2015 A.Y. 2010-11. ERSTWHILE RAJASTHAN GRAMIN BANK LTD VS. DCIT OUTSTANDING LIABILITY FOR PAY REVISION. THE DISALLO WANCE MADE BY LD. AO AND ENHANCED BY LD. CIT (A), ALWAR NEEDS TO BE DELE TED AS :- THE PROVISION FOR LIABILITY TOWARDS WAGES REVISION & PAYMENT HAS BEEN RIGHTLY MADE ON THE BASIS OF BIPARTITE SET TLEMENTS SIGNED ON 02.06.2005 (RETROSPECTIVELY APPLICABLE FR OM 01.11.2002) WHEREBY WAGES/PAY REVISION WAS TO BE 13 .25% OF ESTABLISHMENT EXPENSES & PROVISION MADE @ 12% IS LESS THAN SETTLED BY BIPARTITE SETTLEMENTS. THE SAME OUG HT TO BE ALLOWED AS ALLOWED IN IMMEDIATE PROCEEDING A.Y. 200 9-10 BY LD. CIT (A), JODHPUR. THE AMOUNT OF WAGES REVISION PROVIDED ON 31.03.2010 HAS BEEN DULY PAID ON 24.09.2010 AND CANNOT BE SAID TO BE ADHOC PROVISION. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE DE RIVES INCOME FROM BANKING BUSINESS. IT HAS FILED ITS RETURN OF INCOME DECLARI NG INCOME OF RS. 31,00,49,440/- ON 28.09.2010. THE CASE WAS SCRUTINIZED UNDER SECTION 143(3) OF THE IT ACT, 1961. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICE D THAT THE ASSESSEE HAS MADE ADHOC PROVISION OF RS. 140.00 LACS FOR PAY REVISION IN THE PROFIT & LOSS ACCOUNT. THE AO REQUIRED THE ASSESSEE TO QUANTIFY THE AMOUNT OF SUC H PROVISION OF PAY REVISION. THE ASSESSEE VIDE ITS REPLY DATED 21.03.2013 HAS EXPLAI NED AS UNDER : THE BASIS OF THE PROVISION HAS BEEN THE SAME AS W AS IN PREVIOUS YEAR. THE AMOUNT OF PROVISION IN PREVIOUS YEAR AND CURRENT YEAR WAS CALCULATED 12% OF THE ESTABLISHMENT EXPENSES WHICH HAS BEEN THE BASIS OF EIGHT BIPARTITE SETTLEMENT SIGNED ON 02.06.2005 AND WAS APPLICABLE FROM 01.11.2002. UNDER THE SETTLEMENT WAGE/PAY REVI SION WAY 13.25% OF 3 ITA NO. 169/JP/2015 A.Y. 2010-11. ERSTWHILE RAJASTHAN GRAMIN BANK LTD VS. DCIT THE ESTABLISHMENT EXPENSES. THE ASSESSEE BANK HAS A LSO MADE THE PROVISION @ 12% WHICH IS LESS THAN OF 13.25%. THE ACTUAL PAYMENT HAS BEEN MADE ON 24.09.2010 RS 7 64.10 LACS THE TOTAL PROVISION OF RS. 565.00 LACS (425 LACS FO R THE F.Y. 2008-09 + 140.00 LACS FOR THE F.Y. 2009-10) WHICH IS MORE TH AN THE TOTAL PROVISION. THE BASIS OF PROVISION OF 140.00 LACS IS FULLY PROV ED THAT LIABILITY OF PAY REVISION @ 13.25% HAS BEEN ASCERTAINED WITH EFF ECT FROM 01.11.2007 AS PER 8 TH BIPARTITE SETTLEMENT AND IT WAS MANDATORY TO MAKE THE PROVISION TO DISCLOSE TRUE AND CORRECT NET PROFIT OF THE ASSE SSEE BANK. IN CASE, IF ASCERTAINED LIABILITY OF RS. 140.00 LACS WAS DEBITE D IN THE YEAR OF PAYMENT, THAN SUCH AMOUNT WILL BE TREATED AS EXPENSES PERTAI NING TO PREVIOUS YEAR AND WOULD BE DISALLOWABLE. BESIDE THIS, THE BANKS N ET PROFIT WILL NOT REFLECT TO TRUE AND CORRECT IN BOTH YEARS I.E. IN THE YEAR OF PROVISION AND IN THE YEAR OF PAYMENT. THE PUNJAB NATIONAL BANK (SPONSORED BANK) HAS ALSO MADE THE PROVISION OF DURING THE YEAR UNDER CONSIDERATION ON ACCOUNT OF SALARY. RBI HAS BEEN REGULARLY VERY STRICT MAKING THE PROVI SION OF SALARY REVISION AS PER BIPARTITE SETTLEMENT. RBI HAS RECEN TLY HAS GIVEN THE DIRECTION TO MAKE THE PROVISION PAY REVISION TO THE ALL BANKS FOR THE YEAR ENDED 31 ST MARCH 2013 ON THE BASIS OF PREVIOUS 09 TH . BIPARTITE SETTLEMENT DATED 27.04.2010 DESPITE THE FACT FINAL DECISION OF PAY REVISION WILL BE MARCH 2014. THE PHOTOCOPY OF THE RBI DIRECTION PUBL ISHED IN BUSINESS STANDARD DATED 02.02.2013 THE AO AFTER CONSIDERING THE SUBMISSIONS OF THE ASS ESSEE OBSERVED THAT ASSESSEE HAS MADE THE PROVISION OF PAY REVISION OF RS. 140.00 LA CS WITHOUT ANY BASIS, IT HAS BEEN CREATED ONLY ON ESTIMATE BASIS. NO PROPER SUPPORTIN G EVIDENCE IN THIS REGARD HAS BEEN 4 ITA NO. 169/JP/2015 A.Y. 2010-11. ERSTWHILE RAJASTHAN GRAMIN BANK LTD VS. DCIT FURNISHED. THUS, THE AO DISALLOWED 10% OF PROVISIO N MADE I.E. A SUM OF RS. 14.00 LACS HAS BEEN DISALLOWED AND ADDED TO THE TOTAL INCOME O F THE ASSESSEE. 3. BEING AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE HAS CARRIED THE MATTER BEFORE LD. CIT (A). THE LD. CIT (A) AFTER CONSIDERING THE ASSESSMENT ORDER AND SUBMISSIONS MADE BY THE ASSESSEE, OBSERVED THAT NO PROPER BASIS AND JUSTIFICATION FOR MAKING THE PROVISION WAS FURNISHED IN THE COURSE OF ASSESSMENT PROCEEDINGS. THE LD. CIT (A) OPINED THAT WHOLE AMOUNT OF ADHOC PROVISION MADE BY THE APPELLANT IN THE ACCOUNT BOOKS NEEDS TO BE DISALLOWED RATHER THAN MAKING A 1 0% DISALLOWANCE OF THE AMOUNT. HE, ACCORDINGLY ASKED THE ASSESSEE TO SHOW CAUSE U/ S 251(2) OF THE IT ACT, 1961 AS TO WHY NOT THE WHOLE AMOUNT OF PROVISION OF RS. 140 LA CS MADE FOR PAY REVISION BE DISALLOWED. 3.1. IN RESPONSE TO SHOW CAUSE NOTICE, THE LD. A/R FOR THE ASSESSEE REITERATED HIS SUBMISSION AS MADE BEFORE THE AO. THE LD. A/R FURTH ER SUBMITTED THAT THE PAY REVISION OF RS. 140 LACS WAS MADE ON THE BASIS OF THE PAY RE VISION DUE WITH EFFECT FROM 01.11.2007 AS 9 TH BIPARTITE SETTLEMENT. IN THIS CONNECTION, HE FURTH ER SUBMITTED THT THE PAY REVISION OF BANK EMPLOYEE IS MADE IN FIVE YEARS AND THE LAST PAY REVISION WAS MADE ON 01.11.2002 AS PER 8 TH BIPARTITE SETTLEMENT. THE PAY REVISION AS PER 8 TH BIPARTITE SETTLEMENT WAS DECIDED 13.25% OF ESTABLISHMENT EXPE NSES AND SAME WAS APPLICABLE FROM 01.11.2007. HOWEVER, THE UNION OF THE BANKS WE RE NOT AGREE AND THEREFORE, THE FURTHER NEGOTIATION TO HIKE WAS DECIDED IN 9 TH BIPARTITE SETTLEMENT I.E. 17.5%. FURTHER IT IS ALSO SUBMITTED THAT PROVISION WAS ALSO MADE BY A LL RRBS AS PER THE DIRECTION OF THE 5 ITA NO. 169/JP/2015 A.Y. 2010-11. ERSTWHILE RAJASTHAN GRAMIN BANK LTD VS. DCIT SPONSORED BANK PNB. THE RBI IS ALSO VERY STRICT FOR MAKING THE PROVISION OF PAY REVISION IN THE RESPECTIVE YEARS AND GUIDANCE IS ALSO ISSUED TIME TO TIME. THE COPY OF DIRECTION ISSUED BY RBI WAS ALREADY SUBMITTED TO THE AO. THE LD. A/R ALSO PLACED RELIANCE ON THE DECISION OF ITAT AND HONBLE HIGH COURT REPORTED IN 282 ITR (AT) 135 IN CASE OF NATIONAL MINERAL DEVELOPMENT CORPORATION LTD. VS. J CIT (ASSTT.)(ITAT HYDERABAD) AND COMMISSIONER OF INCOME TAX VS. BHARAT HEAVY ELECTRIC AL LTD. DECIDED ON 11 TH SEPTEMBER, 2012 IN ITA NOS. 278, 807, 1578 & 313/20 10 BY HONBLE HIGH COURT OF DELHI. 3.2. THE LD. CIT (A) WHILE CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE, WAS OF THE VIEW THAT THE PROVISION MADE BY THE BANK FOR PAY RE VISION OF EMPLOYEES IN THE BOOKS OF ACCOUNTS OVER A PERIOD OF 2-3 YEARS, WILL REMAIN ON LY A PROVISION TILL THE LIABILITY TO PAY THE REVISED PAY ARISES. THE LIABILITY TO PAY WOULD ARISE ONLY WHEN AN AGREEMENT/SETTLEMENT IS REACHED BY THE BANK WITH TH E EMPLOYEES. THE AGREEMENT WITH THE EMPLOYEES WOULD ENTAIL DETERMINING THE QUANTUM OF PAY REVISION WHICH IS TO BE GIVEN TO EACH EMPLOYEE AND ALSO THE DATE FROM WHICH THE PAY REVISION WOULD BECOME EFFECTIVE. THEREFORE, THE LIABILITY WOULD ACCRUE ON LY IN THE YEAR IN WHICH SUCH AN AGREEMENT IS SIGNED BY THE BANK. BEFORE THIS PERIOD , ANY PROVISION MADE BY ANY BANK FOR THIS PURPOSE WOULD ONLY REMAIN A PROVISION, WHI CH WOULD BE DESIRABLE ON THE GROUNDS OF PRUDENCE, CONSERVATISM AND GOOD GOVERNAN CE. THE PROVISION MADE BY THE ASSESSEE IS NOT ALLOWABLE UNDER THE INCOME TAX ACT. THE CASE LAWS RELIED UPON BY THE LD. A/R ARE DISTINGUISHABLE ON FACTS. THE LD. CIT (A) PLACING RELIANCE ON THE JUDGMENTS 6 ITA NO. 169/JP/2015 A.Y. 2010-11. ERSTWHILE RAJASTHAN GRAMIN BANK LTD VS. DCIT OF HONBLE SUPREME COURT IN THE CASES OF M/S. SHREE SAJJAN MILLS LTD. VS. CIT, 156 ITR 585, M/S. GEMINI CASHEW SALES CORPORATION, 65 ITR 6 43, M/S. INDIAN MOLASSES CO. P. LTD., 37 ITR 66 AND HONBLE BOMBAY HIGH COURT IN TH E CASE OF M/S. PHALTON SUGAR WORKS LTD. VS. CIT, 162 ITR 622, HELD THAT NO DEDUC TION IS ALLOWABLE TO THE APPELLANT ON ACCOUNT OF ANY ADHOC PROVISION MADE IN THE BOOKS OF ACCOUNTS ON ACCOUNT OF PAY REVISION OF EMPLOYEES. THE AMOUNT WOULD ACCRUE AND BECOME ALLOWABLE AS A DEDUCTION ONLY IN THE YEAR OF AGREEMENT FOR PAY REVISION HAVI NG BEEN SIGNED BY THE BANK WITH THE REPRESENTATIVE OF EMPLOYEES. THEREFORE, THE LD. CI T (A) REJECTED THE CLAIM OF THE ASSESSEE AND ENHANCED THE DISALLOWANCE TO THE EXTEN T OF 100% I.E. RS. 140 LACS. 4. NOW THE ASSESSEE IS BEFORE US. 4.1. THE LD. A/R OF THE ASSESSEE REITERATED THE SUB MISSIONS AS MADE BEFORE THE LOWER AUTHORITIES. HE SUBMITTED THAT THE CASE OF THE ASSE SSEE IS COVERED BY THE DECISION OF ITAT JAIPUR IN THE CASE OF JHALAWAR KENDRIYA SAHAKA RI BANK LTD VS. ACIT IN ITA NO. 1032 & 1051/JP/2011 AND PRAYED THAT THE DISALLOWANC E MAY KINDLY BE DELETED. 4.2. ON THE OTHER HAND, THE LD. D/R SUPPORTED THE O RDER OF THE LD. CIT (A) AND REQUESTED TO CONFIRM THE DISALLOWANCE. 4.3. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. THE LD. A/R OF THE ASSESSEE CONTENDED THAT IN THE I MMEDIATELY PRECEDING ASSESSMENT YEAR 2009-10 THE CLAIM OF THE ASSESSEE IN RESPECT O F PROVISION OF PAY REVISION OF EMPLOYEES WAS ACCEPTED BY THE LD. CIT (A) AFTER TAK ING INTO CONSIDERATION THE JUDGMENTS OF HONBLE HIGH COURTS AND THE ITAT. THE LD. D/R COULD NOT CONTROVERT THE 7 ITA NO. 169/JP/2015 A.Y. 2010-11. ERSTWHILE RAJASTHAN GRAMIN BANK LTD VS. DCIT CLAIM OF THE ASSESSEE. THE AO HAS ONLY DISALLOWED RS. 14.00 LACS I.E. 10% OF THE ADHOC PROVISION MADE BY THE APPELLANT IN THE BOOKS OF ACC OUNT. AGAINST THE SAID DISALLOWANCE, THE ASSESSEE WAS IN APPEAL BEFORE LD. CIT (A). THE LD. CIT (A) AFTER ISSUING THE SHOW CAUSE NOTICE UNDER SECTION 251(2) OF THE IT ACT, SO UGHT REPLY FROM THE ASSESSEE AS TO WHY THE PROVISIONAL AMOUNT OF RS. 140 LACS MADE FOR PAY REVISION BE NOT DISALLOWED. THE ASSESSEE HAS FILED THE REPLY. WE HAVE GONE THRO UGH THE REPLY. IT IS AN UNDISPUTED FACT THAT THE PAY REVISION OF THE EMPLOYEES IS AN O N GOING PROCESS IN RESPECT OF BANK EMPLOYEES. THE PAY REVISION OF RS 140 LACS WAS MADE ON THE BASIS OF PAY REVISION DUE AS ON 1.11.2007 AS 9 TH BIPARTITE SETTLEMENT. THE SETTLEMENT WAS EFFECTED BETWEEN THE CONCERNED PARTIES I.E. MANAGEMENT AND UNION OF EMPLO YEES IN THE FINANCIAL YEAR UNDER CONSIDERATION. ON THE BASIS OF AGREEMENT, THE PAYM ENTS WERE ALSO MADE TO THE EMPLOYEES FROM THE EFFECTIVE DATE. THEREFORE, THE CONCLUSION OF LD. CIT (A) THAT THERE WAS NO CRYSTALLIZED LIABILITY AND NO AGREEMENT WAS ARRIVED AT BETWEEN THE PARTIES, IS WITHOUT ANY MERIT. THE APPELLANT IS A GRAMIN BANK S PONSORED BY PUNJAB NATIONAL BANK AND HAVING THE TRAPPING OF SCHEDULED BANK. THE APPE LLANT IS ALSO GOVERNED BY THE INSTRUCTIONS ISSUED BY THE RBI IN THIS REGARD. IN O UR OPINION, THE EMPLOYEES ARE ENTITLED TO THE REVISION OF THE PAY NOT WHEN THE REPORT OF T HE COMMISSION OR COMMITTEE IS SUBMITTED TO THE MANAGEMENT, BUT THE EMPLOYEES ARE ENTITLED TO THE REVISED PAY FROM THE DATE WHEN IT IS FOUND TO BE DUE AND PAYABLE. TH E SUBMISSION OF REPORT OR ACCEPTANCE OF THE REPORT HAS NO BASIS TO SAY THAT I T WAS NOT DUE AND WILL ONLY BECOME DUE WHEN THE PAY REVISION IS ACCEPTED BY THE EMPLOY EES. IN OUR VIEW, THE EMPLOYEES 8 ITA NO. 169/JP/2015 A.Y. 2010-11. ERSTWHILE RAJASTHAN GRAMIN BANK LTD VS. DCIT ARE ENTITLED TO REVISED PAY FROM THE DATE IT WAS DU E AND PAYABLE BY THE EMPLOYER. HOWEVER, THE QUANTUM MAY VARY, AS IN THE PRESENT CA SE, INITIALLY THE REVISION WAS ESTIMATED @ 13.25%, HOWEVER, LATER ON IT WAS CRYSTA LLIZED @ 17.5%. THE PROVISION IN THE PRESENT CASE WAS MADE ON THE BASIS OF 13.25%, H OWEVER, LATER ON IT WAS REQUIRED TO BE REVISED AND IN FACT REVISED @ 17.5%. THEREFO RE, WE DO NOT FIND ANY MERIT IN THE CONCLUSION DRAW BY LD. CIT (A).THUS THE ORDERS OF L D. CIT (A) AS WELL AS AO ARE HEREBY SET ASIDE. WE ALSO FIND THAT THE CASE OF THE ASSES SEE IS COVERED BY THE DECISION OF THE ITAT JAIPUR BENCH IN THE MATTER OF JHALAWAR KENDRIY A SAHAKARI BANK LTD. VS. ACIT IN ITA NO. 1032/JP/2011 DATED 14.08.2014 WHEREBY THE C LAIM OF THE ASSESSEE WAS ALLOWED. RESPECTFULLY FOLLOWING THE DECISION OF CO ORDINATE BENCH OF THE ITAT, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND ALLOW THE CLAIM OF THE ASSESSEE BY DELETING THE DISALLOWANCE. 5. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 8/01/2016. SD/- SD/- VH-VKJ-EHUK YFYR DQEKJ (T.R. MEENA) (LALIET KUMAR) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 8/01/2016 DAS/ 9 ITA NO. 169/JP/2015 A.Y. 2010-11. ERSTWHILE RAJASTHAN GRAMIN BANK LTD VS. DCIT VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- ERSTWHILE RAJASTHAN GRAMIN BANK, ALWA R. 2. IZR;FKHZ@ THE RESPONDENT- THE DCIT, CIRCLE-1, ALWAR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDRVIHY@ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 169/JP/2015) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR 10 ITA NO. 169/JP/2015 A.Y. 2010-11. ERSTWHILE RAJASTHAN GRAMIN BANK LTD VS. DCIT