Dhanalakshmi Bank Ltd, Thrissur V. ACIT, Thrissur

ITA 188/COCH/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64858 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 13-09-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 14-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SREENIVASU KOLLIPAKA
• Assessee Lawyers: V SATHYANARAYANAN

Judgement Text

1 ITA NO.186 TO 189- /COCH/2011 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKARA N(AM) I.T.A NO. 186/COCH-2011 - A.Y. 2000-01 I.T.A NO. 187/COCH-2011 - A.Y. 2001-02 I.T.A NO. 188/COCH-2011 - A.Y. 2002-03 I.T.A NO. 189/COCH-2011 - A.Y. 2003-04 DHANALAXMI BANK LTD VS THE A.C.I.T., CIR.1(1) NAICKANAL, TRICHUR RANGE-1, TRICHUR PAN : AABCT0019J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V SATHYANARAYANAN RESPONDENT BY : SHRI SREENIVASU KOLLIPAKA DATE OF HEARING : 13-09-2012 DATE OF PRONOUNCEMENT : 12-10-2012 O R D E R PER N.R.S. GANESAN (JM) ALL THE FOUR APPEALS OF THE TAXPAYER IS DIRECTED A GAINST THE INDEPENDENT ORDERS OF THE COMMISSIONER OF INCOME-TAX(A)-III, KOCHI ALL DATED 17-12-2010 FOR THE ASSESSMENT YEARS 2000-01 TO 2003-04. SINCE COMMO N ISSUE ARISES FOR CONSIDERATION IN ALL THESE APPEALS, WE HEARD THEM T OGETHER AND DISPOSE OF THE SAME BY THIS COMMON ORDER. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISAL LOWANCE OF PENSION DIRECTLY PAID BY THE TAXPAYER TO THE RETIRED EMPLOYEES. 2 ITA NO.186 TO 189- /COCH/2011 3. SHRI V SATHYANARAYANAN, THE LD.REPRESENTATIVE FO R THE TAXPAYER SUBMITTED THAT IN THE ORIGINAL ROUND OF LITIGATION THIS TRIBU NAL BY AN ORDER DATED 31-10-2007 REMANDED THE MATTER BACK TO THE FILE OF THE ASSESSIN G OFFICER TO ASCERTAIN THE FACTUAL POSITION AS ALSO WHY THE TAXPAYER BANK IS OB LIGED TO MAKE PENSION PAYMENT TO THE RETIRED EMPLOYEES WHEN THE TAXPAYER BANK IS HAVING APPROVED PENSION FUND TO WHICH THE BANK IS MAKING CONTRIBUTION AND ALSO THAT IF THERE IS ANY SETTLEMENT WITH THE UNION OF EMPLOYEES THE AUTH ORITIES BELOW HAVE TO EXAMINE THE SAME IN THE LIGHT OF THE OBSERVATIONS M ADE BY THE TRIBUNAL. ACCORDINGLY, THE ASSESSING OFFICER EXAMINED THE MAT TER AND ON THE BASIS OF THE JUDGMENT OF THE APEX COURT IN COMMISSIONER OF INCOM E-TAX VS T. STANES & COMPANY LTD 188 ITR 237 AND FOUND THAT THE AMOUNT O F PENSION PAID BY THE TAXPAYER TO THE EXTENT OF AMOUNT AVAILABLE IN THE P ENSION FUND WAS HELD NOT ALLOWABLE AS EXPENDITURE IN THE HANDS OF TAXPAYER. ACCORDINGLY, THE AMOUNT PAID BY THE TAXPAYER AS PENSION TO THE RETIRED EMPLOYEES WAS DISALLOWED AGAIN. THE COMMISSIONER OF INCOME-TAX(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 4. THE LD.REPRESENTATIVE TOOK MUCH PAIN IN EXPLAININ G THE SITUATION AS TO HOW THE TAXPAYER WAS CONTRIBUTING TO THE PENSION FUND. ACCORDING TO THE LD.REPRESENTATIVE, THE FUND AVAILABLE IN THE PENSIO N FUND IS NOT SUFFICIENT TO MEET THE PENSION OF THE RETIRED EMPLOYEES. ACCORDING TO THE LD.REPRESENTATIVE, THERE IS A CONTRACTUAL LIABILITY TO THE TAXPAYER TO PAY P ENSION TO ALL ITS EMPLOYEES. ACCORDING TO THE LD.REPRESENTATIVE, PENSION IS A DE FINITE BENEFIT TO THE EMPLOYEES IRRESPECTIVE OF THE BALANCE IN THE PENSION FUND. I T IS UPTO THE EMPLOYER TO CREATE A FUND TO MEET THE FUTURE LIABILITY OR TO PAY EVERY YEAR PENSION DIRECTLY TO THE RETIRED EMPLOYEES. ACCORDING TO THE LD.REPRESENTAT IVE, IN ANY WAY THERE MAY NOT BE ANY DUPLICATION OF PAYMENT TO THE RETIRED EMPLOY EES BOTH FROM THE FUND AND FROM THE BANK. THE ONLY OBJECTION OF THE DEPARTME NT IS THAT THE TAXPAYER IS 3 ITA NO.186 TO 189- /COCH/2011 CONTRIBUTING TO THE PENSION FUND AND ALSO PAYING PE NSION DIRECTLY TO ITS RETIRED EMPLOYEES. THEREFORE, THERE WAS A DOUBLE PAYMENT. ACCORDING TO THE LD.REPRESENTATIVE, THE TAXPAYER BANK IS FACING A LIQ UIDITY CONSTRAIN AND IS NOT ABLE TO MAKE SUBSTANTIAL CONTRIBUTION TO THE PENSION FUND . AT THE SAME TIME, THE TAXPAYER WAS UNDER THE CONTRACTUAL OBLIGATION TO PA Y PENSION TO ITS RETIRED EMPLOYEES ON THE BASIS OF THE SETTLEMENT REACHED WI TH THE EMPLOYEES UNION. ACCORDING TO THE LD.REPRESENTATIVE, THE AMOUNT RECE IVED FROM THE PENSION FUND TO MEET THE PENSION LIABILITY IS CREDITED TO THE PR OFIT & LOSS ACCOUNT OF THE TAXPAYER. THEREAFTER, THE PENSION WAS PAID BY THE TAXPAYER TO THE RETIRED EMPLOYEES. WHILE COMPLETING THE ASSESSMENT, THE NE T AMOUNT PAID TO THE RETIRED EMPLOYEES AS PENSION IS CLAIMED AS DEDUCTIO N. ACCORDING TO THE LD.REPRESENTATIVE, THE ASSESSING AUTHORITY HAD ACCE PTED ALL THE ADJUSTMENTS MADE BY THE TAXPAYER EXCEPT THE PAYMENT MADE TO THE RETI RED EMPLOYEES TO WHOM PENSION HAS BEEN PAID DIRECTLY. ON THE DIRECTION O F THIS TRIBUNAL, THE LD.REPRESENTATIVE SUBMITTED THE DETAILS OF PENSION PAID TO THE RETIRED EMPLOYEES AND THE AMOUNT OF PENSION RECEIVED FROM PENSION FUN D. THE LD.REPRESENTATIVE SUBMITTED THAT THE AMOUNT RECEIVED AS PENSION FROM THE PENSION FUND DURING THE RELEVANT ASSESSMENT YEAR WAS CREDITED IN THE PROFIT & LOSS ACCOUNT. THE PENSION TO THE RETIRED EMPLOYEES WAS PAID ONLY BY THE BANK AND THE PENSION FUND HAS NOT MADE ANY PAYMENT DIRECTLY. THEREFORE, THE LD.REPRE SENTATIVE FOR THE TAXPAYER CLARIFIED THAT THERE IS NO DOUBLE DEDUCTION AS ALLE GED BY THE REVENUE AUTHORITIES. 5. ON THE CONTRARY, THE LD.DR, SHRI SRINIVASU KOLLIP AKA SUBMITTED THAT THE TAXPAYER IS CONTRIBUTING TO THE PENSION FUND AND TH E PENSION IS PAID DIRECTLY BY THE PENSION FUND AUTHORITIES. THE TAXPAYER CLAIMED THAT IT HAS ALSO PAID PENSION DIRECTLY TO THE RETIRED EMPLOYEES. THEREFORE, ACCO RDING TO THE LD.DR WHEN THE PENSION FUND PAYS THE PENSION FROM CONTRIBUTION MAD E BY THE TAXPAYER THERE IS 4 ITA NO.186 TO 189- /COCH/2011 NO NECESSITY FOR THE TAXPAYER TO PAY PENSION DIRECT LY. THE LD.DR FURTHER SUBMITTED THAT THE CLAIM OF THE TAXPAYER THAT PENSI ON WAS NOT PAID BY THE PENSION FUND AND PENSION WAS DIRECTLY RECEIVED BY T HE TAXPAYER FROM THE FUND WHICH WAS CREDITED IN THE PROFIT & LOSS ACCOUNT AND WHAT WAS PAID TO THE RETIRED EMPLOYEES BY THE TAXPAYER IS CASH PAYMENT WHICH IS DEBITED TO THE PROFIT & LOSS ACCOUNT WAS NOT EXAMINED BY THE LOWER AUTHORITIES. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ONLY ISSUE A RISES FOR CONSIDERATION IS DISALLOWANCE OF PENSION PAID BY THE TAXPAYER TO THE RETIRED EMPLOYEES. THE CONTENTION OF THE LD.DR IS THAT THE TAXPAYER CONTRI BUTES TO THE PENSION FUND AS ALSO PAYS PENSION TO ITS RETIRED EMPLOYEES AND CLAI MS BOTH THE PAYMENTS AS DEDUCTION; THEREFORE, THERE IS A DUPLICATION OF PAY MENT. THE EXPLANATION OF THE TAXPAYER APPEARS TO BE THAT THE PENSION IS NOT PAID TO THE RETIRED EMPLOYEE FROM THE FUND. THE PENSION FUND PAYS TO THE TAXPAYER AN D WHAT WAS RECEIVED FROM THE PENSION FUND IS NOT SUFFICIENT ENOUGH TO MEET THE E NTIRE LIABILITY OF PENSION TO ITS RETIRED EMPLOYEES. THEREFORE, THE AMOUNT OF PENSIO N RECEIVED FROM THE PENSION FUND IS CREDITED TO THE PROFIT & LOSS ACCOUNT AND T HEREAFTER THE TAXPAYER MAKES PAYMENTS TO ITS RETIRED EMPLOYEES. THE AMOUNT RECE IVED FROM THE PENSION FUND IS CREDITED IN THE PROFIT & LOSS ACCOUNT AND WHAT W AS PAID BY THE TAXPAYER IS DEBITED IN THE PROFIT & LOSS ACCOUNT. THEREFORE, A CCORDING TO THE LD.REPRESENTATIVE, THERE IS NO DUPLICATION. THIS T RIBUNAL FINDS THAT IF THE AMOUNT RECEIVED FROM THE PENSION FUND IS CREDITED TO THE P ROFIT & LOSS ACCOUNT OF THE TAXPAYER AND THEN THE TAXPAYER MAKES THE PAYMENT TO THE RETIRED EMPLOYEES AS PENSION, THEN THERE MAY NOT BE ANY DUPLICATION AT A LL. BUT IT HAS TO BE VERIFIED WHETHER THE AMOUNT RECEIVED FROM THE PENSION FUND I S CREDITED IN THE PROFIT & LOSS ACCOUNT OR NOT. IT ALSO NEEDS TO BE EXAMINED WHETHER ANY PAYMENT IS MADE TO THE RETIRED EMPLOYEES FROM THE PENSION FUND DIRE CTLY. IF NO PAYMENT IS MADE 5 ITA NO.186 TO 189- /COCH/2011 FROM THE PENSION FUND DIRECTLY AND THE ENTIRE AMOUN T RECEIVED FROM THE PENSION FUND IS CREDITED IN THE PROFIT & LOSS ACCOUNT AND T HEN THE TAXPAYER MAKES THE PAYMENT TO ITS RETIRED EMPLOYEES BY DEBITING THE SA ME IN THE PROFIT & LOSS ACCOUNT, THEN THE AMOUNT PAID BY THE TAXPAYER AS PE NSION HAS TO BE ALLOWED AS DEDUCTION IN VIEW OF THE CONTRACTUAL OBLIGATION TO PAY THE PENSION. SINCE THESE FACTS WERE NOT EXAMINED BY THE LOWER AUTHORITY, THI S TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE EXAMINED AS TO WHETHER THE AMOUNT RECEIVED FROM THE PENSION FUND IS CREDITED IN THE P ROFIT & LOSS ACCOUNT AND WHETHER THE PENSION FUND AUTHORITIES HAVE MADE ANY PAYMENT DIRECTLY TO THE RETIRED EMPLOYEES. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITY ARE SET ASIDE AND THE ENTIRE MATTER IS REMITTED BACK TO THE FILE O F THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE SAME IN THE L IGHT OF OBSERVATIONS MADE BY THIS TRIBUNAL AND THEREAFTER DECIDE THE SAME AFTER GIVING REASONABLE OPPORTUNITY TO THE TAXPAYER. 7. IN THE RESULT, APPEALS OF THE TAXPAYER ARE ALLOW ED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 TH OCTOBER, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 12 TH OCTOBER, 2012 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH