DCIT (Exemption), Circle - 1(1), Kolkata, Kolkata V. The Institution of Engineers (India), Kolkata

ITA 2031/KOL/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5291 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 13-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C J SINGH
• Assessee Lawyers: I BAN ERJEE
• Keywords: Charitable institution; Bad and doubtful debts
• Section: 11

Judgement Text

I.T.A NO.2031/KOL/2017 THE INSTITUTE OF ENGINEERS (INDIA) PAGE | 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOLKATA BEFORE: SHRI P. M. JAGTAP, VICE PRESIDENT AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A NO.2031/KOL/2017 (ASSESSMENT YEAR: 2010-11) DCIT(EXEMPTION), CIRCLE-1(1), KOLKATA APPELLANT VS THE INSTITUTE OF ENGINEERS (INDIA) RESPONDENT [PAN:AAATT3439Q] FOR THE APPELLANT : SHRI C.J. SINGH, JCIT, SR. DR FOR THE RESPONDENT : SHRI I. BANERJEE, FCA, DATE OF HEARING : 19.03.2019 DATE OF PRONOUNCEMENT : 29.05.2019 ORDER SHRI S.S. VISWANETHRA RAVI, JM: THIS APPEAL BY THE REVENUE AGAINST THE ORDER DATED 31.03.2017 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-25, KOLKATA [CIT(A)] FOR ASSESSMENT YEAR 2010-11. 2. THE PRESENT APPEAL WAS FILED WITH A DELAY OF 100 DAYS. UPON HEARING BOTH THE PARTIES AND ON PERUSAL OF THE AFFIDAVIT DATED 12.09.2017 DEPOSED BY THE APPELLANT, WE FIND THE REASONS STATED IN THE AFFIDAVIT REALLY PREVENTED THE APPELLANT TO FILE THE PRESENT APPEAL WITHIN TIME AND CONSIDERING THE SAME, THE DELAY OF 100 DAYS ARE CONDONED. 3. THE APPELLANT-REVENUE RAISED SIX GROUNDS AMONGST WHICH GROUND NOS.1 AND 2 ARE RELEVANT WHICH WERE RAISED CHALLENGING THE I.T.A NO.2031/KOL/2017 THE INSTITUTE OF ENGINEERS (INDIA) PAGE | 2 ACTION OF THE CIT(A) IN DELETING THE ADDITIONS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF PROVISION FOR DOUBTFUL DEBTS AND ADVANCES, GRATUITY AND LEAVE ENCASHMENT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. SINCE THE FACTS RELATING TO THE SAID THREE ISSUES ARE IDENTICAL AND THEREFORE WE PROCEED TO DISPOSE OFF THE THREE ISSUES TOGETHER. 4. HEARD BOTH PARTIES AND PERSUED THE MATERIALS AVAILABLE ON RECORD. ACCORDING TO ASSESSING OFFICER, THE PROVISIONS MADE BY THE ASSESSEE UNDER THE THREE HEADS I.E. PROVISION FOR LEAVE ENCASHMENT, GRATUITY, DOUBTFUL DEBTS ARE NOT IN THE MEANING OF APPLICATION SPECIFIED U/S 11(1)(A) OF THE ACT. IN EXPLANATION, THE ASSESSEE STATED THAT ALL THE SAID THREE PROVISIONS HAD BEEN MADE IN CONFORMITY WITH THE ACCOUNTING POLICY NO.1.7 SCHEDULE 30 AND THE ASSESSEE FOLLOWS THE SAME, AS A CONSISTENT PRACTICE AND HAVING ITS LIABILITY ASSESSED AND RECOGNIZED AND INCORPORATED IN THE BOOKS. THE SAID PROVISION IS BEING CONSISTENTLY FOLLOWED AS THE APPLICATION U/S 11 OF THE ACT. FURTHER, IT IS NOTED THAT THE ASSESSEE PLACED RELIANCE ON THE THREE DECISIONS IN THE CASES OF BHORUKA PUBLIC WELFARE TRUST; 240 ITR 513(CAL) FOR THE PROPOSITION OF THAT THE INCOME OF CHARITABLE TRUST SHOULD BE COMPUTED ON COMMERCIAL BASIS AS SHOWN BY THE BOOKS OF ACCOUNTS AND NOT STRICTLY AS PER PROVISIONS OF THE INCOME TAX ACT. FURTHER IN THE CASE OF CIT VS. ESTATE SHRI V.L. AETHIRAJ; 136 ITR 12 FOR THE PROPOSITION THAT THE INCOME OF THE TRUST SHOULD BE UNDERSTOOD IN COMMERCIAL SENSE AS PER THE BOOKS OF ACCOUNTS. FURTHER IT IS NOTED THAT IN THE CASE OF CIT VS. TRUSTEES OF HEH NIZAMS CHARITABLE TRUST; 131 ITR 497(AP) FOR THE PROPOSITION THAT IT IS NOT CORRECT TO EQUATE THE WORD APPLIED WITH THE WORK SPENT. 5. THE ASSESSING OFFICER DID NOT ACCEPT THE ABOVE SAID SUBMISSIONS OF THE ASSESSEE. THE ASSESSING OFFICER HELD THAT THE PROVISIONS PARTICULARLY OF LEAVE ENCASHMENT AND GRATUITY HAVE BEEN CREATED TO PAY OFF LIABILITIES OF ALL THE EMPLOYEES EXISTED AND AS SUCH LIABILITY WILL I.T.A NO.2031/KOL/2017 THE INSTITUTE OF ENGINEERS (INDIA) PAGE | 3 COME INTO EXISTENCE ONLY WHEN THE ENTIRE STAFF MEMBERS RETIRE OR OTHERWISE LEFT THE ORGANIZATION DURING THE PREVIOUS YEAR. THE SAID LIABILITY IS CLOSELY AND PERMANENTLY RELATED TO CERTAIN FUTURE CONTINGENCY AND BEING A CONTINGENT LIABILITY. THE ASSESSING OFFICER HELD THAT THE DIRECTION IS NOT ALLOWABLE FOR THE PURPOSE OF SECTION 11(1)(A) OF THE ACT. 6. ACCORDING TO THE CIT(A), SIMILAR ISSUES AROSE IN THE IMMEDIATE PRECEDING ASSESSMENT YEAR I.E. 2009-10 AND THE ASSESSING OFFICER ALLOWED PART OF PROVISION ON THE ACTUAL PAYMENT. FURTHER HE HELD THAT THE INCOME OF THE TRUSTS HAS TO BE COMPUTED ON COMMERCIAL PRINCIPLES AND IS AN ACCEPTED PRINCIPLE FOR PROVISION FOR DOUBTFUL DEBTS AND ADVANCES. REGARDING THE OTHER PROVISIONS I.E. GRATUITY AND LEAVE ENCASHMENT, HE HELD ON AN EXAMINATION OF RECORD AND FOUND THAT THE ASSESSEE MADE THESE PROVISIONS ON THE BASIS OF CERTIFICATE FROM AN ACTUARY AND ALWAYS BEEN DISCLOSED IN THE BOOKS OF ACCOUNTS. FURTHER HE FOUND SATISFIED THE CERTIFICATE FROM THE ACTUARY AND THE PROVISION MADE THEREON FOR SPECIFIC PURPOSES COULD NOT BE DIVERTED FOR OTHER EXPENDITURE. IT IS NOTED THAT, SUPPORTING THE VIEW OF CIT(A), THE ASSESSEE PLACED ON RECORD CERTIFICATE ISSUED BY THE ACTUARY AT PAGE NO.33 OF THE PAPER BOOK WHEREIN IT IS CLEARLY ESTABLISHED THAT THE OPENING LIABILITIES AS PER BOOKS ON 01.04.2009 IS RS.1.80.83.721/- AND LIC PREMIUM OF RS.1,28,15,483/- WERE PAID DURING THE PERIOD OF ASSESSMENT YEAR 2008-09. IT IS ALSO SEEN THAT THE ASSESSEE PROVIDED AN AMOUNT OF RS.88,18,525/- TO THE EXPENDITURE A/C ENDED ON 31.03.2010 AND SHOWING THE CLOSING LIABILITY AS PER BOOKS AS ON 31.03.2010 IS RS.1,40,86,763/-. THEREFORE ON PERUSAL OF THE SAID CERTIFICATE WHICH IS THE BASIS OF CALCULATION TO ARRIVE CURRENCY CHARGE TO INCOME AND EXPENDITURE A/C WHICH CLEARLY SHOWS THAT THE ASSESSEE HAS BEEN PAYING AMOUNT TO GRATUITY AND LEAVE ENCASHMENT UNDER THE PROVISIONS MADE THEREOF. FURTHER IT IS NOTED FROM THE ASSESSMENT I.T.A NO.2031/KOL/2017 THE INSTITUTE OF ENGINEERS (INDIA) PAGE | 4 ORDER FOR ASSESSMENT YEAR 2008-09, THE SIMILAR ISSUE HAS COME UP BEFORE THE ASSESSING OFFICER AND THE ASSESSING OFFICER ALLOWED ON FINDING OF ACTUAL PAYMENT OF GRATUITY AND LEAVE ENCASHMENT. WE FIND THE ASSESSEE IS FOLLOWING CONSISTENTLY ACCEPTED COMMERCIAL ACCOUNTING PRINCIPLES AND THEREFORE WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND WE AGREE WITH THE REASONS AFFORDED BY HIM IN THE IMPUGNED ORDER. THUS GROUND NOS.1 & 2 RELATING TO THE ISSUE DISCUSSED ABOVE RAISED BY THE REVENUE ARE DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.05.2019. SD/- SD/- [P. M. JAGTAP] [S.S. VISWANETHRA RAVI] VICE PRESIDENT JUDICIAL MEMBER DATED : 29.05.2019 PLACE : KOLKATA RS, SR.PS COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT DCIT(EXEMPTION), CIRCLE-1(1), KOLKATA. 2 RESPONDENT THE INSTITUTE OF ENGINEERS (INDIA), 8, GOKHALE ROAD, NEAR P.G. HOSPITAL, KOLKATA 700020. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOL KATA //TRUE COPY// BY ORDER, ASSISTANT REGISTRAR, ITAT, KOLKATA