The West Bengal State Co-Operative Bank Ltd., Kolkata V. DCIT, Circle - 40, Kolkata, Kolkata

ITA 2056/KOL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1830 (ITAT-KOLKATA)
• Duration Of Justice: 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 15-09-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A BHATTACHAR YYA
• Assessee Lawyers: N C MONDAL
• Keywords: Commercial expediency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : KOLKATA [BEFORE HONBLE SHRI M.BALAGANESH, AM & HONBLE S HRI S.S.VISWANETHRA RAVI, JM] I.T.A NO. 2056/KOL/20 17 ASSESSMENT YEAR : 2012-1 3 THE WEST BENGAL STATE CO-OPERATIVE BANK LTD. -VS- DCIT, CIRCLE-40, KOLKATA . [PAN: AAAAT 7072 N] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI N.C. MONDAL, FCA FOR THE RESPONDENT : SHRI A. BHATTACHARYYA, ADDL. CIT DATE OF HEARING : 20.08.2018 DATE OF PRONOUNCEMENT : 05. 09 .2018 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-12, KOLKATA [IN SHORT THE LD CI T(A)] IN APPEAL NO. 39/CIT(A)- 12/KOL/CIR-40/2015-16 DATED 04.07.2017 AGAINST THE ORDER PASSED BY THE DCIT, CIRCLE- 40, KOLKATA [ IN SHORT THE LD AO] UNDER SECTION 143 (3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 28.03.2015 FOR THE ASSESSM ENT YEAR 2012-13. 2. THE GROUND NOS. 1 & 4 RAISED BY THE ASSESSEE ARE GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 3. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD CITA WAS JUSTIFIED IN UPHOLDING THE DISALLOWANCE OF EXPENSES TOWARDS BAKSHIS OF RS 4,58,350/- AND TIPS AND BAKSHIS OF RS 76,150/-, IN THE FACTS AND CIRCU MSTANCES OF THE CASE. 2 ITA NO.2056/KOL/2017 THE WEST BENGAL STATE CO-OPERATIVE BANK LTD. A.YR. 2012-13 2 3.1. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASS ESSEE IS A CO-OPERATIVE SOCIETY CARRYING ON BANKING BUSINESS. IN THE COURSE OF ASSESSMENT P ROCEEDINGS U/S 143(3) OF THE ACT, THE LD AO NOTICED THAT THE ASSESSEE HAD CLAIMED AS DEDU CTION A SUM OF RS 4,58,350/- AND ANOTHER SUM OF RS 76,150/- UNDER THE HEAD TIPS AND BAKSHIS RESPECTIVELY. THE ASSESSEE EXPLAINED THAT THE PAYMENT OF BAKSHIS AND TIPS WERE MADE TO CASUAL/PART TIME WORKERS ENGAGED PURELY ON TEMPORARY AND ADHOC BASIS LIKE SWEEPERS, WATER BOYS, CANTEEN BOYS, SECURITY STAFFS, LIFT MAN, DRIVERS ET C, ON THE EVE OF EID-UL-FITRE AND DURGA PUJA FESTIVAL IN THE NATURE OF EX-GRATIA / BONUS AN D THE SAID PAYMENTS ARE IN THE NATURE OF CONTRACTUAL OBLIGATION THOUGH UNWRITTEN. IT WAS AL SO POINTED OUT THAT THE ASSESSEE HAS BEEN PAYING THE SAID AMOUNTS CONSISTENTLY SINCE LON G AND DEBITED IN BAKSHIS AND TIPS AND BAKSHIS ACCOUNT AND THE SAID EXPENSES ARE PART OF SALARY / WAGES AND THE PAYMENT IS NOT VOLUNTARY BUT OBLIGATORY. THE SERVICES OF THOSE CASUAL / PART TIME WORKERS ARE UTMOST NECESSARY FOR NORMAL AND SMOOTH CONDUCT OF D AY TO DAY BUSINESS OF THE BANK. WITHOUT THE SERVICE OF THOSE PERSONS, IT WOULD BE U TMOST DIFFICULT TO CARRY ON DAY TO DAY OPERATIONS OF THE BANK AND IN THEIR ABSENCE, THE BU SINESS OF THE BANK WOULD SUFFER SUBSTANTIALLY. MINIMUM AMENITIES LIKE SUPPLY OF WA TER, TEA, CLEANLINESS ETC TO THE EMPLOYEES AND CUSTOMERS DURING OFFICE HOURS ARE ESS ENTIAL FOR RUNNING AND SUCCESS OF ANY BUSINESS. THE BANK IS ENGAGED IN THE BUSINESS OF BANKING, SO SECURITY IS OF UTMOST IMPORTANCE TO PROTECT THE BANK FROM ANY EVENTUALITY . SO THOUGH THE SERVICE OF THOSE CASUAL / PART TIME WORKERS ARE NOT DIRECTLY CONNECT ED TO THE EARNINGS OF THE BANK, IN THEIR ABSENCE, THE BANK CANNOT RUN ITS OPERATIONS SMOOTHL Y AND EFFICIENTLY TO EARN ITS INCOME. THE BANK HAS BEEN MAKING PAYMENTS OF THIS NATURE AS A CUSTOMARY OBLIGATION FOR SEVERAL YEARS PURSUANT TO THE AUTHORIZATION OF SUCH PAYMENT S BY THE BOARD OF DIRECTORS. THE VOUCHERS AT HEAD OFFICE WERE DULY SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS BY THE ASSESSEE AND THE NOTE SHEETS ATT ACHED WITH THE VOUCHERS CLEARLY INDICATE THE NAMES OF PERSONS TO WHOM SUCH PAYMENTS WERE MADE. THE SUBJECT MENTIONED PAYMENTS WERE MADE FROM 44 REGIONAL OFFIC ES AND BRANCHES OF THE BANK SITUATED IN DIFFERENT PARTS OF WEST BENGAL AND NECE SSARY VOUCHERS WERE KEPT AT THE 3 ITA NO.2056/KOL/2017 THE WEST BENGAL STATE CO-OPERATIVE BANK LTD. A.YR. 2012-13 3 CONCERNED REGIONAL OFFICES / BRANCHES. IT WAS POINT ED OUT THAT IT WOULD BE VERY DIFFICULT TO COLLECT ALL SUCH VOUCHERS FROM DIFFERENT REGIONA L OFFICES / BRANCHES WITHIN A SHORT TIME. HENCE TIME WAS SOUGHT FOR TO COLLECT THE SAM E FROM THE CONCERNED REGIONAL OFFICES / BRANCHES FOR SUBMISSION BEFORE THE LD AO. 3.2. THE LD AO FOUND THAT THE ASSESSEE COULD NOT PR ODUCE RELEVANT VOUCHERS AND COULD NOT ALSO JUSTIFY THE BUSINESS EXPEDIENCY OF THESE E XPENSES DESPITE GIVING SUFFICIENT TIME FOR THE ASSESSEE. THE LD AO THEREFORE DISALLOWED T HE CLAIM OF THE ASSESSEE FOR DEDUCTION OF THE AFORESAID EXPENSES WHILE COMPUTING INCOME UN DER THE HEAD INCOME FROM BUSINESS. 3.3. THE LD CITA UPHELD THE ACTION OF THE LD AO ON THE GROUND THAT SIMILAR DISALLOWANCE WAS UPHELD BY HIM IN ASSESSEES OWN CASE FOR THE IM MEDIATELY PRECEDING ASSESSMENT YEAR I.E. ASST YEAR 2011-12. 3.4. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US . 3.5. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND T HAT THE ISSUE UNDER DISPUTE IS COVERED IN FAVOUR OF THE ASSESSEE IN ITS OWN CASE F OR THE ASST YEAR 2011-12 IN ITA NO. 1471/KOL/2016 DATED 9.2.2018 WHEREIN IT WAS HELD AS UNDER:- 7. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE FILED BEFORE US A COPY OF THE ORDER OF ITAT B BENCH IN ASSESSEES OWN CA SE FOR A.Y. IN ITA NO.746/KOL/2013 ORDER DATED 30.11.2017. IN THE AFORESAID ORDER THIS TRIBUNAL CAME TO THE CONCLUSION THAT ON IDENTICAL FACTS THAT THE EXPENDITURE WAS ALLOWAB LE AS DEDUCTION. THE FOLLOWING WERE THE RELEVANT OBSERVATIONS OF THE TRIBUNAL.:- 6. GROUND NO 2 AND 3 IS AGAINST THE DISALLOWANCE O F EXPENDITURE OF AN AMOUNT PAID AS TIPS & BAKSIS BY THE BANK TO CASUAL WORKERS ON FESTIVE OCC ASION. THE ASSESSEE SUBMITS THAT THESE PAYMENTS WERE MADE TO CASUAL WORKERS LIKE WATER BOY S, CANTEEN BOYS, SECURITY STAFFS ETE. DURING ANNUAL FESTIVALS LIKE DURGA PUJA AND EID. IT WAS SU BMITTED THAT THE PAYMENT IS IN THE NATURE OF EX-GRATIA/BONUS. THE BREAK-UP OF THESE PAYMENTS, AS MADE BY DIFFERENT BRANCHES OF THE BANK WAS GIVEN. THESE PAYMENTS WERE AUTHORISED BY APPROPRIAT E RESOLUTIONS OF THE BOARD OF DIRECTOR OF THE BANK. THE ASSESSING OFFICER AS WELL AS THE LD. CIT (A) DID NOT ALLOW THIS EXPENDITURE ON THE GROUND THAT THERE WAS NO COMMERCIAL EXPEDIENCY BEHI ND INCURRING THIS EXPENDITURE AND THAT THE 4 ITA NO.2056/KOL/2017 THE WEST BENGAL STATE CO-OPERATIVE BANK LTD. A.YR. 2012-13 4 EXPLANATION IS NOT SATISFACTORY. THE ID. COUNSEL FO R THE ASSESSEE THE DISALLOWANCE IS BAD IN LAW THE ASSESSEE HAS PRODUCED SUFFICIENT EVIDENCE IN TH E FORM OF VOUCHERS AND RECEIPTS IN EVIDENCE OF ANY PAYMENT OF TIPS & BAKSIS. PAYMENTS WERE MADE BY THE HEAD OFFICE, REGIONAL OFFICES AS WELL AS 44 BRANCHES SITUATED IN DIFFERENT PARTS OF WEST BENGAL. SUCH PAYMENTS ARE MADE AFTER DUE AUTHORIZATION FROM THE MANAGEMENT. THE REVENUE AUTHORITIES WERE WRONG IN COMING TO A CONCLUSION THAT THERE IS NO COMMERCIAL EXPEDIENCY I N MAKING THESE PAYMENTS. THE DISALLOWANCE ARBITRARILY UNJUSTIFIED. HENCE WE ALLOW THIS GROUND OF THE ASSESSEE. 8. THE DR POINTED OUT THAT NO EVIDENCE WHATSOEVER W AS FILED BEFORE THE AO. THEREFORE ORDER OF THE CIT(A) SHOULD BE SUSTAINED. THE LD. DR ALSO PLACED RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS CALCUTTA AGENCIES 19 ITR 191 (SC). 9. WE HAVE PERUSED THE DECISION OF THE HONBLE SUPR EME COURT AND ARE OF THE VIEW THAT THE SAME IS NOT APPLICABLE TO THE FACTS OF THE PRES ENT CASE. THE SAID DECISION ON THE THE JURISDICTION OF THE HONBLE HIGH COURT IN A REFEREN CE U/S 66(1) OF THE I.T.ACT, 1962 AND WAS HELD TO BE ADVISORY IN NATURE. THE COURT HELD T HAT ON FACTS THE DECISION OF THE TRIBUNAL IS FINAL UNLESS ITS CONCLUSION ARE BASED ON NO EVID ENCE. IN THE PRESENT CASE THE PLEA OF THE ASSESSEE IS BASED ON THE EXISTING CUSTOMS AND PRACT ICE PREVALENT FOR A LONG TIME. THIS WAS ACCEPTED BY THE TRIBUNAL IN A.Y.2009-10. MOREOVER, THE VOUCHERS WERE FILED BEFORE THE CIT(A) WHICH WERE OMITTED TO BE CONSIDERED BY THE C IT(A). IN THESE CIRCUMSTANCE WE ARE OF THE VIEW THAT THE DECISION RENDERED BY THE TRIBU NAL ON IDENTICAL FACTS SHOULD BE FOLLOWED. RESPECTFULLY FOLLOWING THE DECISION OF TH E TRIBUNAL WE DIRECT THAT THE IMPUGNED ADDITION MADE BY THE AO BE DELETED. RESPECTFULLY FOLLOWING THE AFORESAID DECISION, WE D IRECT THE LD AO TO DELETE THE DISALLOWANCE OF EXPENSES MADE IN THE SUMS OF RS 4,5 8,350/- AND RS 76,150/-. ACCORDINGLY, THE GROUND NO.2 RAISED BY THE ASSESSE E IS ALLOWED. 4. THE LAST ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD CITA WAS JUSTIFIED IN CONFIRMING THE ADDITION MADE IN THE SUM OF RS 61 ,750/- TOWARDS DIFFERENCE IN INTEREST INCOME BETWEEN FORM 26AS AND THAT DISCLOSED BY THE ASSESSEE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4.1. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASS ESSEE DERIVED INTEREST INCOME ON DEPOSITS WITH BANKS AND OTHERS AND OFFERED A SUM OF RS 93,06 ,103.03 BY CREDITING THE SAME IN THE PROFIT AND LOSS ACCOUNT. THE CORRESPONDING INTERES T INCOME FIGURE REFLECTED IN FORM 26AS WAS RS 93,12,278.03 THEREBY LEADING TO A DIFFE RENCE OF RS 6,175/-. THE ASSESSEE 5 ITA NO.2056/KOL/2017 THE WEST BENGAL STATE CO-OPERATIVE BANK LTD. A.YR. 2012-13 5 EVEN IDENTIFIED THIS DIFFERENCE AS ATTRIBUTABLE FRO M INTEREST CALCULATIONS FROM DEPOSITS KEPT WITH STATE BANK OF INDIA. IT STATED THAT STAT E BANK OF INDIA CONSIDERED INTEREST AMOUNT AT RS 4,44,792/- WHEREAS THE ASSESSEE CONSID ERED INTEREST INCOME THEREON OF RS 4,38,598/- LEADING TO DIFFERENCE OF RS 6,175/-. TH E LD AO TREATED THE SAID DIFFERENCE AS DIFFERENCE IN TDS AMOUNT AND ACCORDINGLY CALCULATE D THE INTEREST INCOME THEREON BY EXTRAPOLATING IT TO RS 61,750/- ( 6175 / 10%) AND M ADE ADDITION TOWARDS CONCEALED INTEREST INCOME TO THE TUNE OF RS 61,750/-. THIS A CTION OF THE LD AO WAS UPHELD BY THE LD CITA. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFOR E US. 4.2. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND T HAT THE TOTAL DIFFERENCE IN INTEREST INCOME WAS ONLY RS 6,175/- WHICH IS TO BE BROUGHT T O TAX AND WE FIND THAT THE SAME WAS ACCEPTED TO BE TAXED BY THE LD AR AT THE TIME OF HE ARING BEFORE US. ACCORDINGLY , WE DIRECT THE LD AO TO TAX ONLY A SUM OF RS 6,175/- BE ING THE ACTUAL DIFFERENCE IN INTEREST INCOME WITH STATE BANK OF INDIA AND DELETE THE REMA INING SUM OF RS 55,575/- (61750- 6175) . ACCORDINGLY, THE GROUND NO. 3 RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 05.09.2018 SD/- SD/- [S.S. VISWANETHRA RAVI] [ M.BAL AGANESH ] JUDICIAL MEMBER ACCOUNTANT MEM BER DATED : 05.09.2018 SB, SR. PS 6 ITA NO.2056/KOL/2017 THE WEST BENGAL STATE CO-OPERATIVE BANK LTD. A.YR. 2012-13 6 COPY OF THE ORDER FORWARDED TO: 1. THE WEST BENGAL STATE CO-OPERATIVE BANK LTD, 24A , WATERLOO STREET, KOLKATA-69. 2. DCIT, CIRCLE-40, KOLKATA, 3, GOVT. PLACE (WEST), SECOND FLOOR, KOLKATA-700001. 3..C.I.T.(A)- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S