THE STATE BANK OF INDORE, V. THE ACIT 5(1),

ITA 26/IND/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 7172 (ITAT-INDORE)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-04-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 08-12-2010
• Assessment Year: misc
• Appeal Filed On: 29-01-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K K SINGH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C.SHARMA, ACCOUNTANT MEMBER PAN NO. : AAECS7776C I.T.A.NO.26/IND/2009 A.Y. : 2006-07 STATE BANK OF INDORE ACIT, 5, Y. N. ROAD, VS CIRCLE 5(1), INDORE. INDORE. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANOJ MUNSHI, ADV. RESPONDENT BY : SHRI K.K. SINGH, CIT DR O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-II, INDORE, DATED 22/10/2008 FOR THE ASSE SSMENT YEAR 2006-07. 1. SOLITARY GRIEVANCE OF THE ASSESSEE IS AS UNDER :- IN VIEW OF FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. AO HAS ERRED IN LAW BY NOT ALLOWING THE CLAIM O F -: 2: - 2 THE ASSESSEE BANK THAT THE CONTRIBUTION TO THE PENSION FUND DOES NOT ATTRACT FRINGE BENEFIT TAX AS IT WAS MADE IN LIEU OF THE PROVIDENT FUND. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUS ED. 3. FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN BANKING ACTIVITIES AND ONE OF GOVERNMENT INDIAS UNDERTAKIN GS. NECESSARY APPROVAL OF C.O. D. HAS BEEN OBTAINED AND PLACED ON RECORD. IN THE COURSE OF ASSESSMENT, THE AO HAS DISALLOWED A SUM OF RS. 13.35 CRORES TOWARDS CONTRIBUTION TO P ENSION FUND IN LIEU OF EMPLOYEES CONTRIBUTION TOWARDS P.F . IN RESPECT OF EMPLOYEES, WHO HAVE OPTED FOR PENSION. THE CONTE NTION OF THE LD. AUTHORIZED REPRESENTATIVE MR. MANOJ MUNSHI WAS THAT PAYMENT WAS MADE BY THE ASSESSEE BANK TOWARDS DISCH ARGE OF ITS STATUTORY LIABILITY AND HENCE SAME DOES NOT FAL L WITHIN THE PURVIEW OF FRINGE BENEFIT. HE FURTHER EXPLAINED THA T THE ASSESSEE BANK HAS CONVERTED PROVIDENT FUND INTO PEN SION FUND AND MADE ITS CONTRIBUTION TO THE SUPERANNUATION ACC OUNT ON WHICH FRINGE BENEFIT TAX IS NOT ATTRACTED. IN THIS REGARD, PRECISE OBSERVATION IN THE NOTE ON ACCOUNT WHICH WAS FILED ALONGWITH RETURN WAS AS UNDER :- -: 3: - 3 CONTRIBUTION MADE TO PENSION FUND IN THE SUM OF RS. 38,60,50,000/- HAS NOT BEEN RECKONED FOR FRINGE BENEFIT TAX SINCE. (I) CONTRIBUTION MADE IN THE SUM OF RS. 13,35,50,000/- IS IN LIEU OF EMPLOYERS CONTRIBUTION TOWARDS PROVIDENT FUND MADE TO EMPLOYEES, WHO HAVE OPTED FOR PENSION AND AS SUCH THE SAME IS TREATED AS STATUTORY DEDUCTION. (II) AMOUNT OF RS. 25,25,00,000/- (BEING SHORT FALL TOWARDS PENSION LIABILITY AS PER ACTUARIAL VALUATION ) HAS BEEN MADE AS PROVISION FOR CONTRIBUTION TOWARDS PENSION FUND AND SAME HAS ACTUALLY BEEN PAID TO THE PENSION FUND ON 23.5.2006. IN TERMS OF SECTION 115WC(1)(B) OF THE ACT ACTUAL AMOUNT OF CONTRIBUTION TO AN APPROVED SUPERANNUATION FUND WILL BE VALUE OF FRINGE BENEFIT ON WHICH FRINGE BENEFIT TAX HAS TO BE PAID AND ACCORDINGLY PROVISION MADE IN THE SUM OF RS. 25,25,00,000/-WILL NOT ATTRACT FBT. -: 4: - 4 4. MR.MANOJ MUNSHI FURTHER SUBMITTED THAT TRANSFER OF FUND FROM PROVIDENT FUND TO PENSION FUND ON WHICH F .B.T. WAS INADVERTENTLY PAID WERE NOT ACTUALLY LIABLE TO F.B.T. SINCE THE CONTRIBUTION WAS MADE IN LIEU OF EMPLOYEES CONT RIBUTION TOWARDS PROVIDENT FUND TO EMPLOYEES, WHO HAVE OPTED FOR PENSION AND AS SUCH THE SAME WAS TREATED AS STATUTO RY DEDUCTIONS HAS NOT BEEN RECKONED FOR FRINGE BENEFIT TAX. ACCORDINGLY, IT WAS CLAIMED THAT PROVISION OF RS. 2 5.25 CRORES MADE IN THE YEAR UNDER CONSIDERATION IS NOT LIABLE TO F. B. T. HOWEVER, THE AO DID NOT AGREE WITH THE ASSESSEES C ONTENTION AND HELD THAT THE CONTRIBUTION WAS TO THE SUPERANNU ATION FUND, ON WHICH FRINGE BENEFIT TAX WAS LEVIABLE. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE ACTION OF THE AO. 5. AGGRIEVED BY THE ABOVE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 6. IT WAS CONTENDED BY THE LD. AUTHORIZED REPRESENTAT IVE, MR. MANOJ MUNSHI THAT THE TRANSFER OF CONTRIBUTION TOWARDS PROVIDENT FUND TO PENSION FUND WAS NOT MADE BY T HE ASSESSEE EMPLOYER RATHER THIS AMOUNT WAS TRANSFERRE D BY THE PROVIDENT FUND TRUST TO PENSION FUND TRUST ON THE O PTION -: 5: - 5 EXERCISED BY EMPLOYEES. THEREFORE, IT AMOUNTS TO CO NTRIBUTION OF EMPLOYER IN PROVIDENT FUND WHICH WAS TRANSFERRED TO THE PENSION FUND AT THE REQUEST OF THE EMPLOYEES, THUS, THE CONTRIBUTION TO PROVIDENT FUND WAS MADE BY THE ASSE SSEE EMPLOYER, WHEREAS TRANSFER OF PROVIDENT FUND TO PEN SION FUND WAS MADE BY THE EMPLOYEES THOUGH EFFECTED BY THE RE SPECTIVE TRUST. OUR ATTENTION WAS DRAWN TO THE CHART INDICAT ING MOVEMENT OF FUNDS AS PLACED AT PAGE 2 OF THE PAPER BOOK. THE LD. AUTHORIZED REPRESENTATIVE FURTHER EXPLAINED THA T THE EMPLOYEES OF THE ASSESSEE BANK HAS OPTION EITHER TO OPT FOR PROVIDENT FUND OR TO OPT FOR PENSION FUND AND T HE CONTRIBUTION BY EMPLOYER ASSESSEE IN BOTH THE FUNDS ARE EQUAL. THERE IS NO DISCRIMINATION OR DIFFERENT TREATMENT G IVEN BY THE ASSESSEE EMPLOYER TO ITS EMPLOYEES WHO HAVE OPTED F OR PROVIDENT FUND OR PENSION FUND AS THE CASE MAY BE. IT IS ALSO CLARIFIED THAT THERE IS NO SCHEME IN THE BANK WHERE THE ASSESSEE EMPLOYER MAKES CONTRIBUTION IN BOTH THE FU NDS FOR ANY EMPLOYEE. THUS, THE CONTRIBUTION FROM THE ASSES SEE BANK FOR ITS EMPLOYEE, WHETHER HE OPTED FOR PROVIDENT F UND OR PENSION FUND REMAINS THE SAME. FURTHER CONTENTION OF THE LD. -: 6: - 6 AUTHORIZED REPRESENTATIVE WAS THAT WHEN THERE IS FR INGE BENEFIT TAX ON THE CONTRIBUTION BY THE ASSESSEE EMP LOYER TOWARDS PROVIDENT FUND TRUST THERE SHOULD NOT BE ANY FRINGE BENEFIT TAX ON THE SIMILAR CONTRIBUTION MADE BY THE ASSESSEE EMPLOYER TOWARDS PENSION FUND. FURTHER CONTENTION OF THE LD. AUTHORIZED REPRESENTATIVE WAS THAT THE ASSESSEE BAN K MADE THE CONTRIBUTION TO THE PROVIDENT FUND TRUST WHIC H IS A SEPARATE ENTITY AND TRANSFER OF THE FUND TO THE PE NSION TRUST AS PER THE OPTION EXERCISED BY THE EMPLOYEES. THUS, NO FRINGE BENEFIT TAX CAN BE LEVIED IN THE HANDS OF THE ASSES SEE BANK, WHICH HAD CONTRIBUTED TOWARDS PROVIDENT FUND ON W HICH NO FRINGE BENEFIT TAX IS PAYABLE. 7. ON THE OTHER HAND, THE LD. CIT DR REITERATED THE OBSERVATIONS MADE BY THE LOWER AUTHORITIES IN THE R ESPECTIVE ORDERS FOR COMING TO THE CONCLUSION THAT CONTRIBUTI ON WAS TOWARDS THE PENSION FUND, EVEN THOUGH ROUTED THROUG H A TRUST, WHICH WAS CREATION OF THE ASSESSEE ITSELF. 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOU ND FROM RECORD THAT DURING THE YEAR UNDER CONSIDERATION, TH E ASSESSEE -: 7: - 7 BANK HAS MADE CONTRIBUTION TO PENSION FUND EVEN THO UGH THROUGH A TRUST. ORIGINAL CONTRIBUTION WAS IN THE P ROVIDENT FUND, BUT AN OPTION WAS GIVEN TO THE EMPLOYEES TO O PT FOR TRANSFER OF SUCH FUNDS TO THE PENSION FUND. SINCE T HE EMPLOYEES EXERCISED THE OPTION, THE ASSESSEE BANK H AS TRANSFERRED THE CONTRIBUTION MADE IN PROVIDENT FUND TO THE PENSION FUND. AS PER PROVISIONS OF SECTION 115BC(1) (C), ANY CONSIDERATION FOR EMPLOYMENT PROVIDED BY WAY OF TO AN APPROVED SUPERANNUATION FUND WILL BE VALUE OF FRING E BENEFIT ON WHICH FRINGE BENEFIT TAX IS LEVIABLE. DURING THE YEAR, THE ASSESSEE BANK HAS CONTRIBUTED A SUM OF RS. 25.25 CR ORES ON ACCOUNT OF PROVISIONS OF PENSION FUND BEING SHORT F ALL TOWARDS PENSION LIABILITY AS PER THE ACTUARIAL VALUATION. T HE LIABILITY OF THE ASSESSEE TOWARDS PENSION FUND WAS MANDATORY, TH EREFORE, IT MADE THE PROVISION FOR CONTRIBUTION TO PENSION F UND, WHICH WERE PAID IN NEXT FINANCIAL YEAR. SINCE LIABILITY F OR PENSION HAD ACTUALLY ACCRUED DURING THE CURRENT FINANCIAL YEAR 2005-06, THEREFORE, THE ASSESSEE WAS LIABLE FOR FBT ON THE P ROVISIONS SO MADE FOR THE CURRENT FINANCIAL YEAR. IT IS PERTINE NT TO MENTION HERE THAT THE ASSESSEE BANK HAS ALREADY MADE ITS CO NTRIBUTION -: 8: - 8 OF A SUM OF RS. 13.35 CRORES IN APPROVED SUPERANNUA TION FUND. CONTENTION OF THE LD. AUTHORIZED REPRESENTATI VE TO THE EFFECT THAT SINCE THIS FUND WAS TRANSFERRED OUT OF ASSESSEES BANKS CONTRIBUTION TO PROVIDENT FUND, THEREFORE, L IABLE TO FRINGE BENEFIT TAX, IS NOT TENABLE, SINCE THIS FUND WAS FINALLY TRANSFERRED INTO THE ACCOUNT OF PENSION FUND, LIABI LITY OF WHICH WAS ACTUALLY ACCRUED DURING THE CURRENT FINANCIAL Y EAR. 9. FROM THE RECORD, WE FOUND THAT THE ASSESSEE HAS CLA IMED PAYMENT OF 10 % PER MONTH OF SALARY OF THE EMPLOYEE S WHICH WAS PAID TO THE PROVIDENT FUND ACCOUNT AND WHEN THE SE EMPLOYEES OPTED TO PENSION SCHEME, THE CONTRIBUTION SO MADE IN THE PROVIDENT FUND ACCOUNT WAS TRANSFERRED TO SUPERANNUATION FUND. THUS, THE ASSESSEE BANK INSTEA D OF MAKING DIRECT CONTRIBUTION TO THE PENSION FUND ROUT ED IT THROUGH THE PROVIDENT FUND ACCOUNT, THEREFORE, THE PLEA OF THE LD. AUTHORIZED REPRESENTATIVE TO THE EFFECT THAT IT WAS ACTUALLY CONTRIBUTION TO THE PROVIDENT FUND IS NOT TENABLE. FURTHERMORE, THE TRANSFER OF CONTRIBUTION FROM PROV IDENT FUND TO PENSION FUND WAS NOT MADE BY THE ASSESSEE EMPLOY ER BUT BY THE PROVIDENT FUND TRUST TO PENSION FUND TRUST, BUT SINCE -: 9: - 9 THE TRUST WAS FUNCTIONING ON BEHALF OF THE ASSESSEE BANK ITSELF, A TRANSFER OF SUCH FUND IS TO BE TREATED AS MADE BY THE ASSESSEE BANK ITSELF. ACCORDINGLY, THE PROVISIONS O F SECTION 115WB(1)(C) ARE APPLICABLE AND ASSESSEE IS LIABLE T O PAY FRINGE BENEFIT TAX ON SUCH CONTRIBUTION. THE DETAILED FIND ING RECORDED BY THE LD. CIT(A) AT PAGES 8, 9 & 10 HAS NOT BEEN C ONTROVERTED BY THE LD. AUTHORIZED REPRESENTATIVE. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A) FOR T AXING THE CONTRIBUTION MADE TO SUPERANNUATION FUND THROUGH TR ANSFER ENTRY FROM CONTRIBUTION TO PROVIDENT FUND IS LIABLE TO FRINGE BENEFIT TAX. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMIS SED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 18 TH JANUARY, 2011. SD/- SD/- (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 18 TH JANUARY, 2011. CPU* 1314