The Royal Bank of Scotland N.V. , Kolkata V. DCIT (International Taxation) - 2(1), Kolkata

ITA 2619/KOL/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5192 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 19-12-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: IMOKABA JAMIR
• Assessee Lawyers: R N BAJORIA SENIOR
• Keywords: Retrospective amendment; Additional evidence; Competent authority; Capital expenditure; TDS
• Section: 143(3); 37(1); 250; 251; 2(A); 37; 90

Judgement Text

1 ITA NO.2619/KOL/2018 THE ROYAL BANK OF SCTOLAND N.V. INDIA BRANCHES, AY 2014-15 , C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA ( )BEFORE . , /AND . # . $ , ) [BEFORE SHRI J. SUDHAKAR REDDY, AM & SHRI A. T. VAR KEY, JM] I.T.A. NO. 2619/KOL/2018 ASSESSMENT YEAR: 2014-15 THE ROYAL BANK OF SCOTLAND N.V. INDIA BRANCHES (PAN: AACCA6818K) VS. DEPUTY COMMISSIONER OF INCOME-TAX (INTERNATIONAL TAXATION)-2(1), KOLKATA APPELLANT RESPONDENT DATE OF HEARING 15.01.2020 DATE OF PRONOUNCEMENT 19.02.2020 FOR THE APPELLANT SHRI R. N. BAJORIA, SENIOR ADVOCATE FOR THE RESPONDENT SHRI IMOKABA JAMIR, CIT, DR ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF DCIT (INTERNATIONAL TAXATION), CIRCLE-2(1), KOLKATA (IN SHORT AO) U/S . 143(3) READ WITH SEC. 144C(13) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO A S THE ACT) DATED 30.10.2018 PURSUANT TO THE DIRECTION ISSUED BY THE LD. DISPUTE RESOLUTION PANEL (IN SHORT DRP) VIDE ITS DIRECTION U/S. 144C(5) OF THE ACT DATED 04 .09.2018 FOR AY 2014-15. 2. AT THE OUTSET, THE LD. SR. COUNSEL SHRI R. N. BA JORIA APPEARING FOR THE ASSESSEE IN HIS USUAL MANNER FAIRLY CONCEDED THAT OUT OF THE TWO GROUNDS OF APPEAL PREFERRED BY THE ASSESSEE AGAINST THE IMPUGNED ORDER, ONE OF THE ISSUE I.E. RATE OF TAX APPLICABLE TO THE ASSESSEE HAS BEEN DECIDED BY THE TRIBUNAL IN E ARLIER YEARS AGAINST THE ASSESSEE. THE SAID GROUND OF APPEAL OF THE ASSESSEE IS GROUND NO. 2(A) TO (D), WHICH IS AS UNDER: A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED ASSESSING OFFICER ('AO') HAS ERRED IN PROPOSING AND THE HON'B LE DISPUTE RESOLUTION PANEL ('DRP') FURTHER ERRED IN CONFIRMING THE ACTION OF THE LEARN ED AO IN CHARGING TAX AT THE HIGHER RATE (43.26% INCLUDING SURCHARGE AND EDUCATION CESS ) APPLICABLE TO FOREIGN COMPANIES 2 ITA NO.2619/KOL/2018 THE ROYAL BANK OF SCTOLAND N.V. INDIA BRANCHES, AY 2014-15 INSTEAD OF THE TAX RATE APPLICABLE TO DOMESTIC COMP ANIES (33.99% INCLUDING SURCHARGE AND EDUCATION CESS) AS CLAIMED BY THE APPELLANT, IN VIOLATION OF THE PROVISIONS OF ARTICLE 24 OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT ('DTA A') ENTERED BETWEEN INDIA AND NETHERLANDS. B) IN THIS MATTER, THE LEARNED AO AND HON'BLE DRP H AVE COMPLETELY DISREGARDED THE FINDINGS OF THE HON'BLE INCOME-TAX APPELLATE TRIBUN AL ('ITAT') IN THE APPELLANT'S OWN CASE FOR AY 1996-97. THE HON'BLE ITAT HAD ALLOWED T HE APPLICATION OF THE TAX RATE APPLICABLE TO DOMESTIC COMPANIES IN ITS ORDER FOR A Y 1996-97. C) THE LEARNED AO ERRED IN PROPOSING AND THE HON'BL E DRP FURTHER ERRED IN CONFIRMING THE ACTION OF THE LEARNED AO IN DISREGARDING THE AP PELLANT'S CONTENTION THAT THE EXPLANATION TO SECTION 90 WHICH WAS INTRODUCED BY F INANCE ACT, 2001 WITH RETROSPECTIVE EFFECT FROM 1 APRIL 1962 IS IN CONFLI CT WITH THE MAIN SECTION. D) THE APPELLANT PRAYS BEFORE THE HON'BLE ITA T TO DIRECT THE LEARNED AO TO APPLY THE RATE OF TAX APPLICABLE TO DOMESTIC COMPANIES OR ANY OTHER FAVOURABLE RATE WHILE COMPUTING THE TAX PAYABLE BY THE APPELLANT. 3. WE NOTE THAT THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE IN ASSESSEES OWN CASE IN ITA NO. 503 & 505/KOL/2016 FOR AY 2011-12 V IDE ORDER DATED 05.09.2018 WHEREIN THE TRIBUNAL HAS HELD AS UNDER: THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSE E IS A NON-RESIDENT FOREIGN COMPANY AND THEREFORE THE PRESCRIBED RATE OF TAX APPLICABLE TO IT AS PER THE RELEVANT FINANCE ACT WOULD BE 40% ALONG WITH SURCHARGE AND EDUCATION CESS AS A PPLICABLE. THE ASSESSEE PLEADED THAT IT IS LIABLE TO TAX ONLY AT THE RATE OF 30% AL ONG WITH SURCHARGE AND EDUCATION CESS AS APPLICABLE. WE FIND THAT THIS ISSUE IS DECIDED AGAI NST THE ASSESSEE BY THE ORDER OF THIS TRIBUNAL IN ASSESSEE'S OWN CASE FOR THE ASST YEARS 2005-06 TO 2008-09 VIDE ORDER DATED 13.4.2016 . ACCORDINGLY, THE GROUND NOS. 1 (A) TO L (D) RAISED BY THE ASSESSEE ARE DISMISSED. 4. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL , WE DISMISS THE GROUND OF APPEAL NO. 2(A) TO 2(D) RAISED BY THE ASSESSEE IN T HIS RESPECT. 5. GROUND NO. 1(A) TO (D) IS AS UNDER: A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LEARNED AO HAS LEGALLY ERRED IN PROPOSING AND THE HON'BLE DRP HAS FURTHER ERRED IN CONFIRMING THE DISALLOWANCE OF UNFUNDED PENSION (AKIN TO SALARY) AMOUNTING TO RS. 4,22,00,000 UNDER SECTION 36(1)(IV) OF THE ACT, WITHOUT APPRECIATING THE FACT THAT SECTION 36(1 )(IV) DEALS ONLY WITH CONTRIBUTION TO AN APPROVED SUPERANNUATION FUND AND NOT TO PAYME NT TO PENSIONERS IN NATURE OF EX- GRATIA (AKIN TO SALARY) TO COMPENSATE FOR THE INCRE ASED COST OF LIVING. B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED AO AND THE HON'BLE DRP ERRED IN NOT APPRECIATING THE FACT THAT THE UNF UNDED PENSION PAID BY THE BANK IS AN ACTUAL PAYMENT TO THE PENSIONERS BY THE BANK AFTER DEDUCTION OF APPLICABLE TAXES, AS 3 ITA NO.2619/KOL/2018 THE ROYAL BANK OF SCTOLAND N.V. INDIA BRANCHES, AY 2014-15 AGAINST CONTRIBUTION MADE TO AN APPROVED SUPERANNUA TION FUND AND THUS SHOULD BE ALLOWED UNDER SECTION 37(1) OF THE ACT. C) THE HON'BLE DRP GROSSLY ERRED IN PRESUMING THAT THE IMPUGNED PAYMENT IS MADE TO FEW EMPLOYEES AND NOT TO ALL THE EMPLOYEES. THE HON 'BLE DRP FAILED TO APPRECIATE THE FACTS THAT THE SAID ADDITIONAL PAYMENTS IS PAYABLE TO ALL THE EMPLOYEES WHO JOINED THE BANK PRIOR TO 31.12.2004 AND COMPLETED 10 YEARS OF SERVICE WITH THE BANK, IRRESPECTIVE OF THEIR GRADE AND DESIGNATION AS IS EVIDENT FROM DETA ILS OF SALARY SLIPS AND TDS CERTIFICATES FILED BEFORE THE AO AND THE DRP. D) THE HON'BLE DRP GROSSLY ERRED IN HOLDING THAT TH E PAYMENT OF UNFUNDED PENSION MADE BY THE APPELLANT IS RELATED TO PENSION PAID TO PENS IONERS AND HENCE DISALLOWED UNDER SECTION 36(1 )(IV) WHEREAS THE SECTION 36(1)(IV) DE ALS ONLY WITH CONTRIBUTION TO APPROVED SUPERANNUATION FUND AND NOT TO PAYMENT TO PENSIONER S IN NATURE OF EX-GRATIA/SALARY FOR INCREASED COST OF LIVINGS. 6. THE LD. SR. COUNSEL SHRI BAJORIA ALSO POINTED OU T THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN ASSESSEE S OWN CASE FOR AY 2011-12 WHEREIN THE TRIBUNAL HAS HELD AS UNDER: 5. DISALLOWANCE OF PAYMENT MADE TO EMPLOYEES IN REL ATION TO UNFUNDED PENSION GROUND NO. 4(A) TO 4(C ) OF ASSESSEE APPEAL THE BRIEF FACTS OF THIS ISSUE ARE THAT THE LD AO OB SERVED THAT THE ASSESSEE DURING THE YEAR HAD CLAIMED THE PAYMENT MADE TO ITS EMPLOYEES AGAIN ST THE PROVISION MADE FOR UNFUNDED PENSION AMOUNTING TO RS 4.09 CRORES. IN THIS REGARD , THE ASSESSEE FILED THE SUBMISSIONS ON 20.3.2015 AND 25.3.2015 STATING AS UNDER:- THE BANK HAS ESTABLISHED A SUPERANNUATION FUND FOR THE PURPOSE OF PROVIDING PENSION TO ITS ELIGIBLE EMPLOYEES. THE FUND HAS BEEN APPROVED BY THE COMMISSIONER OF INCOME-TAX UNDER RULE 2(1) OF THE PART B OF THE FOURTH SCHEDUL E. THE BANK HAS BEEN REGULARLY CONTRIBUTING TO THE FUND FOR THE BASE PENSION, BASE D ON ACTUARIAL VALUATION AND HAVE BEEN CLAIMING A DEDUCTION OF THE SAME ON PAYMENT BASIS U NDER SECTION 36(1)(IV) READ WITH SECTION 43B(B) OF THE ACT. APART FROM THE APPROVED SUPERANNUATION FUND, TO COM PENSATE FOR THE INCREASED COST OF LIVING OF THE EMPLOYEES, THE BANK ALSO PROVIDES ANN UAL INCREMENT ON THE BASE PENSION WHICH IS .TOWARDS UNFUNDED PENSION LIABILITY AND DI RECTLY PAID TO THE EMPLOYEES. SUCH PROVISION IN RELATION TO THE UNFUNDED PENSION LIABI LITY IS DISALLOWED IN THE TAX COMPUTATION AND IS CLAIMED AS DEDUCTION ON ACTUAL P AYMENT THE EMPLOYEES (WHICH IS DONE AFTER DEDUCTION OF THE APPLICABLE TDS THEREON). DURING THE YEAR UNDER CONSIDERATION, THE BANK HAS M ADE PAYMENTS TO THE EMPLOYEES AMOUNTING TO RS 4.09 CRORE TOWARDS SUCH UNFUNDED PE NSION LIABILITY. THE PAYMENT HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOS ES OF THE BUSINESS OF THE BANK, THE SAME HAS BEEN CLAIMED AS DEDUCTION BY THE BANK UNDE R SECTION 37(1) OF THE ACT. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, YOUR G OOD SELF HAS ASKED THE BANK AS TO WHY THE SAID AMOUNT SHOULD BE ALLOWED AS DEDUCTION IN V IEW OF THE PROVISIONS OF SECTION 36(1) OF THE ACT. IN THIS REGARD, WE SUBMIT AS UNDER: IN THIS REGARD THE ASSESSEE MENTIONED THE PROVISION S OF SECTION 37(1) OF THE ACT, WHEREBY ANY EXPENDITURE (NOT BEING EXPENDITURE OF THE NATUR E DESCRIBED IN SECTIONS 30 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE OR P ERSONAL EXPENSES OF THE ASSESSEE), LAID 4 ITA NO.2619/KOL/2018 THE ROYAL BANK OF SCTOLAND N.V. INDIA BRANCHES, AY 2014-15 OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURP OSE OF BUSINESS OR PROFESSION SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER TH E HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. IN THIS REGARD, THE ASSEES SEE RELIED ON THE FOLLOWING DECISIONS: CIT V. HIGH LAND PRODUCE CO. LTD. [1986] 158ITR 4 19 (SC) LIBERTY CINEMA V. COMMISSIONER OF INCOME-TAX [196 4] 52 ITR 153, 161 / (CAL.), DECOM MARKETING (P.) LTD. V. CIT (164 CTR 230). RDB INDUSTRIES LTD VS DCIT 120 ITJ 107 (KOL). CIT V. PUNJAB FINANCIAL CORPOMTION LTD.. [2007] 2 95 ITR 510 (PUNJ. & HAR.) KHIMJI VISRAM & SONS (GUJRAT) (P.) LTD. V. CIT [1 995] 79 TAXMAN 112 (GUJ) CIT V. AKKEM LABOMTORIES (P.) LTD.. [2009] 314 IT R 329 (PAT) CIT VS HINDUSTAN MOTORS LTD 175 ITR 411 (CAL); CIT VS. KARAMCHAND PREMCHAND PVT. LTD. 200 ITR 28 1 (GUI), CIT V PUNJAB FINANCIAL CORPORATION LTD., 295 ITR 510 (P&H); DECOM MARKETING PVT. LTD VS CIT 251 ITR 398 (GUJ) ; CIT VS CHHOTABHAI JETHABHAI PATEL TOBACCO PRODUCT S CO. LTD. 128 ITR 70 (GUJ), AND MYLAN LABORATORIES LTD. VS ACIT (ITA NO. 1616/HYD /2010 DATED 16 JANUARY, 2015). FURTHER, WE UNDERSTAND THAT YOUR GOODSELF WISHES TO PLACE RELIANCE ON THE DECISION OF THE CALCUTTA HIGH COURT IN THE CASE OF BROOKE BOND INDIA LIMITED VS. JOINT COMMISSIONER OF INCOME-TAX [2011] 337 ITR 482, WHILE SEEKING TO DISALLOW THE PAYMENT OF RS. 4.09 CRORE TO EMPLOYEES TOWARDS UNFUNDED PENSION. IN THI S REGARD, WE SUBMIT THAT THE AFORESAID DECISION IS NOT APPLICABLE TO THE BANK'S CASE FOR THE FOLLOWING REASONS: IN THE CASE OF THE BANK THE DEDUCTION FOR PENSION H AS BEEN MADE IN RESPECT OF AMOUNTS WHICH HAVE BEEN ACTUALLY PAID TO THE EMPLOYEES OF T HE BANK AND WHICH HAS BEEN GONE OUT IRRETRIEVABLY AND ON WHICH THE BANK HAS NO CONTROL. HOWEVER, IN THE CASE OF BROOKE BOND, THE DEDUCTION FOR PENSION WAS CLAIMED MERELY ON BASIS OF A PROVISION CREATED BASED ON A BOARD RESOLUTION WHICH COULD HAVE REVERS ED AT A LATER DATE. THE BROOKE BOND JUDGMENT ONLY COVERS DISALLOWANCE O F PROVISION MADE IN RESPECT OF SUCH LIABILITY BASED ON ACTUARIAL VALUATION AND THE HON BLE COURT HAVE NOT LOOKED INTO THE QUESTION OF DEDUCTION OF SUCH PENSION PAYMENT MADE DIRECTLY TO EMPLOYEES. THE BANKS RELIES ON JURISDICTION HIGH COURT RULING IN THE CAS E OF CIT VS. HINDUSTAN MOTORS LTD 175 ITR 411 (CAL) WHEREIN IT WAS HELD THAT PAYMENT OF P ENSION TO EMPLOYEE IS A DEDUCTIBLE EXPENDITURE UNDER SECTION 37(1) ON GROUND OF COMMER CIAL EXPEDIENCY. THE INTENTION OF SECTION 36(1)(IV) READ WITH SECTIO N 40A(9) OF THE ACT IS TO RESTRICT THE TAX AVOIDANCE BY THE EMPLOYER BY CREATING TRUST WHEREIN THE UTILIZATION OF CONTRIBUTION MADE TO TRUST IS LEFT TO THE DISCRETION OF THE TRUSTEE A ND WHEREIN THE AMOUNTS FLOWS BACK TO THE EMPLOYER IN THE FORM OF THE DEPOSITS OR INVESTMENT. THUS, THE BANK SUBMITS THAT THE PROVISIONS WHICH ARE INTRODUCED TO CURB A PARTICULA R MISCHIEF SHOULD BE CONSTRUED IN A MANNER THAT THEY DO NOT CREATE JEOPARDY BEYOND THE MISCHIEF WHICH IS SOUGHT TO BE REMEDIED. AS PER THE INTENT, THE ABOVE RESTRICTION SHOULD APPLY TO CONTRIBUTION TO SUPERANNUATION TRUST/FUNDS WHICH ARE NOT APPROVED B Y CIT. AS MENTIONED ABOVE, IN THE BANKS' CASE, THE DEDUCTION FOR UNFUNDED PENSION HAS BEEN MADE IN RESPECT OF AMOUNTS WHICH HAVE BEEN ACTUALLY PAID TO THE EMPLOYEES OF T HE BANK (AND NOT AS CONTRIBUTION TO A FUND/TRUST) AND ON WHICH THE BANK HAS NOT CONTROL. IN RENDERING THE DECISION IN THE CASE OF BROOKE BON DE, THE HONBLE KOLKATA HIGH COURT HAS NOT TAKEN INTO CONSIDERATION THE DECISION OF TH E SUPREME COURT IN THE CASE OF HIGH 5 ITA NO.2619/KOL/2018 THE ROYAL BANK OF SCTOLAND N.V. INDIA BRANCHES, AY 2014-15 LAND PRODUCE AND THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF LIBERTY CINEMA. IN LIGHT OF THE ABOVE, WE SUBMIT THAT THE DECISION IN THE CASE OF BROOKE BONDE IS NOT APPLICABLE TO THE BANK CASE AND THE BANK HAS RIGHTY CLAIMED THE DEDUCTION OF THE UNFUNDED PENSION UNDER SECTION 37 OF THE ACT. GIVEN THE ABOVE, THE BANK SUBMITS THAT THE PAYMENT OF RS. 4.09 CRORES TOWARDS UNFUNDED PENSION SHOULD BE ALLOWED IN FULL. 5.1. THE LD AO IN THE DRAFT ASSESSMENT ORDER PLACED RELIANCE ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF BR OOKE BOND INDIA LTD VS JCIT & ANR. REPORTED IN 337 ITR 482 (CAL) AND OBSERVED THAT THE SAID DECISION WOULD BE APPLICABLE TO THE FACTS OF THE INSTANT CASE. MOREOVER, THE ASSES SEE IN THE INSTANT CASE HAD NOT PROVIDED THE DETAILS IN RESPECT OF THE CLASSES OF EMPLOYEES ELIGIBLE TO AVAIL IT. WHEN CERTAIN DETAILS WERE FURNISHED BY THE ASSESSEE BEFORE THE LD DRP, T HE MATTER WAS REMANDED TO THE LD AO. THE LD AO IN HIS REMAND REPORT COMMENTED AS UNDER:- THE LIST DOES NOT INDICATE THE CLASS OF EMPLOYEES, THEIR PLACE IN THE HIERARCHY, WHETHER THESE WERE TERMINAL BENEFITS OR SHORT TERM BENEFITS , ETC. THE SUBMISSION IS DEVOID OF THE BOARDS RESOLUTION, TERMS AND CONDITIONS OF PAYMENT OF BENEFITS AND BUSINESS EXPEDIENCY OF SUCH PAYMENTS INTER ALIA. IT IS THEREFORE COULD NOT BE PERCEIVED FROM THE ADD ITIONAL EVIDENCE FILED, AS TO HOW IT NEGATES THE PROPOSAL OF THE AO TO DISALLOW PAYMENT OF UNFUNDED PENSION TO THE EMPLOYEES. ON THE BASIS OF THE FACTS AND CIRCUMSTAN CES OF THE CASE, THE ADDITIONAL EVIDENCE FILED DOES NOT HOLD MERIT TO OVERTURN THE AOS PROPOSAL. 5.2. THE LD DRP OBSERVED THAT THIS REMAND REPORT WA S SENT TO ASSESSEE FOR ITS REBUTTAL AND NO SUBMISSIONS WERE MADE LATER ON. ACCORDINGLY , T HE LD DRP UPHELD THE ACTION OF THE LD AO IN DISALLOWING THE SAID EXPENDITURE IN THE SUM O F RS 4.09 CRORES. ACCORDINGLY, THE SAME WAS SOUGHT TO BE DISALLOWED IN THE FINAL ASSES SMENT ORDER BY THE LD AO. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 5.3. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LD AR SUBMITTED THAT THE VERY BASIS ON WHICH THE CLAIM OF EXPENDITURE WAS DISALLOWED BY TH E LD AO AS WELL AS BY THE LD DRP WAS STATED TO BE NON-FURNISHING OF DETAILS OF EMPLO YEES BY THE ASSESSEE TO WHOM THE PAYMENTS WERE MADE. IN THIS REGARD, HE DREW THE AT TENTION OF THE BENCH TO PAGES 247 TO 250 OF THE PAPER BOOK CONTAINING THE LIST OF EMPLOY EES, THEIR DESIGNATION, EMPLOYEE CODE DETAILS AND THE AMOUNTS PAID TO 276 EMPLOYEES IN TO TAL. HE ALSO DREW OUR ATTENTION TO PAGE 416 OF THE PAPER BOOK WHEREIN THESE PAYMENTS WERE D ULY APPROVED BY THE COMPETENT AUTHORITY IN THE ASSESSEE COMPANY INCLUDING THE HEA D OF HUMAN RESOURCES IN CHARGE OF INDIAN OPERATIONS OF THE ASSESSEE BANK. WE FIND THA T THOUGH THE ASSESSEE HAD NOMENCLATURED THE SUBJECT MENTIONED PAYMENTS OF RS 4.09 CRORES AS UNFUNDED PENSION, IT IS EFFECTIVELY PAID TO EMPLOYEES OF THE ASSESSEE BANK AND NO CONTRIBUTION WAS MADE WHATSOEVER TO ANY FUND WITH RESPECT TO THE SAID PEN SION PAYMENTS. IT IS MORE OF A EXGRATIA OR EXTRA PAYMENT OF SALARY MADE TO THE EMP LOYEES OF THE BANK BASED ON SOME CRITERION, WHICH HAS BEEN DULY SUBJECTED TO DEDUCTI ON OF TAX AT SOURCE AND THE SAME HAS BEEN DULY INCLUDED IN THEIR RESPECTIVE FORM NO. 16. THIS FACT IS NOT IN DISPUTE BEFORE US. IN OTHER WORDS, THE PAYMENTS MADE BY THE ASSESSEE B ANK TO THE VARIOUS EMPLOYEES HAD BEEN TREATED EFFECTIVELY AS SALARY AND OTHER ALLOWA NCES INCLUDING PERQUISITES AND THE EMPLOYEES IN TURN HAD PAID TAXES FOR THE SAME BY OF FERING IT TO TAX IN THEIR RETURNS, 6 ITA NO.2619/KOL/2018 THE ROYAL BANK OF SCTOLAND N.V. INDIA BRANCHES, AY 2014-15 WHEREVER APPLICABLE. HENCE IT IS EFFECTIVELY A PAYM ENT MADE AS A WELFARE MEASURE FOR THE BENEFIT OF THE EMPLOYEES OF THE ASSESSEE BANK, WHIC H IS SQUARELY ALLOWABLE AS DEDUCTION U/S 37 OF THE ACT. IT IS WELL SETTLED THAT NOMENC LATURE OR THE FORM OF A TRANSACTION SHOULD HAVE TO BE IGNORED FOR THE PURPOSE OF ALLOWABILITY OF THE SAME AS DEDUCTION FOR INCOME TAX PURPOSES AND SUBSTANCE OF THE TRANSACTION IS TO BE LOOKED INTO. THE REAL SUBSTANCE IS THAT PAYMENT HAS BEEN MADE AS A WELFARE MEASURE TO EMPLO YEES OF THE ASSESSEE BANK WHICH MAKES IT ELIGIBLE FOR DEDUCTION U/S 37 OF THE ACT. THE PAYMENTS WERE MADE TO EMPLOYEES PURSUANT TO EMPLOYER EMPLOYEE RELATIONSHIP. EVE N THE TDS OBLIGATIONS ASSOCIATED WITH THE SAID PAYMENTS HAVE BEEN DULY COMPLIED WITH BY THE ASSESSEE, WHICH IS NOT DISPUTED BY THE REVENUE BEFORE US. EVEN THE SAMPLE FORM NO. 16 WERE DULY SUBMITTED BY THE ASSESSEE BEFORE THE LD AO WHICH ARE ENCLOSED IN PAGE 246 OF THE PAPER BOOK. IT WAS SPECIFICALLY SUBMITTED BEFORE THE LD AO THAT THE PA YMENT MADE UNDER THIS PARTICULAR SCHEME COVERED ALL ELIGIBLE EMPLOYEES RANKING FROM CLERICAL STAFF, ASSISTANT MANAGER, MANAGER, VICE PRESIDENT ETC. WE FIND THAT THE GENUI NITY OF THE SAID PAYMENTS ARE NOT DISPUTED BY THE REVENUE BEFORE US. WE FIND THAT THE CASE LAW RELIED UPON BY THE LD AO IN HIS ASSESSMENT ORDER AND BY THE LD DR I.E BROOKE BO ND INDIA LTD SUPRA, REFERS TO PAYMENTS MADE TO FUND . IN THE INSTANT CASE, THERE WAS NO CONTRIBUTION MADE BY THE ASSESSEE BANK TO ANY OF THE FUNDS. THE PAYMENTS WE RE DIRECTLY MADE TO THE EMPLOYEES OF THE BANK AND SUBJECTED TO DEDUCTION OF TAX AT SOURC E. THE MOMENT THE PAYMENTS ARE MADE TO THOSE EMPLOYEES, THE ASSESSEE HAD LOST COMPLETE CONTROL OVER THOSE FUNDS AND IT HAD NOT COME BACK TO THE ASSESSEE IN ANY MANNER WHATSOEVER EITHER BY CREATION OF ANY FUND MANAGED BY IT OR OTHERWISE. FROM THE APPROVAL LETTE R OF THE COMPETENT AUTHORITY OF THE ASSESSEE BANK, WE FIND THAT THESE PAYMENTS WERE MAD E ONLY TO MEET THE INCREASED COST OF LIVING OF THE EMPLOYEES AND HENCE IT IS EFFECTIVELY A PAYMENT MADE AS A WELFARE MEASURE . HENCE THE PROVISIONS OF SECTION 40A(9) OF THE ACT A S HEAVILY RELIED UPON BY THE LD DR IS NOT AT ALL APPLICABLE TO THE FACTS OF THE INSTANT C ASE. IN VIEW OF THESE OBSERVATIONS, WE HAVE NO HESITATION IN DIRECTING THE LD AO TO GRANT DEDUC TION OF THE SUM OF RS 4.09 CRORES IN THE INSTANT CASE TO THE ASSESSEE. ACCORDINGLY, THE GRO UND NOS. 4(A) TO 4(C ) RAISED BY THE ASSESSEE ARE ALLOWED. 7. SINCE THE ISSUE RAISED BY THE ASSESSEE HAS ALSO BEEN DECIDED BY THIS TRIBUNAL IN THE EARLIER YEARS AND THE LD. DR COULD NOT POINT OU T ANY CHANGE IN FACTS OR LAW, WE RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL AL LOW THIS GROUND OF APPEAL OF THE ASSESSEE AND DIRECT THE AO TO GRANT DEDUCTION OF TH E SUM OF RS.4,22,00,000/- IN THE INSTANT CASE. THIS GROUND OF APPEAL OF ASSESSEE IS ALLOWED. 8. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 19TH FEBRU ARY, 2020 SD/- SD/- (J. SUDHAKAR REDDY) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 19TH FEBRUARY, 2020 JD.(SR.P.S.) 7 ITA NO.2619/KOL/2018 THE ROYAL BANK OF SCTOLAND N.V. INDIA BRANCHES, AY 2014-15 COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT THE ROYAL BANK OF SCTOLAND N. V- INDIA BRANCHES, 907, REGUS, 9 TH FLOOR, PS ARCADIA, 4A, ABANINDRA NATH THAKUR SARAN I, KOLKATA-700 016. 2 RESPONDENT DCIT (INTERNATIONAL TAXATION)-2(1), KO LKATA. 3 . THE CIT(A)-, KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .