BARODA RAJASTHAN KSHETRIYA GRAMIN BANK, AJMER V. DEPUTY COMMISSIONER OF INCOME TAX, AJMER

ITA 272/JPR/2018

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6146 (ITAT-JAIPUR)
• Duration Of Justice: 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 27-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VARINDER MEHTA CIT DR DHK
• Assessee Lawyers: AJAY SOMANI
• Keywords: Business expenditure; Opportunity of being heard; Bad and doubtful debts; Competent authority
• Section: 37(1); 6; 263

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,O JH HKKXPUN] YS[KK LNL; LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, AM VK;DJ VIHY LA-@ ITA NO. 272/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR: 2014-15 BARODA RAJASTHAN KSHETRIYA GRAMIN BANK PLOT NO. 2343,2 ND FLOOR, VAISHALI NAGAR, AJMER CUKE VS. THE DCIT CIRCLE - 1 AJMER LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAAJB 1164 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI AJAY SOMANI, CA JKTLO DH VKSJ LS@ REVENUE BY:SHRI VARINDER MEHTA,CIT - DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 15/03/2018 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 17 /05/2018 VKNS'K@ ORDER PER BHAGCHAND, AM THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORD ER OF THE LD. CIT(A), AJMER DATED 03-01-2018 FOR THE ASSESSMENT YEAR 2014-15 RAISING THEREIN GROUNDS OF APPEAL AS UNDER:- 1. THAT THE LD. CIT(A)S ORDER OF UPHOLDING THE CON VERSION OF THE CASE FROM LIMITED SCRUTINY TO COMPLETE SCRUTINY WHI CH IS BAD IN LAW AS NO ADDITIONS HAVE BEEN MADE REGARDING THE LIMIT ED SCRUTINY THROUGH CASS. THE ASSESSMENT PROCEEDING AND ORDER P ASSED BY AO IS DEVOID OF JURISDICTION AND VOID AB INITIO. 2. THAT THE LD. CIT(A) HAS AJMER HAS ERRED IN LAW A ND THE FACTS IN CONFIRMING THE ADDITIONS/DISALLOWANCES AND ENHANCEM ENT TOTALING TO ITA NO.272 /JP/2018 M/S. BARODA RAJASTHAN KSHETRIYA GRAMIN BANK, AJMER VS DCIT, CI RCLE 1, AJMER 2 RS. 40,70,85,297/- (36,90,95,944+3,80,89,353/-) THE SAME NEEDS TO BE DELETED. I. THAT THE DISALLOWANCE OF PROVISION FOR BAD AND DOUBTFUL DEBTS OF RS. 2,71,72,000/- IS BAD IN LAW A S THE APPELLANT IS SCHEDULED BANK GOVERNED BY RBI GUIDELI NES AND PROVISIONS MADE ARE ALLOWABLE BUSINESS EXPENDITURES UNDER SECTION 36(1)(VIIA) OF INCOME TAX ACT,1961 A HELD B Y ITAT JODHPUR (ITA NO. 240/JODH/2013 DATED 29-11-2013) I N NAGAUR URBANJ COOPERATIVE BANK LTD VS ACIT, NAGAUR. TOTAL INCOME WAS RS. 128.50 CRORES WHEREAS PROVISION IS ONLY 2.7 1 CRORES. II. THAT THE DISALLOWANCE OF INSURANCE PREMIUM PAID TO LIC AND OTHERS REGARDING LEAVE ENCASHMENT LIABILITY , RS. 34,19,23,944/- (RS. 35,19,00,000/- LESS RS. 99,76,0 56/-) IS UNLAWFUL AS THE EXPENDITURE IS ALLOWABLE UNDER SECT ION 36/37. HON'BLE HIGH COURT, UTTRAKHAND IN ITA NO.39 OF 2009 CIT VS M/S. THE NAINITAL BANK LTD AND HON'BLE ITAT DELHI I N HERO MOTOR CORPORATION LTD VS LD. CIT (2013) 60 SDT D25 (DELHI) HAS ALLOWED SIMILAR CONTRIBUTION TO LIC AS DEDUCTIB LE EXPENDITURE. 3. THAT THE LD. CIT(A), AJMER HAS ERRED IN LAW AND THE FACTS OF THE CASE IN ENHANCEMENT OF INCOME BY AN INCOME OF R S. 3,80,89,353/- TREATING THE SAME AS AN INTEREST INCOME OF THE APPE LLANT. THE SAME HAS NEITHER BEEN RECEIVED NOR ACCRUED TO THE APPELLANT. 2.1 APROPOS GROUND NO. 1 OF THE ASSESSEE, THE FACTS AS EMERGES FROM THE ORDER OF THE LD. CIT(A) ARE AS UNDER:- 6.2 I HAVE GONE THROUGH THE ASSESSMENT ORDER , STATEMENT OF FACTS, GROUNDS OF APPEAL, WRITTEN SUBM ISSION, REMAND REPORT AND REJOINDER CAREFULLY. AFTER GOING THROUGH THE REMAND REPORT DATED 25-10-2017 ALONGWITH THE ENCLOSURES, I AM CONVINCED THAT APPROVAL TO CONVERT THE CASE OF THE APPELLANT FROM LIMITED SCRUTINY TO COM PLETE SCRUTINY WAS GRANTED BY THE PR. CIT, AJMER VIDE LE TTER NO. PR.CIT/AJM/ITO(TECH)/16-17/2022 DATED 30-11-2017. THEREFORE, I FIND NO MERIT IN THE GROUND RAISED BY THE APPELLANT. ACCORDINGLY, THIS GROUND IS DISMISSED. ITA NO.272 /JP/2018 M/S. BARODA RAJASTHAN KSHETRIYA GRAMIN BANK, AJMER VS DCIT, CI RCLE 1, AJMER 3 2.2 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE HAVE ALSO TAKEN INTO CONSID ERATION THE WRITTEN SUBMISSION OF THE ASSESSEE BUT WE DID NOT FIND IT C ONTROVERTING THE DECISION OF LD. CIT(A) ON THE ISSUE OF CONVERTING T HE CASE OF THE ASSESSEE FROM LIMITED SCRUTINY TO COMPLETE SCRUTINY. IT IS NOTED THAT THE LD. CIT(A) HAS EXPLICITLY DEALT WITH THE ISSUE IN HIS O RDER WHICH DOES NOT REQUIRE ANY INTERFERENCE. HENCE, THE GROUND NO. 1 O F THE ASSESSEE IS DISMISSED. 3.1 APROPOS GROUND NO. 2 (1) OF THE ASSESSEE, THE F ACTS AS EMERGES FROM THE ORDER OF THE LD. CIT(A) ARE AS UNDER:- 8.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER, STATEMENT OF FACTS, GROUNDS OF APPEAL, WRITTEN SUBM ISSION, REMAND REPORT AND REJOINDER CAREFULLY. THIS ISSUE H AS ALREADY BEEN DECIDED BY ME AGAINST THE APPELLANT VIDE ORDER DATED 15-10-2015 (APPEAL NO.328/2014-15, A.Y. 2012-13). T HE ITAT JODHPUR BENCH IN THE CASE OF RAJASTHAN MARUDHA R GRAMIN BANK VS PR. CIT -1, JODHPUR (ITA NO.143/JODH/2015, A.Y. 2010-11 ORDER DATED 15-09-20 17) HAS ALSO DECIDED THE ISSUE AGAINST THE ASSESSEE. TH EREFORE, FOLLOWING MY DECISION GIVEN IN THE CASE OF APPELLAN T FOR A.Y. 2012-13 AND THE ORDER OF THE ITAT JODHPUR BENCH IN THE CASE OF RAJASTHAN MARUDHAR GRAMIN BANK VS PR. CIT-1 , JODHPUR REFERRED ABOVE, THIS GROUND OF APPEAL IS DI SMISSED. 3.2 DURING THE COURSE OF HEARING, THE LD.AR OF THE ASSESSEE PRAYED THAT THE DISALLOWANCE OF PROVISION FOR BAD AND DOUBTFUL DEBTS IS BAD IN LAW AS ITA NO.272 /JP/2018 M/S. BARODA RAJASTHAN KSHETRIYA GRAMIN BANK, AJMER VS DCIT, CI RCLE 1, AJMER 4 THE APPELLANT BANK IS SCHEDULE BANK GOVERNED BY RB I GUIDELINES AND PROVISIONS MADE ARE ALLOWABLE BUSINESS EXPENDITURES U/S 1961 AS HELD BY ITAT JODHPUR BENCH (ITA NO.240/JODH/2013 DATED 29-1 1-2013) IN NAGAUR URBAN COOPERATIVE BANK LTD. VS ACIT, NAGAUR. TOTAL INCOME WAS RS. 128.50 CRORES WHEREAS PROVISION IS ONLY 2.7 1 CRORES. THE LD.AR OF THE ASSESSEE SUBMITTED THAT BANK ADVANCED TOTALE D TO RS. 6169 CRORES. THE PROVISION FOR BAD AND DOUBTFUL DEBTS MADE AS PE R RBI GUIDELINES RS. 22.86 CRORES (INCLUDING RS. 2.71 CRORES ON STANDARD ASSETS. THE LD.AR OF THE ASSESSEE FURTHER SUBMITTED THAT THE DEDUCTION C LAIMED IS IN CONFORMITY WITH THE INSTRUCTION NO. 17/2008 DATED 26-11-2008 O F CBDT (PB PAGE 41) WHICH IN PARA (III) LAYS DOWN THAT:- (III) SECTION 36(2)(VIIA) (A) OF THE ACT PROVIDES THAT IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DE BTS TO THE TYPE REFERRED TO IN THAT SUB-CLAUSE MADE BY A BANK, AN AMOUNT NOT EXCEEDING 5 PERCENT UPTO 31 ST MARCH 2003 AND THEREAFTER 7.5 PERCENT OF THE TOTAL INCOME (COMPUTE D BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VIA OF THE ACT) AND AN AMOUNT NOT EXCEEDING 10 PERCENT OF THE AGGREGATE AVERAGE ADVANCES MADE BY RURAL BRANCHES OF SUCH BANKS COMPUTED IN THE MANNER PRESCRIBED UNDER THE INCOME TAX RULES, 1962 SHALL BE ALLOWED AS DEDUCTIO N. THE LD.AR OF THE ASSESSEE DURING THE COURSE OF RELI ED ON THE ORDER ITAT JODHPUR BENCH (ITA NO.240/JODH/2013 A.Y. 2009-10 DA TED 29-11-2013) ITA NO.272 /JP/2018 M/S. BARODA RAJASTHAN KSHETRIYA GRAMIN BANK, AJMER VS DCIT, CI RCLE 1, AJMER 5 IN THE CASE OF NAGAUR URBAN COOPERATIVE BANK LTD VS ACIT, CIRCLE NAGAUR WHEREIN THE APPEAL OF THE APPELLANT BANK HAS BEEN ALLOWED ON THIS ISSUE BY THE ITAT, JODHPUR BENCH BY OBSERVING AS UN DER:- 10 AFTER CIRCUMSPECTING THE ENTIRE RECORDS VIS-- VIS THE ORAL SUBMISSIONS, WE ARE OF THE CONSIDERED OPINION THAT GROUND NO. 2 STANDS COVERED IN FAVOUR OF THE A SSESSEE VIDE ORDER OF ITAT, CHENNAI BENCH AS DISCUSSED IN T HE ABOVE EXCERPT. WE HAVE GONE THROUGH THE COPY OF THE TRIBUNAL ORDER REFERRED ABOVE AND ARE CONVINCED THA T THIS GROUND STANDS COVERED IN FAVOUR OF THE ASSESSEE. TH E RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL (SUPRA) IS REP RODUCED AS UNDER:- 8. NOW THE SECOND QUESTION WHICH ARISES FOR DETERMINATION BEFORE US IS WHETHER THE ASSESSEE HAS CREATED ANY RESERVE/PROVISION FOR BAD AND DOUBTFUL DEBTS? THE AR HAS CONTENDED THAT THE ASSESSEE HAS CREATED PROVISION FOR BAD AND DOUBTFUL DEBTS UNDER NOMENCLATURE RESERVE FOR NPA. THE TERMINOLOGY RESERVE FOR NPA HAS BEEN USED BY THE ASSESSEE IN ACCORDANCE WITH THE RBI DIRECTIONS. AS IS EVIDENT F ROM THE ASSESSMENT ORDER, THE ASSESSEE HAS INDEED CREAT ED RESERVE FOR NPA. FOR CLAIMING BENEFIT UNDER THE PROVISIONS OF SECTION 36(1)(VIIA)(A) THE CONDITION TO BE SATISFIED IS: THAT PROVISION FOR BAD AND DOUBTFUL D EBTS SHOULD HAVE BEEN MADE BY THE BANK ELIGIBLE TO CLAIM SUCH DEDUCTION. COOPERATIVE BANKS DO NOT STRICTLY FOLLOW THE PROVISIONS OF BANKING REGULATION ACT FOR THE PURPOSE OF MAINTAINING THEIR BOOKS OF ACCOUNTS. IN OUR CONSIDERED OPINION, THE ASSESSEE HAS CREATED PROVISION FOR BAD AND DOUBTFUL DEBTS MAY BE UNDER DIFFERENT NOMENCLATURE. THIS WILL NOT DIS-ENTITLE T HE ASSESSEE FOR CLAIMING DEDUCTION UNDER THE PROVISION OF ITA NO.272 /JP/2018 M/S. BARODA RAJASTHAN KSHETRIYA GRAMIN BANK, AJMER VS DCIT, CI RCLE 1, AJMER 6 SECTION 36(1)(VIIA)(A). THE PURPOSE FOR CREATION OF RESERVE FOR NPA IS SAME I.E. CREATING PROVISION TOWARDS BAD AND DOUBTFUL DEBTS. IN VIEW OF THE ABOVE, WE FIND THAT THE ASSESSMENT ORDER DATED 09-09-2010 IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE IMPUGNED ORDER OF CIT U/S 263 IS SET ASIDE AND THE APPEAL OF THE ASSESSEE IS ALLOWED. 11. THEREFORE, BY RESPECTFULLY FOLLOWING THE RATIO DECIDENDI OF THE ABOVE TRIBUNAL ORDER, WE ALLOW GRO UND NO. (2) OF THIS APPEAL IN FAVOUR OF THE ASSESSEE. THESE PROVISIONS WHICH ARE IN LINE WITH THE RBI GUIDELINES BECOME ALLOWABLE. 3.3 ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORD ER OF THE LD. CIT(A). 3.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE WRITTEN SUBMISSIO N OF THE ASSESSEE. IT IS NOT IMPERATIVE TO REPEAT THE FACTS AND CIRCUMSTANCE S OF THE CASE AS THE LD. CIT(A) HAS ELABORATELY DISCUSSED THE ISSUE IN QUEST ION. IN THIS GROUND, THE ASSESSEE HAS TAKEN THE SUPPORT OF ITAT JODHPUR BENC H (SUPRA) WHEREIN SIMILAR ISSUE HAS BEEN DECIDED IN FAVOUR OF NAGAUR URBAN COOPERATIVE BANK LTD. JODHPUR(SUPRA). THE ASSESSEE FURTHER SUBM ITTED THE PROVISION FOR BAD DOUBTFUL DEBTS MADE ARE AS PER RBI GUIDELIN ES AMOUNTING TO RS. 22.86 CRORES WHICH INCLUDES RS. 2.71 CRORES ON STAN DARD ASSETS. THE ITA NO.272 /JP/2018 M/S. BARODA RAJASTHAN KSHETRIYA GRAMIN BANK, AJMER VS DCIT, CI RCLE 1, AJMER 7 DEDUCTION CLAIMED IS IN CONFORMITY WITH THE CBDT IN STRUCTION NO. 17/2008 DATED 26-11-2008 (SUPRA). IN VIEW OF THE FA CTS AND CIRCUMSTANCES OF THE CASE, THE ISSUE OF DISALLOWANCE FOR STANDARD ASSET OF RS. 2.71 CRORES IS RESTORED TO THE FILE OF THE AO TO VERIFY AS TO W HETHER THE PROVISION FOR STANDARD ASSETS HAS BEEN MADE AS PER GUIDELINES OF THE RBI. IF THE ASSESSEE HAS COMPLIED WITH THE PROVISION AS PER RBI GUIDELINES, THE RELIEF MAY BE GIVEN TO THE ASSESSEE BY PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THUS GROUND NO. 2 (I) OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 4.1 THE GROUND NO. 2 (II) OF THE ASSESSEE IS REGARD ING THE DISALLOWANCE OF INSURANCE PREMIUM PAID TO LIC AND OTHERS TOWARDS LEAVE ENCASHMENT LIABILITY OF RS. 34,19,23,944/- (RS. 35,19,00,000 L ESS RS. 99,76,056). BRIEF FACTS OF THE CASE ARE THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDING REQUESTED THE ASSESSEE BANK TO FURNISH T HE INFORMATION RELATING TO THE AMOUNT OF LEAVE ENCASHMENT AND CONFIRM AS TO WHETHER THE AMOUNT OF LEAVE ENCASHMENT SHOWN IN P&L A/C IS ACTUALLY PA ID TO THE EMPLOYEES. IF THE SAME IS PAID TO THE EMPLOYEES THEN THE ASSES SEE BANK SHALL FURNISH THE DOCUMENTARY PROOF FOR THE SAME. THE ASSESSEE BA NK SUBMITTED REPLY OF THE ABOVE QUERY VIDE LETTER NO. 18028 DATED 29- 12-2016 WHICH HAS ITA NO.272 /JP/2018 M/S. BARODA RAJASTHAN KSHETRIYA GRAMIN BANK, AJMER VS DCIT, CI RCLE 1, AJMER 8 BEEN CONSIDERED BY THE AO. HOWEVER, THE AO DID NOT FIND THE ASSESSEE BANKS REPLY ACCEPTABLE ON THE FOLLOWING GROUNDS:- (I) IT IS SEEN THAT THE ASSESSEE BANK HAS BEEN CLAI MING THIS DEDUCTION ON THE BASIS OF INVESTMENT MADE FOR THIS PURPOSE WITH THE LIC, BAJAJ ALLIANZ, FUTURE GENERALI, AVIVA, HDFC, I NDIA FIRST AND BIRLA. ANY PAYMENT FOR LEAVE ENCASHMENT IN FUTURE H AS TO BE MADE OUT OF THAT FUND. HOWEVER, NO SUCH DEDUCTION IS ALL OWABLE UNDER ANY OF THE PROVISIONS OF THE INCOME TAX ACT AND DED UCTION IF ANY HAS TO BE ALLOWED ONLY ON THE ACTUAL PAYMENT MADE T O THE EMPLOYEES. (II) THE CONTENTION OF THE ASSESSEE BANK WAS DULY CONSIDERED BUT WAS NOT ACCEPTABLE FOR THE REASON TH AT SECTION 37(1) PROVIDES FOR THE ALLOWING OF ANY EXPENDITURE LAID O UT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSIN ESS. IT DOES NOT COVER ANY PROVISION MADE FOR THE PURPOSE OF ANY FUT URE LIABILITY. (III) THE PROVISIONS MADE BY THE ASSESSEE FOR LEAV E ENCASHMENT EXPENSES (ALTHOUGH THE PAYMENT HAS BEEN MADE TO LIC) IS NOT A PAYMENT TO EMPLOYEES AND AS SUCH THE EXPENSES ARE NOT ALLOWABLE UNDER THE PROVISIONS OF SECTION 43B(F ) OF THE INCOME TAX ACT, 1961. THE CASE OF THE ASSESSEE IS CLEARLY HIT BY THE PROVISIONS OF SECTION 43B(F) OF THE ACT. AS THE ASS ESSEE HAS NOT MADE ANY PAYMENT TO EMPLOYEES MORE PARTICULARLY IN VIEW OF THE PROVISIONS OF SECTION 43B(F) OF THE ACT, THE DEDUCT ION IN RESPECT OF EXPENSES CLAIMED BY THE ASSESSEE ON ACCOUNT OF PROV ISIONS FOR LEAVE ENCASHMENT IS NOT ALLOWABLE TO THE ASSESSEE. (IV) MOREOVER THE ASSESSEE HAS NOT FURNISHED THE DOCUMENTARY PROOF THAT THE GROUP LEAVE ENCASHMENT F UND IS AN APPROVED FUND BY THE COMPETENT AUTHORITY. ITA NO.272 /JP/2018 M/S. BARODA RAJASTHAN KSHETRIYA GRAMIN BANK, AJMER VS DCIT, CI RCLE 1, AJMER 9 IN VIEW OF THE ABOVE REASONS , THE PROVISION MADE F OR THE LEAVE ENCASHMENT OF RS. 35,19,00,000/-IS DISALLOWED AND A DDED TO THE TOTAL INCOME OF THE ASSESSEE BY THE AO. 4.2 IN FIRST APPEAL, THE LD. CIT(A) HAS CONFIRMED T HE ADDITION OF RS. 34,19,23,944/- BY OBSERVING AS UNDER:- 4.12..THE APPELLANT HAS ALSO RELIED UPON THE DECISION OF ITAT JAIPUR IN THE CASE OF JHALAWAR KEN DRIYA SAHAKARI BANK. IN THIS CASE ALSO, THE RELIEF WAS AL LOWED TO THE APPELLANT ON THE SUBMISSION MADE BY THE APPELLANT T HAT AFTER CONTRIBUTION OF PREMIUM, THE APPELLANT HAS NO CONTROL OVER THE SAME. (PAGE NO 9 OF THE ORDER). THE TRIB UNAL ALSO RELIED UPON THE DECISION OF HON'BLE SUPREME COURT I N THE CASE OF TEXTOOL COMPANY LTD AND DECISION OF ITAT DE LHI IN THE CASE OF THE NAINITAL BANK LIMITED. AS I HAVE A LREADY DISCUSSED ABOVE THE FACTS OF TEXTOOL COMPAY LIMITED , ON WHICH THE DECISION OF THE NAINITAL BANK LIMITED WAS BASED WERE TOTALLY DIFFERENT FROM THE FACTS OF THE APPELL ANTS CASE. THEREFORE, THE DECISION OF ITAT JAIPUR IS ALSO NOT APPLICABLE TO THE CASE OF THE APPELLANT BECAUSE THE APPELLANT HAS ABSOLUTE CONTROL OVER THE FUNDS PARKED WITH THESE C OMPANIES AND THE EMPLOYEES DO NOT HAVE ANY CONTROL OVER THE SE FUNDS. THE OTHER DECISION RELIED UPON BY THE APPELLANT ARE NOT RELEVANT FOR DECIDING THE ALLOWABILITY OF DEDUCTION U/S 43B(F). I HAVE GONE THROUGH THE VARIOUS DECISIONS R ELIED UPON BY THE APPELLANT CAREFULLY. IN THE DECISION GI VEN BY THE ITAT DELHI H BENCH IN THE CASE OF THE NAINITAL BA NK, THE AMOUNT PAID TO LIC ON ACCOUNT OF LEAVE ENCASHMENT W AS ALLOWED AS DEDUCTING RELYING ON THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT VS TEXTOOL COMPANY LTD (2 62 IKTR 257) AND THE DECISION IN THE CASE OF ASSOCIATED ELE CTRICAL INDUSTRIES (INDIA) PVT. LTD. I HAVE GONE THROUGH TH E DECISION OF THE SUPREME COURT IN THE CASE OF TEXTOOL COMPANY LTD. CAREFULLY. THE ISSUE DECIDED BY THE HON'BLE SUPREME COURT ITA NO.272 /JP/2018 M/S. BARODA RAJASTHAN KSHETRIYA GRAMIN BANK, AJMER VS DCIT, CI RCLE 1, AJMER 10 IN THAT CASE WAS ADMISSIBILITY OF DEDUCTION OF THE PAYMENT MADE TO LIC TOWARDS GRATUITY FUND U/S 36(1)(V) OF T HE I.T. ACT, 1961. THE ISSUE OF ALLOWABILITY OF DEDUCTION U /S 43(B)(F) OF LEAVE ENCASHMENT WAS NOT THERE BEFORE T HE HON'BLE SUPREME COURT. THE HON'BLE SUPREME COURT ALLOWED THE CLAIM OF THE APPELLANT OBSERVING AS UND ER:- HAVING CONSIDERED THE MATTER IN THE LIGHT OF THE BACKGROUND FACTS, WE ARE OF THE OPINION THAT THERE IS NO MERIT IN THE APPEAL. TRUE THAT A FISCAL STATUTE IS TO BE CONSTRUED STRICTLY AND NOTHING SHO ULD BE ADDED OR SUBTRACTED TO THE LANGUAGE EMPLOYED IN THE SECTION, YET A STRI CT CONSTRUCTION OF A PROVISION DOES NOT RULE OUT THE APPLICATION OF THE PRINCIPLES OF REASONABLE CONSTRUCTION TO GIVE EFFECT TO THE PURPOSE AND INTE NTION OF ANY PARTICULAR PROVISION OF THE ACT (SEE: SHRI SAJJAN MILLS LTD. V S LD. CIT, M.P. & ANR.(1985) 156 ITR 585). FROM A BARE READING OF SEC TION 36(1)(V) OF THE ACT, IT IS MANIFEST THAT THE REAL INTENTION BEHIND THE PROVISION IS THAT THE EMPLOYER SHOULD NOT HAVE ANY CONTROL OVER THE FUNDS OF THE IRREVOCABLE TRUST CREATED EXCLUSIVELY FOR THE BENEFIT OF THE EMPLOYEE S. IN THE INSTANT CASE, IT IS EVIDENT FROM THE FINDINGS RECORDED BY THE COMMISSIO NER AND AFFIRMED BY THE TRIBUNAL THAT THE ASSESSEE HAD ABSOLUTELY NO CONTRO L OVER THE FUNDS CREATED BY THE LIC FOR THE BENEFIT OF THE EMPLOYEES OF THE ASSESSEE AND FURTHER AL THE CONTRIBUTION MADE BY THE ASSESSEE IN THE SAID FUND ULTIMATELY CAME BACK TO THE TEXTOOL EMPLOYEES GRATUITY FUND, APPROVED BY TH E COMMISSIONER WITH EFFECT FROM THE FOLLOWING PREVIOUS YEAR. THUS THE C ONDITIONS STIPULATED IN SECTION 36(1)(V) OF THE ACT WERE SATISFIED. . THUS I AM OF THE OPINION THAT EVEN THE DECISION OF ASSOCIATED ELECTRICAL INDIA PVT. LTD IS ALSO NOT AP PLICABLE IN THE CASE UNDER CONSIDERATION. THE APPELLANT HAS ALSO RELIED UPON THE DECISION OF ITAT JAIPUR IN THE CASE OF JHALAWAR KENDRIYA SAHAKA RI BANK. IN THIS CASE ALSO, THE RELIEF WAS ALLOWED TO THE APPELLANT ON THE SUBMISSION MADE BY THE APPELLANT T HAT AFTER CONTRIBUTION OF PREMIUM, THE APPELLANT HAS NO CONTROL OVER THE SAME (PAGE NO. 9 OF THE ORDER). THE TRI BUNAL ALSO RELIED UPON THE DECISION OF HON'BLE SUPREME COURT I N THE CASE OF TEXTOOL COMPANY LTD AND DECISION OF ITAT DE LHI IN THE CASE OF THE NAINITAL BANK LIMITED. AS I HAVE AL READY DISCUSSED ABOVE THE FACTS OF TEXTOOL COMPANY LIMITE D ON WHICH THE DECISION OF THE NAINITAL BANK LTD WAS BAS ED WERE TOTALLY DIFFERENT FROM THE FACTS OF THE APPELLANT S CASE. ITA NO.272 /JP/2018 M/S. BARODA RAJASTHAN KSHETRIYA GRAMIN BANK, AJMER VS DCIT, CI RCLE 1, AJMER 11 THEREFORE, THE DECISION OF ITAT JAIPUR IS ALSO NOT APPLICABLE TO THE CASE OF THE APPELLANT BECAUSE THE APPELLANT HAS ABSOLUTE CONTROL OVER THE FUNDS PARKED WITH THESE C OMPANIES AND EMPLOYEES DO NOT HAVE ANY CONTROL OVER THESE FU NDS. THE OTHER DECISION RELIED UPON BY THE APPELLANT ARE NOT RELEVANT FOR DECIDING THE ALLOWABILITY OF DEDUCTION U/S 43B( F) 4.13 IT IS PERTINENT TO MENTION THAT IN THE A.Y. 2 009- 10 AND 2010-11,THE APPELLANT ITSELF HAD SHOWN THE F UNDS PARKED WITH LIC AND OTHER COMPANIES FOR LEAVE ENCAS HMENT AS INVESTMENT IN SCHEDULE II OF THE BALANCE SHEET ( RS. 4,35,91,748 AND RS. 5,77,16,828 AS ON 31-03-2009 AN D 31- 03-2010 RESPECTIVELY) IN THE A.Y. 2010-11, THE INTE REST ACCRUED ON SUCH FUNDS WAS CREDITED TO THE PROFIT & LOSS ACCOUNT UNDER THE HEAD OTHER INCOME. THEREFORE , I FIND NO JUSTIFICATION FOR CLAIMING INVESTMENT OF SAME NA TURE AS EXPENDITURE IN THE A.Y. 2014-15. 4.14 AS PER INFORMATION FURNISHED BY THE APPELLANT, THE ACTUAL AMOUNT PAID TOWARDS LEAVE ENCASHMENT TO EMPLOYEES THROUGH LIC WAS RS. 99,76,056/-, THEREFOR E, IN VIEW OF THE DISCUSSION MADE ABOVE, THE DEDUCTION OF RS. 99,76,056/- IS HELD TO BE ALLOWABLE U/S 43B(F) BECA USE THIS WAS THE SUM PAYABLE AND ACTUALLY PAID BY THE ASSESS EE AS EMPLOYER IN LIEU OF ANY LEAVE AT THE CREDIT OF HIS EMPLOYEE, AS SPECIFIED U/S 43B(F). ACCORDINGLY, OUT OF THE TO TAL DISALLOWANCE OF RS. 35,19,00,000/- DISALLOWANCE OF RS. 99,76,056/- IS DELETED AND THE REMAINING DISALLOWAN CE OF RS. 34,19,23,944/- (RS. 35,19,00,000 RS. 99,76,056) I S HEREBY CONFIRMED. 4.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. DURING THE COURSE OF HEARING, THE LD.AR OF THE ASSESSEE DREW OUR ATTENTION TO THE DECISION OF ITAT JAIPUR BENCH IN THE ITA NO.272 /JP/2018 M/S. BARODA RAJASTHAN KSHETRIYA GRAMIN BANK, AJMER VS DCIT, CI RCLE 1, AJMER 12 CASE JHALAWAR KENDRIYA SAHAKARI BANK LTD VS ACIT (I TA NO.1032/JP/2011 AND ITA NO. 1051/JP/2011 IN THE CA SE OF ACIT VS JHALAWAR KENDRIYA SAHAKARI BANK LTD WHEREIN THE BEN CH HAS ALLOWED THE BENEFIT OF GROUP LEAVE ENCASHMENT SCHEME TO THE BAN K BY OBSERVING AS UNDER:- 19. APROPOS THE DEPARTMENTAL APPEAL, THE ASSESSEE TOOK A POLICY FROM LIC NAMED AS JHALWAR KENDRIYA SA HAKARI BANK EMPLOYEE GROUP LEAVE ENCASHMENT SCHEME. THE FACTS A RE MENTIONED IN DETAIL ABOVE. THE PAYMENT OF LEAVE ENCASHMENT IS A CONTRACTUAL LIABILITY8, A CHARGE ON ASSESSEE'S PROFIT. TO ENSUR E TIMELY BENEFIT OF LEAVE ENCASHMENT OF EMPLOYEES SCHEME IS DEVISED BY THE LIC, WHICH WORKS OUT THE LEAVE ENCASHMENT LIABILITY AND FIXATI ON OF PREMIUM. THE LIABILITY IS ASCERTAINED AND CRYSTALLIZED ON A SCIE NTIFIC METHOD BY THE LIC. THUS, THE ASSESSEE'S PAYMENT OF RS. 40 LACS TO WARDS THE SAME IS WITHIN THE FRAMEWORK OF THE SCHEME. IN OUR CONSIDER ED VIEW, THE SAME IS ALLOWABLE DEDUCTION. THIS VIEW FURTHER SUPPORTED BY THE HON'BLE SUPREME COURT IN THE CASE OF TEXTOOL CO. LTD (SUPRA ) AND ITAT JUDGEMENT IN THE CASE OF NAINITAL BANK LTD (SUPRA). RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE ASSESSEE IS EL IGIBLE FOR THIS DEDUCTION. THE LD.AR OF THE ASSESSEE FURTHER SUBMITTED THAT TH E ASSESSEE HAS DISCHARGED ITS LIABILITY TOWARDS LEAVE ENCASHMENT S CHEME, THE SAME IS THEREFORE, ALLOWABLE AS EXPENDITURE U/S 37(1)OF THE ACT. TAKING INTO CONSIDERATION THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AND THE DECISIONS RELIED UPON BY THE LD.AR OF THE ASSESSEE, IT WILL BE IN THE INTEREST OF EQUITY AND JUSTICE TO RESTORE THE ISSUE TO THE FILE OF THE AO FOR AFRESH ADJUDICATION. THE ASSESSEE IS DIRECTED TO SU BMIT THE WRITTEN ITA NO.272 /JP/2018 M/S. BARODA RAJASTHAN KSHETRIYA GRAMIN BANK, AJMER VS DCIT, CI RCLE 1, AJMER 13 SUBMISSION ALONGWITH RELEVANT DETAILS BEFORE THE AO . THUS GROUND NO. 2(II) OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PU RPOSES. 5.1 APROPOS GROUND NO. 3, THE FACTS AS EMERGES FROM THE ORDER OF THE LD. CIT(A) ARE AS UNDER:- 5.2 I HAVE GONE THROUGH THE ASSESSMENT ORDER, STATEMENT OF FACTS, GROUNDS OF APPEAL, WRITTEN SUBM ISSION, REMAND REPORT AND REJOINDER CAREFULLY. WHILE DECIDI NG GROUND NO. 2(C) ABOVE, I HAVE ALREADY HELD THAT THE DEDUCTION ADMISSIBLE TO THE APPELLANT U/S 43B(F) IS ONLY OF RS. 99,76,056/- BECAUSE THIS WAS THE SUM PAYABLE AN D ACTUALLY PAID BY THE ASSESSEE AS AN EMPLOYER IN LIE U OF ANY LEAVE AT THE CREDIT OF HIS EMPLOYEES, AS SPECIFIED U/S 43B(F). THE INTEREST OF RS. 3,80,89,353/- HAS ACCRUED TO TH E APPELLANT ON THE FUNDS PARKED WITH THE VARIOUS COMPANIES DISC USSED BY THE AO IN THE ASSESSMENT ORDER AT PAGE 6 AND THE AP PELLANT HAS NOT CREDITED THIS INTEREST INCOME IN THE PROFIT & LOSS ACCOUNT. I AM OF THE CONSIDERED VIEW THAT THE INTER EST INCOME OF RS. 3,80,89,353/- HAS ACCRUED TO THE APPE LLANT AND CREDITED IN THE AMOUNT OF THE APPELLANT BY THE COMP ANIES, THEREFORE, THIS INCOME SHOULD HAVE BEEN OFFERED FOR TAXATION BY THE APPELLANT IN THE A.Y. 2014-15. AS THE APPELL ANT HAS FAILED TO DISCLOSE THE INTEREST INCOME OF RS. 3,80, 89,353/- IN RETURN OF INCOME OF THE A.Y. 2014-15, THEREFORE, TH E ASSESSMENT OF THE APPELLANT FOR THE A.Y. 2014-15 IS ENHANCED U/S 251(1) BY SUM OF RS. 3,80,89,353/-. PENALTY PRO CEEDINGS U/S 271(1) HAVE ALREADY BEEN INITIATED FOR CONCEAL ING THE PARTICULARS OF INCOME OF RS. 3,80,89,353/-. 5.2 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THIS ISSUE IS CONCERNED WITH T HE ISSUE OF LEAVE ENCASHMENT LIABILITY WHICH HAS BEEN RESTORED BACK T O THE FILE OF THE AO ITA NO.272 /JP/2018 M/S. BARODA RAJASTHAN KSHETRIYA GRAMIN BANK, AJMER VS DCIT, CI RCLE 1, AJMER 14 FOR AFRESH ADJUDICATION. THEREFORE, THIS ISSUE ALSO NEEDS AFRESH ADJUDICATION BY THE AO AS IT PERTAINS TO GROUND NO. 2 (II) OF THE ASSESSEE. THUS GROUND NO. 3 OF THE ASSESSEE REGARDING INTERES T INCOME IS ALLOWED FOR STATISTICAL PURPOSES. 6.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17 -05-2018 . SD/- SD/- FOT; IKY JKO HKKXPUN (VIJAY PAL RAO) ( BHAGCHAND) U;KF;D LNL; / JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 17 /05/ 2018 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. RAJASTHAN KSHETRIYA GRAMIN BAN K, AJMER 2. IZR;FKHZ@ THE RESPONDENT- THE DCIT, CIRCLE 1, AJMER 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 272/JP/2018) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR