Oriental Bank of Commerce, New Delhi V. DCIT, New Delhi

ITA 274/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59058 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 02-02-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 17-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Keywords: Opportunity of being heard; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E: NEW DELHI BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER I.T.A.NO.274/DEL/2011 ASSESSMENT YEAR : 2006-07 ORIENTAL BANK OF COMMERCE, DY. COMMISSIONER OF IN COME-TAX, F-14, IVTH FLOOR, VS. CIRCLE 13(1), NEW DELHI. COMPETENT HOUSE, CONNAUGHT PLACE, NEW DELHI. PAN: AAACO0191M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.V.S.R. KR ISHNA, CA. RESPONDENT BY : SHRI R. S. NEGI, S R. DR O R D E R PER K.D. RANJAN, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE FOR ASSESSMENT YEAR 200 6-07 ARISES OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-X VIII, NEW DELHI. THE GROUNDS RAISED BY THE ASSESSEE ARE REPRODUCED AS UN DER:- GROUND NO.1 THE ASSESSEE BANK CONTENDS THAT FOR ARRIVING AT THE VALUE OF FRINGE BENEFITS, THE CONTRIBUTION OF RS.16,30,73,44 8/- TO THE PENSION FUND OF THE EMPLOYEES OF THE NATIONALIZED B ANK SHOULD NOT BE CONSIDERED. GROUND NO.2 2 THE APPELLANT CONTENDS THAT THE FRINGE BENEFIT U/S 115 WB, CLAUSE (C) DOES NOT ENVISAGE CONTRIBUTION TO EMPLOY EES PENSION FUND OF A PUBLIC SECTOR BANK WHICH IS A COMPULSORY LIABILITY UNDER BANK EMPLOYEES PENSION REGULATION, 1995. GROUND NO.3 THE APPELLANT FURTHER CONTENDS THAT THE INTENTION A ND PURPORT OF INTRODUCING THIS SECTION UNDER THE FRINGE BENEFIT T AX ENACTMENT IS TO COVER NON STATUTORY CONTRIBUTIONS AS EXPRESSE D BY THE THEN FINANCE MINISTER THE SUPERANNUATION FUNDS ARE ES SENTIALLY FOR THE SENIOR EMPLOYEES AND ARE NOT STATUTORY IN N ATURE. GROUNDNO.4 THE APPELLANT BEING A PUBLIC SECTOR BANK, WHEREBY CONTRIBUTIONS TO PENSION FUND IS A STATUTORY LIABIL ITY; THE SAME IS OUTSIDE THE PREVIEW OF FBT AND HENCE TO BE EXCLUDED FOR THE PURPOSE OF FRINGE BENEFIT TAX. 2. THE ONLY ISSUE FOR CONSIDERATION RELATES TO CONS IDERING THE CONTRIBUTION OF RS.16,30,448/- TO THE PENSION FUND OF THE EMPLOYEES OF THE NATIONALIZED BANK FOR THE PURPOSE OF VALUATION OF F RINGE BENEFITS. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSEE F ILED RETURN OF FRINGE BENEFITS UNDER SEC. 115WE(1) ADMITTING TOTAL FRINGE BENEFITS OF RS.32,79,21,476/-. THE RETURN WAS PROCESSED UNDER SEC. 115WE(1) OF THE ACT ON RETURNED FRINGE BENEFITS. THE ASSESSING OFFICER IN ORDER TO VERIFY THE CONTENTS OF RETURN, ISSUED NOTICE UNDER SEC. 115WE(2) OF THE ACT. DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE VIDE ITS REPLY DATED 191.2.2008 REQUESTED THE ASSESSING OFFICER TO EXCLUDE THE PENS ION FUND AMOUNTING TO 3 RS.16,30,73,448/- ON THE GROUND THAT CONTRIBUTION T O EMPLOYEES PENSION FUND WAS A STATUTORY LIABILITY WHICH WAS NOT INTEND ED TO BE COVERED WITHIN THE AMBIT OF FBT PROVISIONS. IT WAS ALSO SUBMITTED THAT THE PUBLIC SECTOR BANKS WERE GIVEN A CHOICE BETWEEN THE PENSION FUND AND PROVIDENT FUND WHERE PENSION FUND SUBSTITUTED PROVIDENT FUND FOR T HE EMPLOYEES WHO OPTED FOR PENSION IN LIEU OF CONTRIBUTORY PROVIDENT FUND IN A BIPARTITE SETTLEMENT IN 1993. IN PUBLIC SECTOR BANK, THE PENSION SCHEME IS STATUTORY IN NATURE ON ACCOUNT OF A PROVISION IN BANK EMPLOYEES PENSION R EGULATION, 1995. THE ASSESSING OFFICER EXAMINING THE CONTENTION OF THE A SSESSEE, HOWEVER, REJECTED THE SAME ON THE GROUND THAT THE ASSESSEE H AD NOT FILED REVISED RETURN AND, THEREFORE, BENEFIT COULD NOT BE ALLOWED IN VIE W OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF GOETZ INDIA LTD. VS. C IT, 284 ITR 323. THE AO ALSO OBSERVED THAT AS PER CLAUSE (C) OF SEC. 115 WB(1), ANY CONTRIBUTION BY WAY OF EMPLOYER TO AN APPROVED SUPERANNUATION FU ND FOR EMPLOYEES WOULD FALL WITHIN THE MEANING OF FRINGE BENEFITS. HE ALSO NOTED THAT THE CONTRIBUTION BY THE EMPLOYER TO AN APPROVED SUPERAN NUATION FUND FOR EMPLOYEES ARE OF TWO TYPES I.E. (I) ORDINARY ANNUAL CONTRIBUTION; (II) INITIAL CONTRIBUTION IN RESPECT OF PAST SERVICES. HE FURTH ER NOTED THAT RULE 82(2) OF INCOME-TAX RULES DEFINES THE TERM FUND TO MEAN A SUPERANNUATION FUND OR A PART OF A SUPERANNUATION FUND WHICH INCLUDES A FUND , BY WHATEVER NAME 4 CALLED, ESTABLISHED OR CONSTITUTED WITH A SOLE PURP OSE OF MAKING PAYMENT OF PENSION OR FAMILY PENSION BY THE EMPLOYER TO HIS EM PLOYEES. THE AO FURTHER OBSERVED THAT THE ASSESSEES PENSION FUND W AS DULY APPROVED BY THE INCOME-TAX DEPARTMENT UNDER RULE 2(1) OF PART `B O F THE FOURTH SCHEDULE OF INCOME-TAX ACT, 1961 WITH EFFECT FROM 9.2.1996. HE THEREFORE, OBSERVED THAT CONTRIBUTION TO APPROVED SUPERANNUATION FUND F OR THE PURPOSE OF CLAUSE (C) OF SEC. 115WB(1) WILL ALSO COVER THE CONTRIBUTI ON MADE SOLELY FOR PROVIDING PENSION. THE AO THUS CONCLUDED THAT APPR OVED PENSION FUND IS LIABLE FOR TAX UNDER THE PROVISIONS OF FRINGE BENEF IT TAX. 3. BEFORE THE LEARNED CIT(A), IT WAS SUBMITTED BY T HE ASSESSEE THAT CONTRIBUTIONS MADE BY BANK TO THEIR APPROVED PENSIO N FUND ARE STATUTORY IN NATURE IN VIEW OF OBLIGATION UNDER THE BANK EMPLOYE ES PENSION REGULATIONS, 1995, WHICH IS IN NATURE OF A SUBORDINATE LEGISLATI ON. THE PENSION SCHEME WAS INTRODUCED IN 1993 AS A SECOND RETIREMENT BENEF IT, AT OPTION, IN LIEU OF CONTRIBUTORY PF AND AS SUCH WAS TO BE TREATED THE S AME WAY AS PF FOR THE PURPOSE OF FBT. MOREOVER, PENSION WHEN RECEIVED WA S TAXABLE IN THE HANDS OF THE RETIREE AND CHARGING FBT ON CONTRIBUTIONS TO PENSION FUNDS WOULD LEAD TO DOUBLE TAXATION. IT WAS THEREFORE, SUBMITT ED THAT CONTRIBUTION TO EMPLOYEES PENSION FUND BY THE PUBLIC SECTOR BANKS WAS AKIN TO STATUTORY LIABILITY WHICH WAS NOT INTENDED TO COVER WITHIN TH E AMBIT OF FBT 5 PROVISIONS. THE LEARNED CIT(A) HOWEVER, REJECTED T HE CONTENTION OF THE ASSESSEE ON THE GROUND THAT ARGUMENTS MADE BY THE A SSESSEE WERE THE SAME AS WERE MADE BEFORE THE ASSESSING OFFICER. THE CON TENTION OF THE ASSESSEE WAS THAT SINCE CONTRIBUTION BY THE BANK TO THE PENS ION FUND IS AS PER RESERVE BANK OF INDIA GUIDELINES AS VETTED BY THE GOVERNMEN T OF INDIA AND PENSION REGULATIONS, THE CONTRIBUTION WAS STATUTORY LIABILI TY OF THE BANK AND HENCE, SHOULD NOT BE INCLUDED IN THE FRINGE BENEFITS. H OWEVER, THIS CONTENTION OF THE ASSESSEE WAS REJECTED IN VIEW OF CLEAR STATUTOR Y PROVISIONS OF SEC.115WB(1)(C) READ WITH RULE 82(2) OF THE INCOME- TAX RULES, 1962. 4. BEFORE US, THE LEARNED AR OF THE ASSESSEE SUBMIT TED THAT CONTRIBUTION TO SUPERANNUATION FUND IS A STATUTORY LIABILITY OF THE ASSESSEE AND THEREFORE, IT WOULD NOT FALL UNDER CLAUSE (C) OF SEC. 115WB(1) OF THE ACT. HE REFERRED TO LETTER DATED 4.01.1996 ISSUED BY THE GOVERNMENT OF INDIA, MINISTRY OF FINANCE, DEPARTMENT OF ECONOMIC AFFAIRS (BANKING DI VISION) ADDRESSED TO ALL PUBLIC SECTOR BANKS, RESERVE BANK OF INDIA AND IBA (INDIAN BANK ASSOCIATION) REFERRING TO THE INTRODUCTION OF PENSI ON SCHEME IN LIEU OF CONTRIBUTORY FUND IN BANKS PURSUANT TO THE INDUSTRY -WISE SETTLEMENT DATED 29.10.1993. HE ALSO REFERRED TO CBDT LETTER NO.F.2 25/199/95-IT/II (PT FILE) DATED 03.01.1996 WHEREIN INCOME-TAX DEPARTMENT HAS GIVEN NO OBJECTION FOR TRANSFER OF ACCUMULATED EMPLOYERS CONTRIBUTION IN THE PROVIDENT FUND TO THE 6 PENSION FUND IN RESPECT OF THOSE EMPLOYEES WHO HAD OPTED FOR PENSION AND HAD CLARIFIED THAT THIS TRANSFER WOULD NOT ADVERSEL Y AFFECT THE GRANT OF APPROVAL TO PROVIDENT FUND OR PENSION FUND BY THE C OMMISSIONER. IT WAS ALSO CLARIFIED THAT THE BANKS COULD MAKE AD HOC PAY MENTS EQUIVALENT TO THE PENSIONARY BENEFITS TO THE ELIGIBLE PENSIONERS AND REGULARIZE THE SAME AFTER DUE CLEARANCE BY THE APPROPRIATE AUTHORITIES. THE ASSESSEE ALSO FILED COPY OF TRUST DEED WHEREIN IT HAS BEEN INTER ALIA AGREED TO INTRODUCE PENSION AS SECOND RETIRING BENEFIT SCHEME IN LIEU OF CONTRIBUT ORY PF. FURTHER PARAGRAPH 11 OF CIRCULAR NO.8/2005 DATED 29.08.2005 RELATING TO FREQUENTLY ASKED QUESTIONS BROUGHT OUT BY CBDT, AGAINST ITEM NO.38 H AD BEEN CLARIFIED THAT THE CONTRIBUTIONS MADE TO APPROVED GPF OR PF WOULD NOT ATTRACT LEVY OF FBT IN VIEW OF FACT THAT SECTION 115WB READ WITH SE C. 115WC DOES NOT SPECIFICALLY CONTAIN ANY PROVISION FOR CHARGEABILIT Y OF CONTRIBUTIONS TO THE FUNDS TO FBT. IN VIEW OF THIS THE LEARNED AR OF TH E ASSESSEE SUBMITTED THAT CONTRIBUTION TO APPROVED SUPERANNUATION FUND BEING STATUTORY LIABILITY, THE SAME CANNOT BE TREATED AS FRINGE BENEFIT. ON THE O THER HAND, THE LEARNED SR. DR SUPPORTED THE ORDERS OF THE CIT(A) AND THE AO. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. CLAUSE (C) OF SEC. 115WB(1) S PECIFIES THAT ANY CONTRIBUTION BY THE EMPLOYER TO AN APPROVED SUPERAN NUATION FUND OF THE 7 EMPLOYEES WOULD MEAN FRINGE BENEFITS AND WILL BE LI ABLE FOR FRINGE BENEFIT TAX. THE QUESTION BEFORE US IS WHETHER CONTRIBUTIO N TO PENSION FUND OF THE EMPLOYEES UNDER A SCHEME APPROVED BY THE GOVERNMENT AMOUNTS TO AN APPROVED SUPERANNUATION FUND FOR THE EMPLOYEES TO W HICH PROVISIONS OF SEC. 115WB ARE ATTRACTED. DURING THE COURSE OF HEARING OUR ATTENTION WAS DRAWN TO THE FINANCE BILL, 2005. SPEECH DELIVERED IN RAJ YA SABHA BY SHRI P. CHIDAMBARAM, THE THEN FINANCE MINISTER ON 5 TH MAY, 2005 WHEREIN HE SUPERANNUATION FUND WAS CLARIFIED NOT TO BE A STATU TORY CONTRIBUTION. THE ASSESSEE HAD RELIED ON THE LETTER ISSUED BY MINISTR Y OF FINANCE DATED 4.01.1996 AND CBDT LETTER NO.F.225199/95-IT-II (PT FILE) DATED 03.01.1996 IN SUPPORT OF THE CONTENTION THAT THE CONTRIBUTION TO PENSION FUND IS A STATUTORY LIABILITY AND HENCE CANNOT BE COVERED UND ER APPROVED SUPERANNUATION FUND FOR THE EMPLOYEES. FROM THE AS SESSMENT ORDER WE FIND THAT THE AO HAD NOT EXAMINED THE ISSUE IN THE LIGHT OF THE LETTERS RELIED UPON BY THE ASSESSEE. THE LEARNED CIT(A) HAS ALSO NOT E XAMINED THE SCOPE OF THE LETTERS ISSUED BY CBDT, GOVERNMENT OF INDIA AND ALS O RBI DATED 23 RD SEPTEMBER, 1995. WE, THEREFORE, SET ASIDE THE ISSU E TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THE CONTENTION OF THE ASSESSEE AFRESH IN THE LIGHT OF MATERIAL RELIED UPO N BY THE ASSESSEE TO DECIDE AS TO WHETHER THE CONTRIBUTION TO PENSION FUND IS C OVERED BY CLAUSE (C) OF 8 SEC. 115WB(1) OF THE ACT. THE ASSESSING OFFICER WI LL PROVIDE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 7. THIS DECISION IS PRONOUNCED IN THE OPEN COURT ON 30 TH MARCH, 2012. SD/- SD/- (R.P. TOLANI) (K.D. RANJAN) JUDICIAL MEMBER ACOUNTANT MEMBER DATED: 30 TH MARCH, 2012. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.