ACIT, SRIGANGANAGAR V. The Ganganagar Kendriya Sahakari Bank Ltd., SRIGANGANAGAR

ITA 301/JODH/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3110 (ITAT-JODHPUR)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 15-05-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 11-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEERAJ CHAWLA
• Assessee Lawyers: G R KOKANI
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER ITA NO. 301/JU/2011 ASSESSMENT YEAR : 2008-09 PAN: AABFT 0209 R THE ACIT VS. THE GANGANAGAR KENDRIYA SAHAKARI B ANK LTD. CIRCLE HEAD OFFICE, COURT ROAD SRIGANGANAGAR SRIGANGANAGAR (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI G.R. KOKANI APPELLANT BY : SHRI NEERAJ CHAWL A DATE OF HEARING : 15-05-2013 DATE OF PRONOUNCEMENT : 19-06-2013 ORDER PER N.K. SAINI, A.M. THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE ORD ER DATED 13-06-2011 OF THE LD. CIT(A), BIKANER . FOLLOWING GROUND HAS BEEN RAISED IN THIS APPEAL. ' ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE ID. CIT(A) HAS ERRED IN ALLOWING ADDITION OF RS. 23.49 LACS MADE BY THE AO ON ACCOUNT OF CONTRIBUTION TO STAFF GRATUITY FU ND. 2.1 THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASS ESSEE FILED THE RETURN OF INCOME ON 30-09- 2008 DECLARING AN INCOME OF RS. 90,08,199/-. THEREA FTER THE ASSESSEE REVISED THE RETURN OF INCOME ON 15-12-2008 DECLARING AN INCOME OF RS. 1,4 4,56,939/-. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY. 2.2 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD CLAIMED DEDUCTION OF RS. 25.00 LACS ON ACCOUNT OF CONTRIBUTION INTO STAFF GRATUITY FUND WHICH WAS MADE WITH EMPLOYEES GRATU ITY SCHEME TO LIC OF INDIA. THE ASSESSING OFFICER DID NOT ALLOW THE CLAIM BY OBSERV ING THAT APPROVAL OF THE LD. CIT WAS NOT OBTAINED. ACCORDINGLY, THE ADDITION OF RS. 25.00 L ACS WAS MADE. 2 2.3 THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT( A) AND SUBMITTED THAT THE ASSESSEE WAS A COOPERATIVE SOCIETY HAVING LICENSE FROM RBI TO DO B ANKING BUSINESS AND WAS WORKING UNDER THE POLICY FRAME WORK AND CONTROL OF NABARD. IT WAS STATED THAT IN PARA 5.3 OF THE CIRCULAR NO. 193 DATED 17-08-2002 ISSUED BY THE NABARD, IT W AS PROVIDED THAT LIABILITIES TOWARDS PF AND GRATUITY SHOULD BE ESTIMATED ON ACTUARIAL BASIS AND FULLY PROVIDED FOR. IT WAS CONTENDED THAT THE ASSESSEE MADE A PROVISION OF RS. 25.00 LAC S FOR STAFF GRATUITY IN ACCORDANCE WITH SAID CIRCULAR ISSUED BY THE GOVT. DEPARTMENT WHICH WAS B INDING ON THE ASSESSEE AND THE EXPENDITURE WAS ALLOWABLE. IT WAS STATED THAT THE PROVISION OF THE CONTRIBUTION WAS MADE FOR THE BENEFIT AND MOTIVATION OF THE EMPLOYEES AND NO DISALLOWANCE WAS MADE WHILE FRAMING THE ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1961 ( HEREINAFTER REFERRED TO AS THE ACT IN SHORT) IN THE PRECEDING YEAR WHEREIN SIMILAR PROVI SION WAS MADE. IT WAS ALSO STATED THAT THE ASSESSEE HAD TAKEN GROUP GRATUITY POLICY ON 10-09-2 004 WITH A SUM ASSURED OF RS. 3.72 CRORES UNDER THE SAID POLICY IN CASE OF MISHAPPENIN G WITH THE EMPLOYEE BEFORE THE RETIREMENT , THE COMPLETE AMOUNT OF GRATUITY WAS TO BE PAID BY T HE LIC OF INDIA DIRECTLY TO THE EMPLOYEE AND THE SAID PAYMENT WAS NOT GOVERNED BY SECTION 40 A(7) OF THE ACT BUT WAS DEDUCTIBLE ON ACTUARIAL BASIS U/S 36(1) OF THE ACT. RELIANCE WAS PLACED ON THE DECISION OF ITAT DELHI BENCH IN THE CASE OF ITO VS MINERALS AND METAL TRADING CO RPORATION (3 ITD 305) AND THE DECISION OF ITAT NAGPUR BENCH IN THE CASE OF SUNFLAG IRON AND S TEEL COMPANY LTD. VS DCIT (96 TAXMAN 27). IT WAS ALSO POINTED OUT THAT THERE WAS NO FIND ING IN THE ASSESSMENT ORDER TO SHOW ANY MISUSE OF THE PROVISION/ CONTRIBUTION MADE AND ITS UTILIZATION FOR ANY NON-BUSINESS PURPOSES. THEREFORE, THE ENTIRE DISALLOWANCE MADE BY THE ASSE SSING OFFICER WAS UNJUSTIFIED AND OUGHT TO HAVE BEEN DELETED. ALTERNATIVELY, IT WAS PLEADED TH AT DURING THE YEAR UNDER CONSIDERATION, 07 EMPLOYEES OF ASSESSEE ORGANIZATION HAD ATTAINED THE AGE OF RETIREMENT TO WHOM A SUM OF RS. 21.63 LACS WAS PAID AND PREMIUM OF RS. 1.86 LACS WA S PAID AS PER THE TERMS OF THE LIC POLICY TAKEN BY THE ASSESSEE. THUS THE ACTUAL PAYMENT TOWA RDS GRATUITY WAS RS. 23.49 LACS OUT OF THE PROVISION OF RS. 25.00 LACS. 3 2.4 THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE DELETED THE ADDITION OF RS. 23.49 LACS OUT OF TOTAL ADDITION OF RS. 25.0 0 LACS BY OBSERVING AS UNDER:- I HAVE CONSIDERED THE FACTS OF THE CASE AND THE S UBMISSIONS MADE. THE FIRST PLEA OF THE A/R THAT DESPITE MAKING SIMILAR PROVISION IN THE PRECEDING YEAR AND NO DISALLOWANCE BEEN MADE THERE OUGHT NOT TO BE ANY DISALLOWANCE IN THE CURRENT YEAR IS HELD TO BE DEVO ID OF ANY MERIT AS THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE TO THE INCOME TAX PROCEEDINGS. EACH ASSESSMENT YEAR IS SEPARATE AND DISTINCT. THE VIEW TAKEN IN A PRECEDING YEAR CANNOT BE HELD TO BE BINDING IN A SUBSEQUENT Y EAR. HOWEVER, ON PERUSAL OF THE FACTS OF THE CASE IT IS ALSO SEEN THAT THE APPE LLANT HAD NOT MADE ANY SEPARATE GRATUITY FUND. ON THE CONTRARY, IT HAD TAKEN A GROU P GRATUITY POLICY FROM THE LIC TOWARDS WHICH PREMIUM WAS BEING PAID AND THE GRATUI TY AMOUNT AS APPLICABLE DURING THE YEAR DISBURSED DIRECTLY BY THE LIC TO TH E RETIRED EMPLOYEES. IN THE DECISION OF THE ITAT, DELHI IT WAS HELD THAT THE PR OVISION OF SECTION 40A(7) WERE NOT APPLICABLE BECAUSE NO PROVISION WAS MADE F OR CONTRIBUTION TOWARDS AN APPROVED GRATUITY FUND AND AN OUTRIGHT PAYMENT ON A CTUARIAL BASIS WAS ENTITLED TO DEDUCTION U/S 36(1). IN THE DECISION OF ITAT, NA GPUR REFERRED TO ABOVE IT WAS HELD THAT PAYMENTS ON ACTUAL BASIS AND NOT NECE SSARILY MADE TO AN APPROVED GRATUITY FUND WERE ALLOWABLE. IN THE DECIS ION OF MADRASH HIGH COURT IN THE CASE OF CIT V/S TAXTOOL CO. LTD. (257 ITR 39 ) IT WAS HELD THAT 'WHERE THE APPELLANT PAID THE AMOUNT DIRECTLY TO THE LIC I NSTEAD OF TO THE EMPLOYEES GROUP GRATUITY FUND, DEDUCTION SHOULD NOT BE DENIED STRAIGHT AWAY, WHEN THE NOTICE ISSUED BY THE LIC WAS IN THE NAME OF THE SAI D GROUP GRATUITY FUND AND THE SAID FUND WAS SHOWN AS PAPER IN THE POLICY. T HE SAID DECISIONS ARE SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CAS E. HOWEVER, IT IS ALSO SEEN THAT THE ACTUAL EXPENDITURE MADE BY THE APPELLANT W AS ONLY RS. 23.49 LACS AS SUCH IT IS ONLY THIS AMOUNT WHICH CAN BE HELD AS AL LOWABLE. THE BALANCE WOULD REMAIN IN THE REALM OF A PROVISION ONLY WHICH COULD NOT BE HELD TO BE ALLOWABLE. THUS, THE DISALLOWANCE CAN AT BEST BE RE STRICTED ONLY TO THE BALANCE FIGURE OUT OF THE PROVISION MADE. 2.5 NOW THE DEPARTMENT IS IN APPEAL. 2.6 THE LD. D.R. FOR THE REVENUE SUPPORTED THE ORDE R OF THE ASSESSING OFFICER AND REITERATED THE OBSERVATIONS MADE IN THE ASSESSMENT ORDER. 2.7 IN HIS RIVAL SUBMISSIONS, THE LD. COUNSEL FOR T HE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER AND STRONGLY SUPP ORTED THE IMPUGNED ORDER PASSED BY THE LD. CIT(A). 2.8 WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND GONE THROUGH THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, IT IS AN ADMITTED FACT THAT THE ASSESSEE HAD TAKEN A 4 GROUP GRATUITY POLICY FROM THE LIC TOWARDS WHICH PR EMIUM WAS BEING PAID AND THE GRATUITY AMOUNT AS APPLICABLE DURING THE YEAR WAS DISBURSED DIRECTLY BY THE LIC TO THE RETIRED EMPLOYEES. THE ASSESSEE INCURRED AN EXPENDITURE OF RS. 23.49 LACS BUT MADE THE PROVISION OF RS. 25.00 LACS TOWARDS CONTRIBUTION TO STAFF GRATUI TY FUND. IN THE PRESENT CASE, AN OUTRIGHT PAYMENT ON ACTUARIAL BASIS WAS AT RS. 23.49 LACS WH ICH WAS ELIGIBLE FOR DEDUCTION U/S 36(1) OF THE ACT BECAUSE IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE SAID EXPENDITURE WAS NOT INCURRED FOR THE BUSINESS PURPOSES. THE LD. CIT(A) ALLOWED THE SAID EXPENDITURE WHICH WAS MADE BY THE ASSESSEE ON ACTUAL BASIS. WHILE DOING SO, THE LD. CIT(A) FOLLOWED THE RATIO LAID DOWN BY HON'BLE MADRAS HIGH COURT IN THE CASE OF CI T VS TAXTOOL CO. LTD. (257 ITR 39). IN OUR OPINION, THE LD. CIT(A) WAS FULLY JUSTIFIED IN ALLOWING RELIEF TO THE ASSESSEE TO THE EXTENT OF RS. 23.49 LACS WHICH WAS THE ACTUAL PAYMENT MADE ON ACCOUNT OF PAYMENT TOWARDS GRATUITY. WE, THEREFORE, DO NOT SEE ANY INFIRMITY IN THE ORDE R OF THE LD. CIT(A) ON THIS ISSUE. ACCORDINGLY, WE DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT 3.0 IN THE RESULT, THE APPEAL FILED BY THE DEPARTM ENT IS DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19-06- 2013.) SD/- SD/- (HARI OM MARATHA) (N.K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 19 TH JUNE, 2013 MISHRA COPY TO:- 1.THE APPELLANT 2. THE RESPONDENT 3. THE LD. CIT 4. THE LD. CIT(A) 5. THE DR 6. THE GUARD FILE ASSISTANT REGISTRAR ITAT, JODHPUR 5