ACIT, Jaipur V. STATE BANK OF BIKANER & JAIPUR, Jaipur

ITA 324/JPR/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99430 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 30-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S KOTHARI
• Assessee Lawyers: P C PARWAL CA DHK
• Section: 43B; 37(1)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO. 324 & 325/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2008-09 & 2009-10 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-6, JAIPUR. CUKE VS. M/S STATE BANK OF BIKANER & JAIPUR, H.O., TILAK MARG, C- SCHEME, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AADCS 4750 R VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI D.S. KOTHARI (CIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (C.A.) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 27/10/2015 MN?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 30/10/2015 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M.: BOTH THE APPEALS FILED BY THE REVENUE ARE AGAINST THE ORDERS DATED 12/02/2014 PASSED BY THE LEARNED CIT (A)-II, JAIPUR FOR A.Y. 2008-09 & 2009-10 RESPECTIVELY. THE EFFECTIVE COMMON GROUNDS OF THE APPEALS ARE AS UNDER:- ITA 324 & 325/JP/2014_ ACIT VS SBBJ 2 (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 2.56 CRORES IN A.Y. 20 08- 09 AND RS. 4.14 CRORES IN A.Y. 2009-10 MADE BY DISALLOWING THE PROVISION OF LONG TERM BENEFITS OF EMPLOYEES WITHOUT APPRECIATING THE FACT THAT IT IS NOT COVERED U/S 37(1) OR 43B(F) OF THE IT ACT, 1961 . (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW LD. CIT(A) HAS ERRED IN HOLDING THAT MERELY CREATING A LIABILITY ON THE BASIS OF ACTUARIAL VALUATION WOULD MAKE IT AN ASCERTAINED LIABILITY. 2. GIVEN THE SIMILARITY OF FACTS AND ISSUE UNDER CO NSIDERATION, WE HAVE TAKEN FACTS OF A.Y. 2008-09 FOR DISCUSSION. BR IEFLY THE FACTS OF THE CASE ARE THAT DURING THE RELEVANT YEAR, PURSUAN T TO AS-15 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANT OF INDIA R ELATING TO ACCOUNTING OF EMPLOYEES BENEFITS, THE ASSESSEE CHAN GED ITS METHOD OF ACCOUNTING AND MADE PROVISION FOR LIABILITY ON ACCO UNT OF ACCUMULATED LEAVE FARE CONCESSION (LFC), SICK LEAVE REIMBURSEME NT AND SILVER JUBILEE AWARDS PAYABLE TO THE EMPLOYEES AMOUNTING T O RS. 2.56 CRORES ON THE BASIS OF ACTUARIAL VALUATION. AS PER A.O. TH ESE AMOUNTS WERE UNASCERTAINED/CONTINGENT LIABILITIES, THE SAME WERE DISALLOWANCE U/S 37(1) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT ) OR CLAUSE (F) OF ITA 324 & 325/JP/2014_ ACIT VS SBBJ 3 SECTION 43B OF THE ACT AND THIS WAS ALSO ONE OF THE REASONS FOR REOPENING OF THE MATTER FOR THE YEAR UNDER CONSIDER ATION. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE SUBM ITTED THAT ALL THESE AMOUNTS ARE ASCERTAINED LIABILITIES COMPUTED BY THE ACTUARIES OF THE BANK BASED ON THE NUMBER OF EMPLOYEES, COMPLETE D YEARS OF SERVICES, EMPLOYEES TURNOVER AND VARIOUS OTHER FACT ORS. SINCE ALL THESE LIABILITIES ARE COMPUTED BY THE ACTUARIES ON SCIENTIFIC AND STATISTICAL METHOD, THESE ARE DEFINITE AND ASCERTAI NED LIABILITIES AND ARE ALLOWABLE U/S 37(1) OF THE ACT. AS FAR AS PROVISIO NS OF SECTION 43B(F) IS CONCERNED, THE SAID PROVISIONS ARE NOT APPLICABL E IN RELATION TO THE PROVISIONS OF EMPLOYEE BENEFITS UNDER CONSIDERATION . THE REPLY OF THE ASSESSEE DID NOT FIND FAVOUR WITH THE ASSESSING OFF ICER AND HE DISALLOWED RS. 2.56 CRORES BY HOLDING THAT THE SAID AMOUNT FORM PART OF RS. 16.42 CRORES AND WHERE THE ASSESSEE HAS ALRE ADY DISALLOWED RS. 13.86 CRORES, THE BALANCE AMOUNT OF RS. 2.56 CRORES SHOULD ALSO BE DISALLOWED. SECONDLY, THE ASSESSING OFFICER HELD TH AT THESE AMOUNTS ARE UNASCERTAINED/CONTINGENT LIABILITIES AND DISALL OWANCE U/S 37(1) OR SECTION 43B(F) OF THE ACT. ITA 324 & 325/JP/2014_ ACIT VS SBBJ 4 3. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN AP PEAL BEFORE THE LD CIT(A). THERE, THE ASSESSEE REITERATED ITS SUBMI SSION MADE BEFORE THE ASSESSING OFFICER AND SUBMITTED FURTHER THAT TH E ABOVE PROVISION WAS MADE ON ACTUARIAL VALUATION AND IT SHOULD BE AL LOWABLE AS DEDUCTION IN THE YEAR IN WHICH LIABILITY HAS ACCRUE D NOTWITHSTANDING THAT THE SAME IS TO BE DISCHARGED AT A LATER DATE. THE PROVISIONS WAS NECESSITATED ON ACCOUNT OF BONAFIDE CHANGE IN THE M ETHOD OF ACCOUNTING PURSUANT TO AS-15 AND THEREFORE, ALLOWAB LE EXPENDITURE U/S 37(1) OF THE ACT. IN SUPPORT THEREOF, THE ASSES SEE RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF BH ARAT EARTHMOVERS VS. CIT 245 ITR 428 (SC), CALCUTTA CO. LTD. VS. CIT 37 ITR 1 (SC) AND ROTORK CONTROLS INDIA LTD VS. CIT 314 ITR 62 (SC). FURTHER THE ASSESSEE SUBMITTED THAT AN IDENTICAL ISSUE HAS BEEN DECIDED BY THE ITAT DELHI C BENCH IN THE CASE OF HERO MOTOR CORP LIMITED VS. ADDL. CIT 91 DTR 1 (DEL)(TRIB) WHEREIN IT WAS HELD THAT U NDISPUTED FACT IS THAT THE CHANGE IN THE METHOD OF ACCOUNTING WAS DON E BY THE ASSESSEE TO FOLLOW THE MANDATORY REQUIREMENT OF AS- 15 WHICH REQUIRED THE ASSESSEE TO MAKE THE PROVISION FOR ES TIMATED LIABILITY ON ACCOUNT OF ACCUMULATED MEDICAL REIMBURSEMENT AND LE AVE TRAVELLING ITA 324 & 325/JP/2014_ ACIT VS SBBJ 5 ALLOWANCE. THUS, THERE IS A BONAFIDE CHANGE IN THE METHOD OF ACCOUNTING. FURTHER DISALLOWANCE IS AGAINST THE RAT IO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF BHARAT EARTHMO VERS VS. CIT (SUPRA) AND ACCORDINGLY THE DISALLOWANCES MADE BY T HE ASSESSING OFFICER SHOULD BE DELETED. AS PER LD CIT(A), FIRSTL Y, THE PROVISION FOR LFC, SICK LEAVE AND SILVER JUBILEE CELEBRATION ARE NOT COVERED BY SECTION 43B AND SECONDLY THESE PROVISIONS ARE ALLOW ABLE U/S 37(1) OF THE ACT IF THERE IS A REASONABLE BASIS TO COMPUTE T HE SAME. FURTHER, THE LD CIT(A) HELD THAT THESE PROVISIONS WERE CREAT ED ON THE BASIS OF ACTUARIAL VALUATION AND ARE ASCERTAINED LIABILITY A S PER DECISIONS RELIED UPON BY THE APPELLANT AND HENCE NOT DISALLOWABLE. 4. THE LD SR. DR HAS RELIED ON THE ORDER OF THE ASS ESSING OFFICER. 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. FIRST LY WHETHER THE PROVISION OF LONG TERM BENEFIT OF EMPLOYEES AMOUNTI NG TO RS. 2.56 CRORES ARE COVERED UNDER THE PROVISIONS OF SECTION 43B(F) OF THE ACT IS CONCERNED, THE LD SR. DR FAIRLY AGREED THAT THE SA ID PROVISION WILL NOT FALL WITHIN THE MEANING OF PROVISION OF SECTION 43B (F) OF THE ACT. NOW COMING TO THE OTHER CONTENTIONS OF THE REVENUE WHET HER THE PROVISIONS ITA 324 & 325/JP/2014_ ACIT VS SBBJ 6 IS COVERED BY SECTION 37(1) OR NOT, WE ARE INCLINED TO ACCEPT THE REASONING OF THE LD CIT(A) SAYING THAT WHERE THESE PROVISIONS ARE ESTIMATED ON A REASONABLE BASIS, THE SAME SHOULD BE ALLOWABLE U/S 37(1) OF THE ACT. THE ASSESSEE HAS SUBMITTED THAT P ROVISIONS HAVE BEEN MADE ON THE BASIS OF ACTUARIAL VALUATION WHERE IN THE ACTUARIES OF THE BANK HAVE CONSIDERED VARIOUS FACTORS SUCH AS NU MBER OF EMPLOYEES, COMPLETED YEARS OF SERVICE, EMPLOYEES TU RNOVER ETC. THE HON'BLE SUPREME COURT IN SERIES OF DECISIONS (SUPRA ) HAVE CONSISTENTLY HELD THAT WHERE THE PROVISIONS HAS BEEN CREATED ON A SCIENTIFIC BASIS, THE SAME SHOULD BE ALLOWABLE IN THE HANDS OF ASSESS EE. IT IS NOT THE CASE OF THE REVENUE THAT THE LIABILITY FOR WHICH TH E PROVISIONS HAS BEEN CREATED HAS NOT ACCRUED DURING THE YEAR UNDER CONSI DERATION. ALL THE REVENUE IS CONTESTING IS THAT THE BASIS OF COMPUTIN G LIABILITY HAS BEEN ON THE BASIS OF ACTUARIAL VALUATION. HOWEVER, THE R EVENUE HAS NOT STATED THAT IF THE ACTUARIAL VALUATION IS NOT THE B ASIS FOR WORKING OUT THE LIABILITY WHAT THE OTHER REASONABLE BASIS ON WH ICH THE ASSESSEE WOULD HAVE WORK OUT ITS LIABILITIES. THE ASSESSEE W AS MANDATORY REQUIRED TO ADHERE TO THE PROVISIONS OF AS-15 ISSUE D BY THE ICAI, WHICH IS ALSO NOT BEEN DISPUTED BY THE REVENUE. IN THE LIGHT OF ABOVE, ITA 324 & 325/JP/2014_ ACIT VS SBBJ 7 WE ARE OF THE CONSIDERED VIEW THAT QUANTIFICATION O F LIABILITY ON THE BASIS OF ACTUARIAL VALUATION IS THE MOST REASONABLE , RATIONAL AND SCIENTIFIC BASIS AND WHERE THE LIABILITY TOWARDS TH E LONG TERM BENEFIT OF EMPLOYEES HAVE BEEN DETERMINED ON ACTUARIAL VALUATI ON, THE SAME SHOULD BE ALLOWABLE IN THE HANDS OF THE ASSESSEE U/ S 37(1) OF THE ACT. SIMILAR REASONING AND CONCLUSION SHALL APPLY IN RES PECT OF A.Y. 2009-10 IN LIGHT OF ABOVE, BOTH THE GROUNDS RAISED BY THE R EVENUE IN BOTH THE YEARS ARE DISMISSED. 6. IN THE RESULT, BOTH THE REVENUES APPEALS ARE DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/10/2015. SD/- SD/- VKJ-IH-RKSYKUH FOE FLAG ;KNO (R.P.TOLANI) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 30 TH OCTOBER, 2015 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ACIT, CIRCLE-6, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- M/S SBBJ, JAIPUR, 3. VK;DJ VK;QDR@ CIT ITA 324 & 325/JP/2014_ ACIT VS SBBJ 8 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 324 & 325/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR