Nainital Almora Kshetriya Gramin Bank, Haldwani V. JCIT, Haldwani

ITA 4240/DEL/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97912 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 05-11-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 21-09-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJNA
• Assessee Lawyers: K SAMPATH CA SH RAJA KUMAR
• Keywords: Business income; Search and seizure
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SH. C.M.GARG, JM AND SH. PRASHANT MAHARISHI, AM ITA NO. 4240/DEL/ 2012 : A.Y. : 2008-09 NAINITAL ALMORA VS. JCIT KSHETRIYA GRAMIN BANK INCOME TAX OFFICE, UTTARAYAN PRAKASHAN PARISAR, KHURANA COMPOUND NAINITAL ROAD NAINITAL ROAD HALDWANI HALDWANI PAN: AABCN5364J ITA NO. 5234/DEL/2012: A.Y.: 2009-10 NAINITAL ALMORA VS. ACIT KSHETRIYA GRAMIN BANK INCOME TAX OFFICE, UTTARAYAN PRAKASHAN PARISAR, KHURANA COMPOUND NAINITAL ROAD NAINITAL ROAD HALDWANI HALDWANI PAN: AAAAN6017H ITA NO. 5312/DEL/2013: A.Y.: 2010-11 NAINITAL ALMORA VS. DCIT KSHETRIYA GRAMIN BANK INCOME TAX OFFICE, UTTARAYAN PRAKASHAN PARISAR, KHURANA COMPOUND NAINITAL ROAD NAINITAL ROAD HALDWANI HALDWANI PAN: AAAAN6017H ASSESSEE BY: SH. K.SAMPATH, CA SH. RAJA KUMAR, ADV. REVEN UE BY : SH. P. DAM KANUNJNA , SR. DR DATE OF HEARING: 05.11.2015 DATE OF PRONOUNCEMENT: 09 .11.2015 ITA NO. 4240/DEL/2011 AY 2008-09 ITA NO. 5234/DEL/2012 A Y 2009-10 ITA NO. 5312/DEL/2013 A Y 2010-11 NAINITAL ALMORA, KSHETRIYA GRAMIN BANK 2 | PA GE ORDER PER PRASHANT MAHARISHI, AM: 01. ALL THESE THREE APPEALS ARE PREFERRED BY ASSESSEE A GAINST THE COMMON DISALLOWANCE U/S 43B (F) OF THE ACT ON ACCOUNT OF UNPAID PROVISION O F LEAVE ENCASHMENT PAYABLE TO EMPLOYEES FOR 3 YEARS FOR AY: 2008-09, 2009-10 & 20 10-11. AS THE CLAIM, REASON FOR DISALLOWANCE FOR ALL THE YEARS ARE IDENTICAL, THESE THREE APPEALS ARE DISPOSED OFF BY THIS COMMON ORDER. 02. THE DISALLOWANCES FOR THE RESPECTIVE YEARS OF PROVI SION OF LEAVE ENCASHMENT MADE BY ASSESSEE WHICH IS UNPAID IS AS UNDER : SERIAL NO. A.Y. AMOUNT RS.) 01. 2008-09 26,66,363/- 02. 2009-10 77,68,640/- 03. 2010-11 62,37,756/- 03. THE BRIEF FACTS AS GATHERED FROM THE ASSESSMENT YEA R 2008-09 IS THAT THE ASSESSEE HAS MADE A PROVISION LEAVE ENCASHMENT FOR ITS EMPLOYEES ON THE BASIS OF ACTUARIAL VALUATION PAYABLE TO THE EMPLOYEES ON THEIR RETIREM ENT, DEATH OR TERMINATION OF EMPLOYMENT. THE ASSESSING OFFICER HAS DISALLOWED TH IS EXPENDITURE APPLYING PROVISIONS OF SECTION 43B (F) OF THE ACT HOLDING TH AT SUCH AMOUNT OF PROVISIONING IS ALLOWABLE ONLY IF PAID. AO WAS OF THE VIEW THAT ACC ORDING TO CLAUSE (F) OF SECTION 43B OF THE INCOME TAX ACT, ANY SUM PAYABLE BY THE ASSES SEE AS AN EMPLOYER IN LIEU OF ANY LEAVE AT THE CREDIT OF HIS EMPLOYEE SHALL BE ALLOWE D IN THE PREVIOUS YEAR IN WHICH SUCH SUM IS ACTUALLY PAID IRRESPECTIVE OF THE PREVIOUS Y EAR IN WHICH LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE ASSESSEE. AS IN THIS YEAR A SSESSEE HAS MADE PROVISION IN THE BOOKS OF ACCOUNTS BASED ON ACTUARIAL VALUATION BUT HAS NOT PAID THIS AMOUNT SAME IS DISALLOWED. ASSESSEE CARRIED THE MATTER BEFORE THE CIT (A) WHO DISMISSED THE APPEAL OF THE ASSESSEE CONCURRING WITH THE VIEWS OF THE AO . FACTS FOR THE SUBSEQUENT ASSESSMENT YEAR I.E. A.Y. 2009-10 AND 2010-11 ARE IDENTICAL. THEREFORE, ASSESSEE IS IN APPEAL BEFORE US FOR ALL THE THREE YEARS RAISING ID ENTICAL GROUNDS OF APPEAL. . ITA NO. 4240/DEL/2011 AY 2008-09 ITA NO. 5234/DEL/2012 A Y 2009-10 ITA NO. 5312/DEL/2013 A Y 2010-11 NAINITAL ALMORA, KSHETRIYA GRAMIN BANK 3 | PA GE 04. LD. AR OF THE ASSESSEE MR. K. SAMPAT, CA SUBMITTED THAT DISALLOWANCE MADE BY THE AO IS INCORRECT AND PROVISIONS OF SECTION 43B (F) A RE HELD TO BE CONSTITUTIONALLY IN VALID AND THEREFORE THE DISALLOWANCE MADE FOR ALL THREE YEARS BE DELETED. FOR THIS PROPOSITION HE RELIED ON VARIOUS JUDICIAL PRECEDENT S AS UNDER:- I. EXIDE INDUSTRIES LTD. VS. UNION OF INDIA, 292 ITR 4 70 II. DCIT VS. A.P. STATE SEEDS DEVELOPMENT CORPORATION L TD. ITA NO. 1459/HYD/2013 III. EIMCO ELECON (INDIA) LTD. VS. ACIT 22 ITR (TRIB.) 3 80 IV. UNIVERSAL CABLES VS. DCIT, 954/KOL/2010 05. LD. DR RELIED ON THE ORDERS OF LOWER AUTHORITIES AND SUBMITTED THAT THE PROVISIONS OF SECTION 43B (F) ARE CLEAR AND THEREFORE DISALLOWANC E OF ACTUARIAL LEAVE ENCASHMENT WHICH IS ADMITTEDLY UNPAID MAY BE UPHELD. 06. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION AND ARE OF THE VIEW THAT WITH EFFECT FROM 01.04.2002, CLAUSE (F) HAS BEEN ADDED IN SECTI ON 43B OF THE INCOME TAX ACT WHICH PROVIDES THAT DEDUCTION OF PROVISION OF EARNE D LEAVE OF EMPLOYEES MADE BY THE ASSESSEE SHALL NOT BE ALLOWED AS DEDUCTION IN COMPU TING THE BUSINESS INCOME OF THE ASSESSEE PROVIDED SUCH SUM IS ACTUALLY PAID. IF SAM E IS NOT PAID IN THE YEAR OF PROVISIONING SAME SHALL BE ALLOWED SUBSEQUENTLY IN THE YEAR OF PAYMENT. HONBLE CALCUTTA HIGH COURT IN EXIDE INDUSTRIES LTD. VS. UN ION OF INDIA, 292 ITR 470 HAS STRUCK DOWN THE CONSTITUTIONAL VALIDITY OF SECTION 43B(F) BEING ARBITRARY, UNCONSCIONABLE AND DE HORSE THE FACTS APEX COURT DE CISION IN THE CASE OF BHARAT EARTH MOVERS 245 ITR 428. SUBSEQUENTLY OTHER TRIBUNAL DEC ISIONS CITED BY THE LD. AR ARE BASED ON THE DECISION OF HONBLE CALCUTTA HIGH COUR T AND DELETED THE ADDITION. HOWEVER, IT HAS COME TO THE NOTICE OF THE BENCH THA T REVENUE HAS PREFERRED AN APPEAL AGAINST THE ORDER OF HONBLE CALCUTTA HIGH COURT AN D HONOURABLE SUPREME COURT HAS STAYED IT VIDE ITS ORDER DATED 08/05/2009 AS UND ER :- PENDING HEARING AND FINAL DISPOSAL OF THE CIVIL APP EAL, DEPARTMENT IS RESTRAINED FROM RECOVERING PENALTY AND INTEREST WHICH HAS ACCRUED T ILL DATE. IT IS MADE CLEAR THAT AS FAR AS THE ITA NO. 4240/DEL/2011 AY 2008-09 ITA NO. 5234/DEL/2012 A Y 2009-10 ITA NO. 5312/DEL/2013 A Y 2010-11 NAINITAL ALMORA, KSHETRIYA GRAMIN BANK 4 | PA GE OUTSTANDING INTEREST DEMAND AS OF DATE IS CONCERNED , IT WOULD BE OPEN TO THE DEPARTMENT TO RECOVER THAT AMOUNT IN CASE CIVIL APPEAL OF THE DEP ARTMENT IS ALLOWED. WE FURTHER MAKE IT CLEAR THAT THE ASSESSEE WOULD, D URING THE PENDENCY OF THIS CIVIL APPEAL, PAY TAX AS IF SECTION 43B(F) IS ON THE STATUTE BOOK BUT AT THE SAME TIME IT WOULD BE ENTITLED TO MAKE A CLAIM IN ITS RETURNS. 07. WE ARE AFRAID WE CANNOT AGREE WITH THE VIEWS OF LD. AR THAT ADDITION MAY BE DELETED. AS RIGHTLY SUBMITTED BY THE LEARNED AR, THE PROVISI ONS OF SECTION 43B (F) WAS STRUCK DOWN BY THE CALCUTTA HIGH COURT AS ARBITRARY AND DE HORS OF THE APEX COURT JUDGMENT IN BHARAT EARTH MOVERS ( SUPRA ). IT IS ALSO AN ADMITTED FACT THAT THE APEX COURT HAS STAYED THE JUDGMENT OF THE CALCUTTA HIGH COURT IN EXIDE INDUSTRIES LTD . ( SUPRA ). THEREFORE, THE CORRECT POSITION OF LAW IS THAT WE S HOULD READ THE STATUTE AS IF THOSE PROVISIONS ARE THERE ON THE STATUTE BOOK. THIS TRIB UNAL BEING A QUASI-JUDICIAL AUTHORITY HAS TO DECIDE THE APPEAL ONLY BASED ON THE PROVISIO NS OF SECTION 43B (F) OF THE ACT. IN OTHER WORDS, THE PROVISIONS OF SECTION 43B(F) CANNO T BE IGNORED SINCE THE JUDGMENT OF THE CALCUTTA HIGH COURT IN THE CASE OF EXIDE INDUST RIES LTD. WAS STAYED BY THE APEX COURT. THEREFORE, THE CLAIM OF THE ASSESSEE COULD BE ALLOWED ONLY IF IT IS ACTUALLY PAID ON THE DUE DATE FOR FILING THE RETURN OF INCOME. IT IS NOT THE CASE OF THE ASSESSEE THAT THE AMOUNT CLAIMED AS LEAVE ENCASHMENT WAS PAID BEFORE THE DUE DATE FOR FILING THE RETURN OF INCOME. OUR VIEW IS FURTHER STRENGTHENED BY DE CISION OF HONOURABLE KERALA HIGH COURT WHERE IN IT IS HELD WHILE CONSIDERING IDENTI CAL FACTS AND CIRCUMSTANCES IN CASE OF SOUTH INDIAN BANK LIMITED V CIT 45 TAXMANN.COM 428 ( KERALA ) THAT :- 6. THEN COMING TO THE SECOND ISSUE, IT PERTAINS TO TH E PROVISION MADE FOR LEAVE ENCASHMENT AND THE DISALLOWANCE CLAIMED WAS UNDER SECTION 43B (F). AS ALREADY STATED ABOVE, THE OPINION OF THE CIT (APPEALS) WAS SET ASIDE BY THE TRIBUNAL IN THE LIGH T OF THE STAY ORDER OF THE JUDGMENT OF THE HIGH COURT OF CALCUTTA IN EXCIDE INDUSTRIES CASE (SUPRA) AND THE SLP STATED ABOVE IS STILL PENDING. THEREFORE, THE OPINION OF THE TRIBUNAL SO FAR AS DI SALLOWANCE CLAIMED IN RESPECT OF LEAVE ENCASHMENT UNDER SECTION 43B(F) OF THE ACT, AS ON TODAY, THE P ROVISION SEEMS TO BE IN FORCE IN THE LIGHT OF THE S TAY ORDER GRANTED BY THE APEX COURT IN THE SLP. THEREFO RE, AS LONG AS SECTION 43B (F) IS ON STATUTE, THE SAID DISALLOWANCE IS JUSTIFIED 08. SINCE THE PROVISIONS MADE BY ASSESSEE OF LEAVE E NCASHMENT REMAINS TO BE PAID, WE ARE OF THE CONSIDERED OPINION THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS RIGHTLY CONFIRMED THE DISALLOWANCE MADE BY THE ASSE SSING OFFICER ON UNPAID LEAVE ENCASHMENT PROVISIONS APPLYING PROVISION OF SECTI ON 43B (F) OF THE INCOME TAX ACT. ITA NO. 4240/DEL/2011 AY 2008-09 ITA NO. 5234/DEL/2012 A Y 2009-10 ITA NO. 5312/DEL/2013 A Y 2010-11 NAINITAL ALMORA, KSHETRIYA GRAMIN BANK 5 | PA GE 09. DURING THE COURSE OF HEARING BEFORE US LD. AR R AISED O ANOTHER ISSUE THAT THE PROVISION OF LEAVE ENCASHMENT IS NOT COVERED IN SEC TION 43B (F) OF THE ACT BUT U/S 43B (B) OF THE ACT WHICH PROVIDES ABOUT ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPLOYER BY WAY OF CONTRIBUTION TO ANY PROVIDENT FUND OR SUPERA NNUATION FUND OR GRATUITY FUND OR ANY OTHER FUND FOR THE WELFARE OF EMPLOYEES. 10. WE HAVE CONSIDERED THE ABOVE ARGUMENT BUT REJECT I T AT THRESHOLD BECAUSE OF THE REASON THAT LEAVE ENCASHMENT IS NOT A SCHEME WHER E EMPLOYER AND EMPLOYEE CONTRIBUTES BUT IS A PROVISION TO BE MADE ACCORDI NG TO ACCRUAL METHOD OF ACCOUNTING WHERE PAYMENT DUE TO EMPLOYEES ON THEIR RETIREMENT OR OTHERWISE FOR THEIR ACCRUED LEAVE FOR THE TENURE OF THE SERVICE. FURTHER IT I S NOT FOR THE WELFARE OF THE EMPLOYEES BUT IT IS WAGES DUE TO THE EMPLOYEES FOR THE SERVIC ES RENDERED BY THEM ACCORDING TO THE TERMS OF EMPLOYMENT. IT IS ALSO NOT A STATUTORY PAY MENT BUT A CONTRACTUAL PAYMENT. FURTHER FINANCE ACT 2001 HAS INTRODUCED SECTION 43B (F) WHEREIN LEAVE ENCASHMENT PROVISION WERE COVERED, THEREFORE IT IS APPARENT TH AT EARLIER TO THAT IT WAS ALLOWED ON ACCRUAL BASIS IRRESPECTIVE OF THE YEAR OF PAYMENT. 11. THEREFORE IN VIEW OF ABOVE APPEAL OF ASSESSEE FOR A LL THE THREE YEARS ARE DISMISSED. (ORDER PRONOUNCED IN THE COURT ON 09/11/2 015) SD/- SD/- (C.M.GARG) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTA NT MEMBER DATED: 09 /11/2015 *B. RUKHAIYAR* COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(APPEALS) 5.DR: ITAT ASSISTANT REGISTRAR ITA NO. 4240/DEL/2011 AY 2008-09 ITA NO. 5234/DEL/2012 A Y 2009-10 ITA NO. 5312/DEL/2013 A Y 2010-11 NAINITAL ALMORA, KSHETRIYA GRAMIN BANK 6 | PA GE DATE INITIAL 1. DRAFT DICTATED ON 09/11/2015 2. DRAFT PLACED BEFORE AUTHOR 09/11/2015 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 5. APPROVED DRAFT COMES TO THE SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 7. FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.