Jaisalmer Central Co-operative Bank Limited, JAISALMER V. JCIT, BARMER

ITA 47/JODH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70229 (ITAT-JODHPUR)
• Duration Of Justice: 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-09-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 01-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Assessee Lawyers: NISHA MALPANI; SUDHIR MAHESHWARI
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL: JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 47/JODH/2013 (A.Y. 2008-09) AND ITA NO. 48/JODH/2013 (A.Y. 2009-10) JAISALMER CENTRAL CO-OPERATIVE VS JCIT, BANK LIMITED RANGE, CHANDRAVEER SINGH COLONY, BARMER. JAISALMER. PAN NO. AAAAT9129L (APPELLANT) (RESPONDENT) ASSESSEE BY : MS. NISHA MALPANI AND SHRI SUDHIR MAHESHWARI. DEPARTMENT BY : SHRI N.A. JOSHI- DR. DATE OF HEARING : 04/09/2013. DATE OF PRONOUNCEMENT : 20/09/2013. O R D E R PER HARI OM MARATHA, J.M. : THE ABOVE CAPTIONED APPEALS OF THE ASSESSEE FOR A. YS. 2008-09 AND 2009-10 ARISE OUT OF SEPARATE BUT EVEN DATED 29 /11/2012 ORDERS OF LD. CIT(A), JODHPUR. IN BOTH THE APPEALS IDENTICAL ISSUES, ARISING OUT OF 2 COMMON FACTS, ARE INVOLVED, THEREFORE, FOR THE SAKE OF CONGRUENCE, BREVITY AND CONVENIENCE WE ARE PROCEEDING TO DECIDE THEM BY A COMMON ORDER. 2. BRIEFLY STATED, THE FACTS EMERGING FROM APPEAL I N ITA NO. 47/JODH/2013 FOR A.Y. 2008-09 ARE THAT THE ASSESSEE IS A LIMITED COOPERATIVE BANK WHO CARRIES OUT BUSINESS OF BANKIN G AND FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING. FOR A.Y. 2008-09 T HIS BANK FILED ITS RETURN OF INCOME [ROI] ON 30/09/2008, DECLARING TOT AL INCOME OF RS. 1,62,92,940/-. DURING THE ASSESSMENT PROCEEDINGS, F ROM THE COMPUTATION OF TOTAL INCOME IT WAS NOTICED THAT THE ASSESSEE HAS CLAIMED PROVISIONS FOR GRATUITY OF RS. 1,38,790/-, PROVISION FOR SALARY SETTLEMENT OF RS. 11,00,000/- AND PROVISION FOR VET AN SURAKSHA KOSH OF RS. 8,11,865/-. THE A.O. HAS FOUND ALL THE ABOVE PR OVISION AS NOT ALLOWABLE. THEREFORE, HE HAS DISALLOWED THEM AND HA S ADDED THEM IN ASSESSEES TOTAL INCOME OF THE YEAR AND HAS COMPUTE D ITS TOTAL INCOME OF THE YEAR AT RS. 1,83,43,600/-. 2.1 AGGRIEVED, THE ASSESSEE BANK WENT IN FIRST APPE AL AND LD. CIT(A) IN TURN, HAS CONFIRMED THESE ADDITIONS. BEING FURTH ER AGGRIEVED, THE ASSESSEE-BANK HAS FILED THIS SECOND APPEAL BEFORE T HE APPELLATE 3 TRIBUNAL. THE ASSESSEE BANK HAS HOWEVER, RAKED UP O NLY TWO ISSUES (I) REGARDING DISALLOWANCE OF RS. 11 LAKHS DEBITED TO T HE P&L ACCOUNT ON THE GROUND THAT THE PROVISION IS NOT MADE FOR ASCER TAINED LIABILITY AND DOES NOT RELATE TO THIS YEAR; AND (II) REGARDING DI SALLOWANCE OF PROVISION FOR GRATUITY AMOUNTING TO RS. 1,38,790/- MADE IN THE BOOKS OF ACCOUNT WHICH ACCORDING TO THE ASSESSEE IS A PROVIS ION FOR CONTRIBUTION TOWARDS AN APPROVED GRATUITY FUND UNDER AN IRREVOCA BLE TRUST. 2.2 IN ASSESSMENT YEAR 2009-10, THE EXACTLY SIMILAR GROUNDS IN REGARD HAVE BEEN RAISED, EXCEPT FOR THE AMOUNTS BEING RS. 7 LAKHS TOWARDS PROVISIONS FOR THE SALARY SETTLEMENT AND RS. 10,13, 659/- TOWARDS PROVISION FOR APPROVED GRATUITY FUND, ALL THE FACTS ARE IDENTICAL. IN THIS YEAR TWO MORE GROUNDS ONE RELATING TO LEVY OF SURCH ARGE OF RS. 4,02,861/-, AND THE OTHER CHALLENGING LEVY OF INTER EST U/S 234C OF RS. 4,954/- HAVE ALSO BEEN RAISED. FIRST WE WILL DEAL WITH COMMON GROUNDS OF THESE APP EALS. 2.3 WE HAVE HEARD RIVAL SUBMISSIONS. WE HAVE ALSO T REATED THROUGH THE ENTIRE RECORD. WE HAVE PERUSED THE WRITTEN SUBM ISSIONS AND THE PAPER BOOK. IT WAS ARGUED BY LD. AR THAT THE DISALL OWANCE OF PROVISION 4 FOR SALARY SETTLEMENT ON THE GROUND THAT THIS IS NO T AN ASCERTAINED LIABILITY AND THIS LIABILITY DOES NOT PERTAIN TO TH E YEAR IN QUESTION, IS NOT JUSTIFIED. ACCORDING TO HER, SALARY IS NOT AN I TEM SIMILAR TO ITEMS MENTIONED IN THE SECTION 43B OF THE ACT WHEREIN THE PROVISION IS ALLOWABLE ONLY ON PAYMENT BASIS. SHE ARGUED THAT TH E ASSESSEE HAS BEEN FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND AS PER AS-I, ALL INCOMES AND EXPENSES WOULD HAVE TO BE RECOGNIZED ON ACCRUAL BASIS. SHE STATED THAT THE LIABILITY IS CRYSTALLIZED IN TH E YEAR OF APPROVAL. 2.4 PER CONTRA, LD. DR RELIED ON THE ORDERS OF THE AUTHORITIES BELOW AND REITERATED THE SAME REASONS AS WERE GIVEN BY TH EM FOR DISALLOWING THIS PROVISION. 2.5 AFTER CONSIDERING RIVAL SUBMISSIONS WE ARE OF T HE CONSIDERED OPINION THAT THE LIABILITY TO PAY IN RESPECT OF SAL ARY SETTLEMENT ACTUALLY ACCRUES AT THE VERY POINT OF TIME WHEN ITS ACCEPTAN CE IS RECEIVED FROM THE REGISTRAR. THIS LIABILITY WOULD NOT ARISE AT TH E TIME OF EXECUTION OF AGREEMENT, SAY IN THE MONTH OF MAY, 2003, AS IT WAS SUBJECT TO APPROVAL BY THE REGISTRAR. THE ASSESSEE-BANK WAS NO T CONSIDERED THE PROVISION / LIABILITY BELONGING TO THE PRIOR PERIOD . THE AUDITORS HAVE ALSO NOT CONSIDERED THIS PROVISION AS SUCH. THIS IS SUE SEEMS TO BE 5 COVERED BY THE DECISION OF THE HONBLE APEX COURT R ENDERED IN THE CASE OF NONSUCH TEA ESTATE LTD. VS CIT 98 ITR 189 ( SC). IN THIS CASE IT HAS BEEN HELD THAT WHERE ANY PAYMENT IS SUBJECT TO APPROVAL, THE LIABILITY TO PAY CRYSTALLIZES IN THE YEAR OF APPROV AL. SIMILAR VIEW HAS BEEN TAKEN BY HONBLE GUJARAT HIGH COURT IN THE CAS E OF SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES LTD. 213 ITR 523 (GU J). THUS, ALTHOUGH THE LIABILITY PERTAINS TO EARLIER YEARS (FROM JANUA RY, 1999 TILL DECEMBER, 2003) IT CANNOT BE SAID THAT IT PERTAINS TO THE EARLIER YEARS BECAUSE THE LIABILITY WAS APPROVED BY THE REGISTRAR DURING THIS YEAR. 2.6 IN THE OTHER ASSESSMENT YEAR, SIMILAR REASONING SHALL APPLY. 2.7 THEREFORE, WE ALLOW THE ISSUE OF PROVISIONS FOR SALARY SETTLEMENT IN BOTH ASSESSMENT YEARS IN THE FAVOUR OF THE ASSES SEE AND ORDER THE DELETION OF THE SAME FROM ASSESSEES HANDS. 3. REGARDING PROVISION FOR GRATUITY, THE ASSESSEE-B ANK HAS CLAIMED DEDUCTION OF THIS PROVISION. THE ASSESSEE ' CONTRIB UTED TO THE GROUP GRATUITY SCHEME, UNDER THE MASTER POLICY, WHICH IS DULY APPROVED GRATUITY FUND UNDER THE POLICY ISSUED BY THE LIC, C REATED FOR THE EXCLUSIVE BENEFIT OF THE EMPLOYEES AND IS AN IRREC OVERABLE TRUST. THE 6 A.O. HAS DISALLOWED FOR WANT OF APPROVAL OF CIT. TH E LD. CIT(A) HAS ALSO CONFIRMED THIS DISALLOWANCE. 3.1 IT WAS ARGUED BY LD. AR THAT THE ASSESSEE HAS S ATISFIED THE REQUISITE CONDITIONS TO AVAIL THIS DEDUCTION. HOWEV ER, LD. DR HAS OPPOSED THE STAND TAKEN BY LD. AR AND HAS SUPPORTED THE APPELLATE ORDER. 3.2 AFTER HEARING BOTH SIDES, WE HAVE FOUND THAT TH IS ISSUE STANDS SQUARELY COVERED BY THE DECISION OF HONBLE APEX CO URT RENDERED IN THE CASE OF CIT VS. TEXTLOOL CO. LTD. APPEAL NO. 44 7 OF 2003, WHEREIN IT HAS BEEN HELD THAT THE PAYMENT MADE BY THE ASSES SEE-COMPANY DIRECTLY TO LIC TOWARDS GROUP GRATUITY FUND IS ALLO WABLE. ACCORDINGLY, BY RESPECTFULLY FOLLOWING THE ABOVE DECISION THIS I SSUE IS ALLOWED IN FAVOUR OF THE ASSESSEE. THE ADDITIONS SO MADE IN BO TH THE YEARS ARE DELETED. 4. IN A.Y. 2009-10 TWO MORE GROUNDS RELATING TO CHA RGING OF SURCHARGE AND LEVY OF INTEREST U/S 234C HAVE BEEN R AISED. SINCE CHARGING OF INTEREST AND SURCHARGE ARE MANDATORY, T HESE GROUNDS CANNOT BE ALLOWED. 7 5. IN THE RESULT THE APPEAL IN ITA NO. 47/JODH/2013 FOR A.Y.2008-09 IS ALLOWED AND THE APPEAL IN ITA NO. 48/JODH/2013 F OR A.Y. 2009-10 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 20 TH SEPTEMBER, 2013. SD/- SD/- (N.K.SAINI) [HARI OM MARAT HA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 20 TH SEPTEMBER, 2013. VL/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT BY ORDER 4. THE CIT(A) 5. THE DR ASSISTANT REGISTRAR ITAT, JODHPUR