DCIT-WARDHA CIRCLE, Wardha V. THE YAVATMAL DISTRICT CENTRAL COOP BNAK LTD., Yavatmal

ITA 50/NAG/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3150 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 03-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure
• Section: 43B; 143(3); 263

Judgement Text

1 ITA NO. 50/NAG/2014 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO. 50/NAG/2014 ASSESSMENT YEAR : 2009 - 10. DY. COMMISSIONER OF INCOME - TAX, THE YAVATMAL DISTRICT CENTRAL WARDHA CIRCLE, WARDHA. VS. COOP. BANK LTD. YAVATMAL. PAN AAAAT11438L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI NARENDRA KANE. RESPONDENT : SHRI MAHAVIR ATAL. DATE OF HEARING : 05 - 01 - 2016 DATE OF PRONOUNCEMENT : 15 TH JANUARY, 2016. O R D E R PER MUKUL K. SHRAWAT, J.M. THIS IS AN APPEAL FILED BY THE REVENUE ARISING FROM TH E ORDER OF LEARNED CIT(APPEALS) - I, NAGPUR DATED 28 - 11 - 2013. THE GROUNDS RAISED ARE REPRODUCED BELOW: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE & ADDITION OF RS.1,62,95,907/ - OUT OF TOTAL CLAIM OF LEAVE ENCASHMENT OF RS. 2 CRORE AS ONLY R.37,04,093/ - IS ACTUALLY PAID TO EMPLOYEES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN NOT APPRECIATING THE FACTS THAT THE AMOUNT OF LIABILITY SHOWN AT RS.2 CRORE HAD NO BASIS FOR ITS QUA NTIFICATION. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN NOT APPRECIATING THE FACTS THAT THE CASE OF BHARAT EARTH MOVERS VS CIT, 245 ITR 224 CITED BY THE A.R. WAS DISTINGUISHABLE FROM THE PRESENT CASE, 2 ITA NO. 50/NAG/2014 4. ON THE FACTS AND IN THE CIR CUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN NOT TAKING INTO ACCOUNT THAT THE ASSESSEE HAD NOT SUBMITTED ANY DETAILS OF POLICY OF LIC FUND, OR PURPOSE IN RESPECT OF PAYMENT OF RS. 2 CRORE. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDE R PASSED U/S 143(3) DATED 27 - 12 - 2011 WERE THAT THE ASSESSEE IS A COOPERATIVE SOCIETY ENGAGED IN BANKING ACTIVITIES, AS NOTED BY THE AO. IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAD MADE A PROVISION OF LEAVE ENCASHMENT OF RS.2 CRORES IN PROFIT & LOSS ACCO UNT. THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF ACTUAL EXPENDITURE INCURRED IN LIEU OF ANY LEAVE AT THE CREDIT OF HIS EMPLOYEES UNDER THE PROVISIONS OF SECTION 43B(1)(F) OF THE I.T. ACT. A LEGAL QUESTION WAS RAISED ABOUT THE ALLOWABILITY OF LEAVE SAL ARY PAYMENT IN THE HANDS OF THE EMPLOYEE THAT WHETHER IT WAS TO BE ALLOWED ON ACTUAL PAYMENT BASIS OR IT WAS MERELY A PROVISION FOR FUTURE LIABILITY. IN THE OPINION OF THE AO IN A MERCANTILE SYSTEM OF ACCOUNTING THE BASIC CONDITION IS THAT THE LIABILITY MUST ACCRUE. HE HAS CON CLUDED THAT NO DEDUCTION COULD BE ALLOWED IN RESPECT OF ANY SUM PAID BY THE ASSESSEE AS AN EMPLOYEE TOWARDS LEAVE ENCASHMENT TO LIC WHICH WAS COMPUTED AT RS.1,62,95,907/ - FOR DISALLOWANCE BY THE AO. 3. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, LEARNED CIT(APPEALS) HAS DISCUSSED THE ISSUE AT SOME LENGTH AND THEREUPON ARRIVED AT THE CONCLUSION AS UNDER : IT IS SEEN FROM THE ABOVE, THAT THE AMENDMENT TO SEC. 43B WHICH IS SUBSEQUENT TO THE DECISION OF THE HON BLE APEX COURT OVER RULES THE DECISION TO THE EXTENT THAT IT IS COVERED BY SECTION 43B OF THE ACT. THE SECTION CLEARLY STIPULATES THAT THE AMOUNT PAYABLE BY THE ASSESSEE AS AN EMPLOYER, WHICH REMAINS UNPAID DURING THE FINANCIAL YEAR, IS COVERED BY THE AME NDED PROVISIONS OF SEC. 43B OF THE ACT. HOWEVER, THE CASE OF THE APPELLANT IS COVERED BY PROVISO TO SECTION 43B OF THE ACT. THEREFORE, KEEPING IN VIEW THE DECISION OF THE APEX COURT AND ALSO THAT THE PAYMENT HAS BEEN MADE BEFORE FILING OF THE RETURN U/S 13 9(1) OF THE ACT, THE CLAIM IS ACCEPTABLE. THEREFORE, THE ADDITION MADE BY TE AO IS DIRECTED TO BE DELETED. 3 ITA NO. 50/NAG/2014 4. WE HAVE HEARD BOTH THE SIDES. AT THE OUTSET WE HAVE BEEN INFORMED THAT THE ITAT, NAGPUR, NAGPUR IN THE CASE OF ACIT VS. MANGANESE ORE (INDIA) LT D. BEARING ITA NO. 45/NAG/2013 FOR ASSESSMENT YEAR 2005 - 06, ORDER DATED 21 ST AUGUST, 2015 HAS CONSIDERED THIS ISSUE AND THEREAFTER HELD AS UNDER : 5. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. NOTHING HAS BEEN BROUGHT ON RECORD BY THE REVEN UE AS TO HOW THE SAID DECISION RELIED UPON BY THE LEARNED CIT(APPEALS) IS NOT APPLICABLE ON THE FACTS OF THE CASE. LEARNED COUNSEL OF THE ASSESSEE IN THIS REGARD HAS SUMMARIZED HIS ARGUMENTS AS UNDER : A) CLAIM IS MADE FOR THE INSURANCE PREMIUM PAID, THE SAME IS NOT A PROVISION FOR THE FUTURE LIABILITY BUT A PAYMENT FOR THE ASCERTAINED LIABILITY. B) ONCE THE ASSESSEE HAS PAID THE PREMIA, IT INCURS NO LIABILITY TOWARDS LEAVE ENCASHMENT. THE LIABILITY IS SOLELY ON INSURER. C) THE PREMIA PAID IS A BUSINESS E XPENDITURE INCURRED FOR THE BUSINESS PURPOSE & ALLOWABLE AS DEDUCTION U/S 37. I) (2012) CIT V/S. HINDUSTAN LATEX LTD. (KER HC). II) (2014) CIT V/S. NAINITAL BANK LTD. (UTTARAKHAND HC) TAX HC) 8 TAX CORP (DT) 56471. III) (2015) DCIT V/S. ANDHRA PRADESH HANDICRAFTS DEVELOPMENT C ORPORATION LTD. ITA NO. 915 & 916/HYD/2014. IV) (2014) DCIT V/S. ANDH RA BANK ITA NO. 167, 168 & 169/HYD/2014 V) (2012) ACIT V/S. THE NAINITAL BANK LTD. ITA NO. 3606/DEL/2011 C) ALTERNAT IVELY, SEC. 43B WAS INTRODUCED TO DISSUADE TAX PAYERS FROM CLAIMING DEDUCTION ON THE BASIS OF PROVISION FOR DISCHARGING STATUTORY LIABILITIES, WITHOUT ACTUALLY DISCHARGING THEM. LEAVE ENCASHMENT IS NOT A STATUTORY LIABILITY AND PROVISION ITSELF IS ALLOW ABLE AS BUSINESS EXPENDITURE. I) (2000) BHARAT EARTH MOVERS V/S. CIT (SC). II) (2007) EXIDE INDUSTRIES LTD. V/S. UNION OF INDIA (CAL HC). 4 ITA NO. 50/NAG/2014 6. PER CONTRA LEARNED D.R. RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 7. UPON CAREFUL CONSIDERATION WE FIND THAT THE ASSESSEE HAD PAID INSURANCE PREMIUM TO THE LIC TO TAKE CARE OF ITS LIABILITY IN FUTURE AGAINST THE LEAVE ENCASHMENT CLAIM OF THE EMPLOYEES. THE INSURANCE PREMIUM INVOLVED HAS BEEN DULY PAID. THERE IS NO CASE THAT THE SAID PAYMENT IS AGAINST UNASCERTAINED LIABILITY. IN THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THE AO'S INVOKING OF THE PROVISIONS OF SECTION 43B(F) IS NOT SUSTAINABLE. THE ARGUMENTS OF THE LEARNED COUNSEL OF THE ASSESSEE AS MENTIONED ABOVE THAT THE AMOUNT INVOLVED IS THE INSURANCE PREMIUM PAID AND IT IS NOT AN ASCERTAINED LIABILITY IS QUITE COGENT. FURTHER MORE THE CASE LAWS MENTIONED AS ABOVE DO SUPPORT THE CASE OF THE ASSESSEE. WE FIND THAT IDENTICAL ISSUE WAS CONSIDERED BY HONBLE KERALA HIGH COURT IN THE CASE OF CIT V/S. HINDUSTAN LATEX LTD. 209 TAXMAN 42. ALTHOUGH THE APPEAL WAS PREFERRED UNDER SECTION 263 OF THE I.T. ACT, THE HONBLE HIGH COURT HAS DULY CONSIDERED THE PROVISIONS OF SECTION 43B(F) AND HAS EXPOUNDED THAT THE ASSESSEES CLAIM WITH RESPECT TO PAYMENT OF PREMIUM TO LIC FOR THE POLICY UNDER GROUP B ENCASHMENT SCHEME WAS ALLOWABLE AS EXPENDITURE INCURRED FOR THE PURPOSE OF BUSINESS. THE HONBLE HIGH COURT HAS ALSO FOUND THE APPLICATION OF SECTION 43B(F) IN SUCH CASES AS NOT SUSTAINABLE. ACCORDINGLY IN THE BACKGROUND OF AFORESAID DISCUSSION AND PRECEDENT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED CIT(APPEALS). ACCORDINGLY WE UPHOLD THE SAME. 5. BEFORE US THE RESPONDENT ASSESSEE HAS ALSO FURNISHED A RECEIPT OF PAYMENT TO LIC UNDER PENSION AND GR OUP SCHEME WHERE A PREMIUM OF RS. 2 CRORES WAS PAID VIDE RECEIPT DATED 30 TH OF SEPTEMBER, 2009, CLAIMED TO BE WITHIN THE TIME PRESCRIBED. THEREFORE, UNDER THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE HEREBY RESPECTFULLY FOLLOW THE DECISION O F THE TRIBUNAL AS CITED SUPRA AND AFFIRM THE RELIEF GRANTED BY LEARNED CIT(APPEALS) REJECTING THE GROUNDS RAISED BY THE REVENUE. 5 ITA NO. 50/NAG/2014 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15 TH DAY OF JANUARY, 2016. SD/ - SD/ - (SHAMIM YAHYA) (MUKUL K. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL MEMBER NAGPUR, DATED: 15 TH JANUARY, 2016. COP Y FORWARDED TO : 1. THE YAVATMAL DISTRICT CENTRAL COOP. BANK LTD. YAVATMAL - 445001. . 2. D.C.I.T., WARDHA CIRCLE, WARDHA. 3. COMMISSIONER OF INCOME - TAX - , NAGPUR. 4. CIT(APPEALS) - I. , NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, NAGPUR WAKODE.