M/s Rajdhani Nagar Sahkari Bank Ltd., Lucknow V. Dy. Commissioner of Income Tax, Lucknow

ITA 696/LKW/2015

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6597 (ITAT-LUCKNOW)
• Duration Of Justice: 2 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 17-11-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R K VISHWAKARMA
• Assessee Lawyers: K R RASTOGI
• Keywords: Principle of natural justice; Condonation of delay

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW BEFORE SHRI. T.S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO. 696/LKW/2015 ASSESSMENT YEAR: 2010 - 11 M/S RAJDHANI NAGAR SAHKARI BANK LTD. 551GA/86 , SARDARI KHERA ALAMBAGH, LUCKNOW V. DCIT - VI LUCKNOW T AN /PAN : (APP ELL ANT) (RESPONDENT) APPELLANT BY: SHRI K.R. RASTOGI, FCA RESPONDENT BY: SHRI R. K. VISHWAKARMA, D.R. DATE OF HEARING: 15 0 5 201 8 DATE OF PRONOUNCEMENT: 17 0 5 201 8 O R D E R PER P ARTHA SARATHI CHAUDHURY, J.M : THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LD. CIT(A), LUCKNOW DATED 27/2/2015 AS PER FOLLOWING GROUNDS OF APPEAL: - (1) LD. C.I.T. (A) ERRED ON FACTS AND IN LAW IN CONFIRMING T HE DISALLOWANCE OF RS . 4,12,527/ - BEING NO T.D.S. ON INTEREST PAID TO MEMBER DEPOSITORS WITHOUT APPRECIATING THAT AS PER SECTION 194A(V) OF I. T. ACT , COOPERATIVE BANK IS NOT REQUIRED TO DEDUCT T.D.S. ON INTEREST PAID TO MEMBER DEPOSITORS. (2) LD. C.I.T. (A) ERRED ON FACTS AN D IN LAW IN CONFIRMING THE DISALLOWANCE OF RS. 1,89,78,237 / - WHICH IS ACCUMULATED CLOSING BALANCE AS ON 31.03.2010 UNDER THE HEAD 'EMPLOYER PROVIDENT FUND' WITHOUT APPRECIATING THAT RS. 1,61,20,088 / - IS THE 'OPENING BALANCE1 AND ADDITION DURING THE YEAR IS ONLY RS. 15,61,416/ - BEING EMPLOYERS CONTRIBUTION AND RS. 15,60,416/ - IS BEING ITA NO.696/LKW/2015 PAGE 2 OF 6 EMPLOYEES CONTRIBUTION. THUS, NO ADDITION SHOULD BE MADE W. R. T. OPENING BALANCE RS. 1,61,20,088/ - . (3) THE LD. C.I.T. (A) DID NOT APPRECIATED THAT THE APPELLATE HAS MADE PAYM ENT OF RS. 15,49,580 / - TO LIC'S GROUP PENSION SUPERANNUATION POLICY W.R.T. EMPLOYER'S CONTRIBUTION AND RS. 15,49,580 / - KEPT AS F.D.R. IN SEPARATE HEAD FOR EMPLOYER'S CONTRIBUTION, HENCE NO ADDITION SHOULD BE MADE U/S 2(24), 36(IV) AND 36(VA) OF I. T. ACT. (4) THE ADDITION MADE ARE HIGHLY EXCESSIVE, CONTRARY TO THE FACTS, LAW AND PRINCIPLE OF NATURAL JUSTICE AND WITHOUT PROVIDING SUFFICIENT TIME AND OPPORTUNITY TO HAVE ITS SAY ON THE REASONS RELIED UPON. 2 . AT THE VERY OUTSET , WE FIND THAT THERE IS A PETITION F OR CONDON ATION OF DELAY AND THERE HAS BEEN A DELAY OF 172 DAYS IN FILING THE APPEAL BEFORE US. THE ASSESSEE HAS FILED CONDONATION OF DELAY PETITION AND WE ARE CONVINCED WITH THE REASONS STATED THEREIN. WE CONDONE THE DELAY AND PROCEED TO HEAR THE APPEAL. 3 . SO FAR AS GROUNDS OF APPEAL ARE CONCERNED, MAINLY THERE ARE TWO ISSUES I.E. CONFIRM ING THE DISALLOWANCE OF RS. 4,12,527/ - BEING NO T.D.S. ON INTEREST PAID TO MEMBER DEPOSITORS AND SECOND ISSUE IS CONFIRMING THE DISALLOWANCE OF RS. 1,89,78,237/ - WHICH IS A CCUMULATED CLOSING BALANCE UNDER THE HEAD 'EMPLOYER PROVIDENT FUND'. WITH REGARD TO THIS GROUND, ASSESSEE STATED THAT RS.1,74,07,489/ - IS THE OPENING BALANCE AND ADDIT ION DURING THE YEAR IS ONLY RS. 15,61,416/ - WHICH IS EMPLOYERS CONTRIBUTION AND RS.15,60 ,416/ - IS THE EMPLOYEES CONTRIBUTION. TH EREFORE , NO ADDITION SHOULD BE MADE W ITH REGARD TO THE OPENING BALANCE OF RS. 1,61,20,088/ - . 4 . WITH REGARD TO GROUND NO.1, THE LD. A.R. OF THE ASSESSEE STATED BEFORE US THAT ASSESSEE IS A COOPERATIVE BANK AND AS PER PR OVISIONS OF SECTION 194A (V) OF THE ACT , THE ASSESSEE BANK IS NOT REQUIRED TO DEDUCT T.D.S ON INTEREST PAYMENT TO MEMBER DEPOSITOR. THE AMENDMENT HAS ITA NO.696/LKW/2015 PAGE 3 OF 6 BEEN MADE WITH EFFECT FROM 1/6/2015 BY THE F INANCE A CT , 2015 WHERE THIS BENEFIT HAS BEEN WITHDRAWN. ACCORD INGLY , DURING ASSESSMENT YEAR 2010 - 11 AS PE R PROV ISIONS OF SECTIO N 194 A (V) OF THE ACT, THE ASSESSEE BANK IS NOT REQUIRED TO DEDUCT T.D.S ON INTEREST PAID TO MEMBERS OF THE BANK ON FIXED DEPOSITS. ACCORDINGLY IT WAS PRAYED THAT NO DISALLOWANCE SHOULD BE MA DE FOR NON DEDUCTION OF TDS. 5 . WE ENQUIRED FROM THE LD. A.R. OF THE ASSESSEE THAT WHETHER THIS ISSUE WAS RAISED AND TAKEN UP BEFORE THE LD. CIT(A) , T HE LD. A.R. OF THE ASSESSEE ANSWERED THAT THIS ISSUE WAS NEVER TAKEN UP BEFORE THE LD. CIT(A) AND THIS WAS TH E SUBMISSION ONLY MADE FIRST TIME BEFORE US. 6 . WE HAVE PERUSED THE CASE RECORDS AND HEARD THE CONTENTIONS OF THE PARTIES AND WE FIND THAT ASSESSEE HAS RAISED THE ISSUE THAT ASSESSEE IS A COOPERATIVE BANK AND SO FAR AS ASSESSMENT YEAR 2010 - 11 IS CONCERNED AS PROVIDED UNDER PROVISIONS OF SECTION 194A(V) OF THE ACT, IT IS NOT REQUIRED TO DEDUCT TDS ON INTEREST PAID TO MEMBERS OF THE BANK ON FIXED DEPOSIT. HOWEVER, THIS BENEFIT HAS BEEN WITHDRAWN BY AN AMENDMENT W.E.F. 1/6/2015 BY THE FINANCE ACT, 2015. WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THE MATTER BACK TO HIS FILE TO DETERMINE THE CONTENTIONS RAISED BY THE ASSESSEE AND TO GIVE A FINDING ON THE ISSUE AFTER PROVIDING AN OPPORTUNITY OF HEARING TO THE ASSESSEE. THIS ISSUE IS THEREFO RE RESTORED BACK TO THE FILE OF THE LD. CIT(A). 7 . WITH REGARD TO THE SECOND ISSUE, THE SUBMISSION OF THE ASSESSEE IS THAT ASSESSEE BANK HAS DEPOSITED RS.15,49,580/ - THROUGH CHEQUE WITH REGARD TO PF CONTRIBUTION OF EMPLOYER PART WITH LIFE INSURANCE GROUP POLI CY AS APPROVED 'FUND BY G OVERNMENT OF INDIA IN THIS REGARD. ASSESSEE BANK HAS NO CONTROL WITH LIFE INSURANCE CORPORATION PROVIDENT FUND IRREVOCABLE TRUST CREATED EXCLUSIVELY FOR THE BENEFIT OF THE EMPLOYEES AS PER SCHEME OF GOVERNMENT OF INDIA. THE DETAILS OF THE ITA NO.696/LKW/2015 PAGE 4 OF 6 PAYMENTS MADE DURING THE YEAR ALONG WITH SUMMARY OF PF CONTRIBUTION DURING A.Y. 2010 - 11 AND DETAILS OF LIC RECEIPTS ACKNOWLEDGING THE PAYMENT MADE TO LIC TOWARDS PF CONTRIBUTION ARE GIVEN IN THE PAPER BOOK FROM PAGE 05 TO 23. THE LD. A.R. OF THE A SSESSEE FURTHER SUBMITTED THAT ASSESSEE BANK HAS SUBSEQUENTLY GOT REGISTERED THE EMPLOYEES PROVIDENT FUND WITH PROVIDENT FUND COMMISSIONER, LUCKNOW. THE RELEVANT EVIDENCE OF REGISTRATION SUBMITTED AT PAGES 24 TO 26 OF THE PAPER BOOK. THE LD. A.R. OF THE ASSESSEE FURTHER PLACED RELIANCE ON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S SCOOTERS INDIA LTD. VS. CIT IN ITA NO.1 OF 2015 WHEREIN THEY HAVE ANALYSED THE ALLOWABILITY OF PAYMENT OF GRATUITY UNDER GROUP GRATUITY SCHEME OF L IC AND HAVE TAKEN INTO CONSIDERATION THE VIEW OF THE HON'BLE APEX COURT IN THE CASE OF CIT VS. TEXTOOL CO. LTD. [2013] 216 TAXMAN 327 (SC). 8 . WE HAVE PERUSED THE CASE RECORDS, ANALYSED THE FACTS AND CIRCUMSTANCES OF THE CASE AND HAVE CONSIDERED THE JUDICIAL PRONOUNCEMENTS PLACED BEFORE US. A T THE OUTSET , IT IS NOT DISPUTED THAT THE CONTRIBUTION HAS BEEN ALREADY MADE BY THE ASSESSEE IN LIFE INSURANCE GROUP POLICY WHICH IS ALSO ACCEPTED BY THE DEPARTMENT. THE JUDICIAL INTERPRETATION GIVEN IN THE SCOOTERS IND IA (SUPRA) CASE WHEREIN THEY HAVE ALSO RELIED ON THE DECISION OF THE HON'BLE APEX COURT IN TEXTOOL CO. LTD. (SUPRA) , MAY BE LOOKED INTO FOR ANALYSIS . HERE IS A SITUATION WHERE CONTRIBUTION WAS MADE TO THE LIFE INSURANCE GROUP POLICY AND IT WAS ACCEPTED BY THE DEPARTMENT AND THERE IS NO DI SPUTE ON THAT. THE FUNDS PAID ARE ALREADY BEYOND THE CONTROL OF THE ASSESSEE AND IN SUCH SITUATION , THERE IS REQUIREMENT OF APPLICATION OF PRINCIPLES OF REASONABLE CONSTRUCTION TO GIVE EFFECT TO THE PURPOSE AND INTENTION OF ANY PARTICULAR PROVISIONS OF THE ACT. FROM A BARE RE A DING OF SECTION 36(1)(V) OF THE ACT, IT IS MANIFEST THAT THE REAL INTENTION BEHIND THE PROVISION IS THAT THE EMPLOYER SHOULD NOT HAVE ANY CONTROL OVER THE ITA NO.696/LKW/2015 PAGE 5 OF 6 FUNDS OF THE IRREVOCABLE TRUST CREATED EXCLU SIVELY FOR THE BENEFIT OF THE EMPLOYEES. IN THE INSTANT CASE, IT IS EVIDENT FROM THE FINDINGS RECORDED BY THE DEPARTMENT THAT THE ASSESSEE HAD ABSOLUTELY NO CONTROL OVER THE FUND CREATED FOR THE BENEFIT OF THE EMPLOYEES FOR WHICH CONTRIBUTION HAS ALREADY BEEN MADE BY THE ASSESSEE. IT HAS BEEN DULY OBSERVED BY THE HON'BLE JURISDICTION HIGH COURT IN THE SCOOTERS INDIA CASE (SUPRA) AS FOLLOWS: - 25. NOW COMING TO QUESTIONS - (III), (IV), (V), (VI) AND (VII), LEARNED COUNSELS FOR PARTIES, AT THE OUTSET, COULD NOT DISPUTE THAT THESE QUESTIONS STAND COVERED BY SUPREME COURT'S JUDGMENT IN CIT VS. TEXTOOL CO. LTD. 2013 (216) TAXMAN 327 IN FAVOUR OF ASSESSEE. TRIBUNAL, HAD DISALLOWED PAYMENT MADE TO L.I.C. UNDER GRATUITY INSURANCE SCHEME BY REFERRING TO SECTION 40 (A)(VII) OBSERVING THAT FUND WAS NOT RECOGNIZED BY DEPARTMENT. A SIMILAR QUESTION WAS CONSIDERED IN CIT VS. TEXTOOL CO. LTD. (SUPRA) WHERE ALSO PAYMENT WAS MADE TO L.I.C. TOWARDS GROUP LIFE ASSURANCE SCHEME AND THIS WAS HELD TO BE AN APPROVED SCHEME AND TH ERE WAS NO VIOLATION OF SECTION 36(1 )(V) OF ACT, 1961. COURT HELD THAT A NARROW INTERPRETATION STRAINING LANGUAGE OF SUB - CLAUSE (V) SO AS TO DENY DEDUCTION TO ASSESSEE SHOULD NOT BE FOLLOWED SINCE THE OBJECTIVE OF FUND WAS ACHIEVED. PARA - 8 OF JUDGMENT IS REPRODUCED AS UNDER: '8. HAVING CONSIDERED 'THE MATTER IN THE LIGHT OF THE BACKGROUND FACTS, WE ARE OF THE OPINION THAT THERE IS NO MERIT IN THE APPEAL. TRUE THAT A FISCAL STATUTE IS TO BE CONSTRUED STRICTLY AND NOTHING SHOULD BE ADDED OR SUBTRACTED TO THE LANGUAGE EMPLOYED IN THE SECTION, YET A STRICT CONSTRUCTION OF A PROVISION DOES NOT RULE OUT THE APPLICATION OF THE PRINCIPLES OF REASONABLE CONSTRUCTION TO GIVE EFFECT TO THE PURPOSE AND INTENT ION OF ANY PARTICULAR PROVISION OF THE ACT. (SEE : SHREE SAJJ AN MILLS LTD, V. CIT [1985] 156 ITR 585/23 TAXMAN 37 (SC). FROM A BARE RENDING OF SECTION 36(1)(V) OF THE ACT, IT IS MANIFEST THAT THE REAL INTENTION BEHIND THE PROVISION IS THAT THE EMPLOYER SHOULD NOT HAVE ANY CONTROL OVER THE FUNDS OF THE IRREVOCABLE TR UST CREATED EXCLUSIVELY FOR THE BENEFIT OF THE EMPLOYEES. IN THE INSTANT CASE, IF IS EVIDENT FROM THE FINDINGS ITA NO.696/LKW/2015 PAGE 6 OF 6 RECORDED BY THE COMMISSIONER AND AFFIRMED BY THE TRIBUNAL THAT THE 'ASSESSEE HAD ABSOLUTELY NO CONTROL OVER THE FUND CREATED BY THE LIC FOR THE B ENEFIT OF THE EMPLOYEES OF THE ASSESSEE AND FURTHER ALL THE CONTRIBUTION MADE BY THE ASSESSEE IN THE SAID FUND ULTIMATELY CAME BACK TO THE TEXTOOL EMPLOYEES GRATUITY FUND, APPROVED BY THE COMMISSIONER WITH EFFECT FROM THE FOLLOWING PREVIOUS YEAR. THUS, THE CONDITIONS STIPULATED IN SECTION 36(1)(V) OF THE ACT WERE SATISFIED. HAVING REGARD TO THE FACTS FOUND BY THE COMMISSIONER AND AFFIRMED BY THE TRIBUNAL, NO FAULT CAN BE FOUND WITH THE OPINION EXPRESSED BY THE HIGH COURT, WARRANTING OUR INTERFERENCE.' 2 6. IN VIEW THEREOF, WE ANSWER QUESTIONS - (III) TO (VII) IN FAVOUR OF ASSESSEE AND AGAINST REVENUE. 9 . RESPECTFULLY FOLLOWING THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT, WE ALLOW THIS ISSUE IN FAVOUR OF THE ASSESSEE. THEREFORE, GROUND NO.2 OF THE GROU NDS OF APPEAL IS ALLOWED. 10 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17 / 0 5 / 201 8 . SD/ - SD/ - [ T.S. KAPOOR ] [PARTHA SARATHI CHAUDHURY ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE D: 17 TH MAY , 201 8 JJ: 1505 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR