Baran Kendriya Sahakari Bank Ltd, Baran V. Assistant Commissioner Of Income Tax, Cirlce-2, Kota

ITA 723/JPR/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9481 (ITAT-JAIPUR)
• Duration Of Justice: 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 25-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHOK KHANNA JCIT DHK
• Assessee Lawyers: DEEPAK SETHI
• Keywords: Condonation of delay

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S B, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA NO. 723/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2013-14 BARAN KENDRIYA SAHAKARI BANK LTD. STATION ROAD, BARAN. CUKE VS. A.C.I.T., CIRCLE-2, KOTA. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAALB 0443 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI DEEPAK SETHI (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI ASHOK KHANNA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 18/12/2018 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 19/12/2018 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 08/01/2018 OF LD. CIT(A), KOTA FOR THE A.Y. 2013-14 . 2. THERE IS A DELAY OF 26 DAYS IN FILING THE PRESENT APPEAL. THE ASSESSEE HAS FILED AN APPLICATION DATED 24/5/2018 F OR CONDONATION OF DELAY. 3. WE HAVE HEARD THE LD. AR AS WELL AS THE LD DR ON THE CONDONATION OF DELAY AND CAREFULLY PERUSED THE APPLICATION FILE D BY THE ASSESSEE. THE ONLY EXPLANATION FOR DELAY IN FILING THE APPEAL AS PER THE APPLICATION IS ITA 723/JP/2018_ BARAN KENDRIYA SAHAKARI BANK VS ACIT 2 THAT DUE TO CLOSING OF THE FINANCIAL YEAR AND OTHER EVENTS, THERE IS DELAY IN FILING THE APPEAL. THE APPLICATION OF CONDONATION OF DELAY READS AS UNDER: IT IS TO STATE THAT CIT APPEAL ORDER WAS RECEIVED ON 28/02/2018 AT OUT OFFICE. THEREFORE, DUE TO CLOSING OF THE FINANC IAL YEAR AND OTHER EVENTS WERE THE REASON TO DELAY IN FILING APPEAL BE FORE YOUR HONOUR. I, SINCERELY, REQUEST YOUR HONOUR TO CONDONE THE DE LAY. IT IS PERTINENT TO NOTE THAT THE FINANCIAL YEAR IS CLOSED ON 31/3/2018, WHEREAS THE APPEAL HAS BEEN FILED ON 25/05/2018. TH EREFORE, EVEN ON 30/04/2018, THE APPEAL COULD HAVE BEEN FILED WITHIN LIMITATION. THUS, IT IS CLEAR THAT THE ASSESSEE HAS NOT GIVEN ANY SPECIF IC REASONS AS TO WHY THE APPEAL WAS NOT FILED WITHIN THE PERIOD OF LIMITAT ION. THIS IS NOT THE FILING OF RETURN OF INCOME OR COMPUTATION OF INCOME SO AS TO REQUIRE THE OFFICIALS OF THE BANK FOR PREPARATION OF THE RETURN OF INCOME BUT THIS IS SECOND APPEAL ARISING FROM THE ORDER OF THE LD. CIT( A), THEREFORE, THE ONLY STEP TO BE TAKEN BY THE AUTHORIZED SIGNATORY O F THE BANK WAS TO SIGN THE APPEAL PAPERS TO BE PREPARED BY THE AUTHOR IZED REPRESENTATIVE/LEGAL ADVISOR. IT APPEARS THAT THE B ANK HAS TAKEN A VERY CASUAL APPROACH IN EXPLAINING THE DELAY. HOWEVER, SI NCE THE ISSUE RAISED BY THE BANK IN THIS APPEAL ARE COVERED IN FAVOUR OF THE ASSESSEE, THEREFORE, TAKING A LENIENT VIEW, WE CONDONE THE DELA Y OF 26 DAYS IN FILING THE APPEAL SUBJECT TO COST OF RS. 5,000/- (F IVE THOUSANDS). ITA 723/JP/2018_ BARAN KENDRIYA SAHAKARI BANK VS ACIT 3 4. IN THIS APPEAL, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEAL) WAS NOT JUSTIFIED IN HOLDING THE ADDITION OF RS.31,53,596/- UNDER THE HEAD INCOME FROM BUSINESS & PROFESSION MA DE BY THE A.O. WITH REFERENCE TO DISALLOWANCE THE CLAIM OF PR OVISION OF LEAVE SALARY ENCASHMENT EXPENSE PAID TO LIC. THE ACTION O F LD. CIT (APPEAL) IS ILLEGAL AND DESERVED TO BE SET ASIDE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT (APPEAL) WAS NOT JUSTIFIED IN HOLDING THE ADDITION OF RS 47,21,936/- UNDER THE HEAD INCOME FROM BUSINESS & PROFESSION MA DE BY THE A.O. WITH REFERENCE TO SECTION 36(V) READ WITH SECT ION 40A(7)(A) OF I.T. ACT REGARDING THE DISALLOWANCE THE EXPENSES PR OVISION OF GRATUITY. THE ACTION OF LD. CIT (APPEAL) IS ILLEGAL AND DESERVED TO BE SET ASIDE. 3. THE ASSESSEE CRAVES TO ADD, AMEND OR ALTER ANY O F THE GROUND OF APPEAL DURING THE COURSE OF APPELLATE PROCEEDINGS/H EARING. 5. GROUND NO. 1 OF THE APPEAL IS REGARDING THE DISA LLOWANCE OF LEAVE ENCASHMENT EXPANSES PAID TO LIFE INSURANCE CORPORAT ION OF INDIA (LIC). THE ASSESSEE HAS TAKEN LEAVE ENCASHMENT POLICY FROM THE LIC AND PAID THE ANNUAL PREMIUM TO THE LIC OF RS. 31,53,596/-. TH E ASSESSING OFFICER HAS DISALLOWED THE CLAIM OF EXPENDITURE ON ACCOUNT O F PROVISION OF LEAVE ENCASHMENT EXPENSES ON THE GROUND THAT IT IS ONLY A PROVISION NOT A CRYSTALLIZED LIABILITY. THE LD. CIT(A) HAS CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THE PAY MENT TO THE LIC IS NEITHER AN ANNUAL PREMIUM NOR A CERTAIN LIABILITY. 6. BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMITT ED THAT WHEN THE ASSESSEE HAS TAKEN THE POLICY AND MADE THE PAYMENT TOWARDS THE LEAVE ITA 723/JP/2018_ BARAN KENDRIYA SAHAKARI BANK VS ACIT 4 ENCASHMENT FUND OF LIC THEN TO THE EXTENT OF PAYMEN T MADE BY THE ASSESSEE, IT IS BASED ON ACTUAL CRYSTALLIZATION OF LIABILITY BASED ON THE BENEFIT ACCRUED TO THE EMPLOYEES BASED ON THE LENGT H OF THEIR SERVICE, THEREFORE, THE PAYMENT TO LIC IS ONLY A LIABILITY WH ICH IS ALLOWABLE. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE D ECISION OF THIS TRIBUNAL DATED 14/08/2014 IN THE CROSS APPEALS IN TH E CASE OF JHALAWAR KENDRIYA SAHAKARI BANK LTD. VS ACIT IN ITA NOS. 1032 /JP/2011 AND 1051/JP/2011. THUS, THE LD AR HAS SUBMITTED THAT THE RE ARE SERIES OF DECISIONS ON THIS POINT WHEREBY THE CLAIM OF LEAVE E NCASHMENT EXPENDITURE ON ACCOUNT OF PAYMENT TO LIC IS HELD AS AN ALLOWABLE CLAIM. 7. ON THE OTHER HAND, THE LD DR HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT IT IS ONLY A PR OVISION AND NOT THE CRYSTALLIZATION OF LIABILITY, THEREFORE, IT IS NOT ALLOWABLE. 8. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL A S RELEVANT MATERIAL ON RECORD AT THE OUTSET WE NOTE THAT THE CO ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF JHALAWAR KENDRIYA SAHAKA RI BANK LTD. VS ACIT (SUPRA) HAS CONSIDERED AN IDENTICAL ISSUE IN PA RA 15 AND 19 AS UNDER: 15. APROPOS DEPARTMENTAL APPEAL, THE LEARNED COUNS EL CONTENDS THAT THE ASSESSEE HAD TAKEN A POLICY FROM LIC NAMED AS 'JHAL AWAR KENDRIYA ITA 723/JP/2018_ BARAN KENDRIYA SAHAKARI BANK VS ACIT 5 SAHAKARI BANK EMPLOYEE GROUP LEAVE ENCASHMENT SCHEM E'. THE POLICY WAS TAKEN TO PAY ITS EMPLOYEES. AS PER ESTIMATES OF LIC THE TOTAL LIABILITY OF THE APPELLANT BANK TOWARDS LEAVE ENCASHMENT ALREADY ACCRUED STOOD AT R S. 83,57,029/- AS ON 31.03.2008. HOWEVER, APPELLANT PAID RS. 40,00 ,000/- BY THE END OF FY 2007-08 AND JHALAWAR KENDRIYA SAHAKARI BANK L TD. VS. ACIT. ACCORDINGLY DEBITED ONLY RS. 40,00,000/- TO ITS PR OFIT & LOSS ACCOUNT AGAINST SAID PAYMENT. IT IS PERTINENT TO NOTE THAT AFTER CONTRIBUTION OF PREMIUM, THE APPELLANT HAS NO CONTROL OVER THE SAME. FURTHER, TH E EMPLOYEE'S OF THE APPELLANT ARE ENTITLED TO TAKE THE MONEY ON ACCOUNT OF LEAVE ENCASHMENT DIRECTLY FROM LIC UNDER SAID POLICY ON A CCOUNT OF THEIR LEAVE ENCASHMENT. THUS, IT ENSURED THE TIMELY PAYME NT OF THE DUES OF THE EMPLOYEES, IRRESPECTIVE OF THE FINANCIAL HEALTH OF THE BANK AT THE TIME OF PAYMENT. THIS BENEFITED THE EMPLOYEES BY AS SURING THEIR LEAVE ENCASHMENT PAYMENTS. THE EXPENSES CLAIMED FOR LEAVE ENCASHMENT IS TOWARDS ACTUAL PAYMENT MADE AND NOT AGAINST THE PRO VISION. LEAVE ENCASHMENT IS PAYABLE ON THE PERIOD OF SERVI CES ALREADY RENDERED, FOR WHICH EMPLOYEES ARE ENTITLED FOR LEAV E ENCASHMENT, HOWEVER, IT IS PAYABLE PERIODICALLY OR AT THE TIME OF RETIREMENT. THUS, A CERTAIN LIABILITY CRYSTALLIZED ON ACCOUNT OF SERVIC E ALREADY RENDERED BY THE EMPLOYEES. IT IS A PRESENT LIABILITY, WHICH IS GOING TO BE PAID IN FUTURE. THE LIC HAS WORKED OUT THE ACCRUED AMOUNT O F THE LIABILITY AS ON 31.3.2008 ON THE BASIS OF SERVICE ALREADY RENDER ED BY THE DIFFERENT EMPLOYEES TOWARDS LEAVE ENCASHMENT LIABILITY. IT IS CLEAR THAT TO THE EXTENT OF PAYMENT MADE TO THE LIC, THE EXISTING LIA BILITY TOWARDS LEAVE ITA 723/JP/2018_ BARAN KENDRIYA SAHAKARI BANK VS ACIT 6 ENCASHMENT OF THE APPELLANT CEASED TO EXISTS AND EM PLOYEES BECAME ENTITLED TO RECEIVE THE SAME FROM THE LIC. JHALAWAR KENDRIYA SAHAKARI BANK LTD. VS. ACIT. THE PAYMENT MADE TO LIC TOWARDS LEAVE ENCASHMENT P OLICY IS AKIN TO PAYMENTS MADE TO EPF/ESI, WHEREIN, THE EMPLOYER DEP OSITS A PARTICULAR SUM WITH THE RESPECTIVE DEPARTMENT IN EV ERY YEAR AND THE EMPLOYEES GET BENEFIT OF THE SAME IN THE YEAR OF TH EIR RETIREMENT OR UPON THEIR DEATH. FURTHER RELIANCE IS PLACED ON THE ORDER OF ITAT DE LHI BENCH 'H' IN THE CASE OF ACIT VS. NAINITAL BANK LIMITED VIDE ITA NO. 3606/DEL/2011, WHICH IN TURN RELIES ON HON'BLE MADRAS HIGH COURT J UDGMENT IN THE CASE OF CIT VS. TEXTOOL CO. LTD. (SUPRA) HELD THAT SUCH PAYMENTS TO THE LIC FOR LEAVE ENCASHMENT BENEFITS IS AN ALLOWABLE E XPENDITURE. SIMILAR VIEW HAS BEEN TAKEN BY THE HON'BLE KERELA HIGH COUR T IN THE CASE OF CIT VS. HINDUSTAN LATEX LTD. (2012) 209 TAXMAN 42. .. 19. APROPOS THE DEPARTMENTAL APPEAL, THE ASSESSEE T OOK A POLICY FROM LIC NAMED AS JAWAHAR KENDRIYA SAHAKARI BANK EMPLOYEE GR OUP LEAVE ENCASHMENT SCHEME. THE FACTS ARE MENTIONED IN DETAI L ABOVE. THE PAYMENT OF LEAVE ENCASHMENT IS A CONTRACTUAL LIABIL ITY, A CHARGE ON ASSESSEE'S PROFIT. TO ENSURE TIMELY PAYMENT OF LEAV E ENCASHMENT TO EMPLOYEES' SCHEME IS DEVISED BY THE LIC, WHICH WORK S OUT THE LEAVE ENCASHMENT LIABILITY AND FIXATION OF PREMIUM. THE L IABILITY IS ASCERTAINED AND CRYSTALISED ON A SCIENTIFIC METHOD BY JHALAWAR KENDRIYA SAHAKARI BANK LTD. VS. ACIT. THE LIC. THUS, THE ASSESSEE'S PAYMENT OF RS. 40 LA CS TOWARDS THE SAME IS WITHIN THE FRAME WORK OF THE SCHEME. IN OUR CONS IDERED VIEW, THE ITA 723/JP/2018_ BARAN KENDRIYA SAHAKARI BANK VS ACIT 7 SAME IS AN ALLOWABLE DEDUCTION. THIS VIEW FURTHER S UPPORTED BY THE HON'BLE SUPREME COURT IN THE CASE OF TEXTOOL CO. LT D. (SUPRA) AND ITAT JUDGMENT IN THE CASE OF NAINITAL BANK LTD. (SUPRA). RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE ASSESSEE IS EL IGIBLE FOR THIS DEDUCTION. THUS, IT IS CLEAR THAT THE TRIBUNAL WHILE DECIDING TH E ISSUE HAS FOLLOWED THE DECISION OF HON'BLE SUPREME COURT IN THE CASE O F CIT VS. TEXTOOL CO. LTD. 263 ITR 257 AND THE PAYMENT MADE TO LIC WAS HELD TO BE ALLOWABLE DEDUCTION. IN ABSENCE OF ANY CONTRARY PREC EDENT WE FOLLOW THE DECISION OF THE COORDINATE BENCH AND ACCORDINGLY TH E CLAIM OF EXPENDITURE ON ACCOUNT OF PAYMENT TO LIC FOR LEAVE ENCASHMENT SCHEME POLICY IS ALLOWED. 9. GROUND NO. 2 OF THE APPEAL IS REGARDING THE DISA LLOWANCE OF CLAIM OF PROVISION FOR GRATUITY. 10. WE HAVE HEARD THE LD AR AS WELL AS THE LD DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER A S WELL AS THE LD. CIT(A) DENIED THE CLAIM ON THE GROUND THAT THE PAYME NTS MADE TO THE LIC ON ACCOUNT OF EMPLOYEES GRATUITY FUND IS NOT A N APPROVED GRATUITY SCHEME AS PER THE PROVISIONS OF SECTION 36(1)(V) OF THE ACT. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THIS ISSUE WAS AL SO CONSIDERED BY THIS TRIBUNAL IN THE CASE OF JHALAWAR KENDRIYA SAHAKARI BA NK LTD. VS ACIT ITA 723/JP/2018_ BARAN KENDRIYA SAHAKARI BANK VS ACIT 8 (SUPRA) AS WELL AS IN THE SUBSEQUENT DECISION DATED 07/09/2018 IN THE CASE OF JHALAWAR KENDRIYA SAHAKARI BANK LTD. VS ACIT IN ITA NO. 349/JP/2018. WE NOTE THAT THE COORDINATE BENCH OF T HIS TRIBUNAL IN THE CASE JHALAWAR KENDRIYA SAHAKARI BANK LTD. VS ACIT (SU PRA) VIDE ORDER DATED 14/08/2014 HAS CONSIDERED THIS ISSUE IN PARA 17 AS UNDER: APROPOS GROUND NO. 2 IN RESPECT OF GROUP GRATUITY SCHEME POLICY FROM TIME TO TIME THEREOF WAS PAID TO LIC. THE DISALLOWA NCE HAS BEEN MADE BY LOWER AUTHORITIES HOLDING THAT THE NECESSARY REGIST RATION OF SCHEME WAS NOT OBTAINED BY THE ASSESSEE, IN OUR CONSIDERED VIE W, THE CONTROVERSY STANDS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE B Y THE HON'BLE SUPREME COURT JUDGMENT IN THE CASE OF CIT VS TEXTOO L CO. LTD. 263 ITR 257 (SC) WHEREIN JHALAWAR KENDRIYA SAHAKARI BANK LT D. VS ACIT THE SIMILAR PAYMENT BY THE ASSESSEE DIRECTLY TO LIC FOR GROUP GRATUITY FUND WAS HELD TO BE ALLOWABLE DEDUCTION U/S 36(1)(V) OF THE ACT. THIS DECISION HAS BEEN FOLLOWED BY THE DELHI BENCH OF ITAT IN THE CASE OF HEIHIN PENALFA LTD. VS ACIT VIDE ITA NO. 4309/DEL/2011 (SU PRA) TO WHICH ONE US (LEARNED J.M.) IS A PARTY. IN VIEW THEREOF, WE ARE INCLINED TO HOLD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION OF PAYMENT OF GRA TUITY TO THE LIC. ACCORDINGLY, GROUND NO. 2 OF THE ASSESSEE IS ALLOWE D. THUS, IT IS CLEAR THAT ONCE THE PAYMENT WAS MADE TO THE LIC AGAINST THE GROUP GRATUITY FUND POLICY TAKEN FROM THE LIC THEN THERE IS NO REQUIREMENT OF A SEPARATE APPROVAL OF THE FUND FOR ALLOWING THE CLAIM U/S 36(1)(V) OF THE ACT. ACCORDINGLY, FOLLOWING THE EARLIER DECISION OF THIS ITA 723/JP/2018_ BARAN KENDRIYA SAHAKARI BANK VS ACIT 9 TRIBUNAL, WE ALLOW THE CLAIM OF THE ASSESSEE AND THE D ISALLOWANCE MADE BY THE AUTHORITIES BELOW ON THIS ACCOUNT IS DELETED. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH DECEMBER, 2018. SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 19 TH DECEMBER, 2018 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- BARAN KENDRIYA SAHAKARI BANK LTD., BARAN. 2. IZR;FKHZ @ THE RESPONDENT- THE A.C.I.T., CIRCLE-2, KOTA. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 723/JP/2018) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR