Haryana Financial Corporation, Chandigarh V. DCIT, Panchkula

ITA 785/CHANDI/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73546 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 11-03-2014
• Assessment Year: 2002-2003
• Appeal Filed On: 09-08-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AKSHILESH GUPTA
• Assessee Lawyers: B K NOHRIA
• Section: 143(3); 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NOS.785 & 945/CHD/2011 ASSESSMENT YEARS : 2002-03 & 2003-04 HARYANA FINANCIAL CORPORATION, VS. THE D.C.I.T., BAY NO.17-18-19, SECTOR 17-A, PANCHKULA CIRCLE, CHANDIGARH. SECTOR 2, PANCHKULA. PAN: AAACH4685B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B.K.NOHRIA RESPONDENT BY : SHRI AKSHILESH GUPTA, DR DATE OF HEARING : 11.03.2014 DATE OF PRONOUNCEMENT : 27.03.2014 O R D E R PER SUSHMA CHOWLA, J.M. : THESE TWO APPEALS FILED BY THE ASSESSEE ARE AGAINST THE SEPARATE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS), PANCHKULA, DATED 16.5.2011 AND 27.7.2011 RELATING TO ASSESSMENT YEAR S 2002-03 AND 2003- 04 RESPECTIVELY AGAINST THE ORDER PASSED UNDER SECT ION 143(3) OF INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. THE GROUND OF APPEAL RAISED BY THE ASSESSEE IN B OTH THE APPEALS READS AS UNDER: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LEARNED CIT(A)PANCHKULA HAS ERRED IN LAW AND FA CTS IN UPHOLDING THE ADDITION OF RS.56,33,188/- IN ITA NO.785/CHD/2011 AND RS.2289,137/- IN ITA 2 NO.945/CHD/2011 FOR ACTUAL PAYMENT OF PENSION TO TH E EMPLOYEES OUT OF CONTRIBUTION BY THE APPELLANT TO T HE PENSION FUND DURING THE YEAR BEING UNRECOGNIZED AS PER THE DIRECTIONS OF THE HON'BLE ITAT CHANDIGARH BENCH B TO ADJUDICATE THE ISSUE. 3. BOTH THE APPEALS RELATING TO THE SAME ASSESSEE O N SIMILAR ISSUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY T HIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 4. THE ISSUE RAISED IN BOTH THE APPEALS BEFORE US I S AGAINST UPHOLDING OF ADDITION ON ACCOUNT OF ACTUAL PAYMENT OF PENSION TO THE EMPLOYEES OUT OF CONTRIBUTION BY THE ASSESSEE TO THE PENSION FUND DURING THE YEAR UNDER CONSIDERATION. 5. THE FACTS IN BOTH THE CASES ARE IDENTICAL AND HO WEVER, REFERENCE IS MADE TO THE FACTS IN ITA NO.785/CHD/2011 TO ADJUDIC ATE THE ISSUE INVOLVED IN THE CASE. 6. THE BRIEF FACTS OF THE CASE ARE DURING THE COURS E OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE AS SESSEE HAD CLAIMED DEDUCTION ON ACCOUNT OF CONTRIBUTION TO UNRECOGNIZE D PENSION FUND. AS THE DEDUCTION WAS ALLOWABLE ONLY WHEN CONTRIBUTION IS MADE TO RECOGNIZED FUND, THE DEDUCTION CLAIMED BY THE ASSES SEE WAS DISALLOWED UNDER SECTION 36 OF THE ACT. THE CIT (APPEALS) CO NFIRMED THE ORDER OF THE ASSESSING OFFICER. HOWEVER, THE TRIBUNAL SET A SIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR EXAMINATION. IN THE SECOND ROUND OF PROCEEDINGS, THE ASSESSING OFFICER ASKED THE ASSESS EE TO FURNISH THE DETAILS REGARDING THE AMOUNT OF DEDUCTION CLAIMED O N ACCOUNT OF CONTRIBUTION TO PENSION FUND. THE ASSESSING OFFICE R NOTED THAT THE DIRECTIONS OF THE HON'BLE ITAT WERE IN THE CONTEXT OF THE SUBMISSIONS OF THE ASSESSEE THAT THE BOARD OF DIRECTOR OF THE ASSE SSEE HAD APPROVED A 3 SEPARATE PENSION FUND SCHEME FOR ITS EMPLOYEES IN 1 996 THEREBY TRANSFERRING THE AMOUNTS LYING IN THE P.F. ACCOUNTS OF THE VARIOUS EMPLOYEES WHO HAD OPTED FOR THE SCHEME TO THE PENSI ON FUND AND THAT LATER THE PENSION SCHEME HAD BEEN SCRAPPED AND THE SAID AMOUNTS WERE REVERTED BACK TO THE EXISTING P.F. SCHEME IN THE YE AR 2004. HOWEVER, IN THE ABOVE MENTIONED REPLIES, THE ASSESSEE HAS NOT M ADE ANY SUBMISSIONS NOR HAVE GIVEN ANY DETAILS ON THIS ASPECT OF THE IS SUE. INSTEAD, THE ASSESSEE HAS REQUESTED THAT THE DEDUCTION OF THE AM OUNT OF ACTUAL PAYMENT OF PENSION MADE DURING THE YEAR MAY BE ALLO WED IN VIEW OF THE PROVISIONS OF SECTION 37(1) AND NOT UNDER SECTION 3 6(1)(IV) . THE ASSESSING OFFICER THUS HELD THAT THE PLEA OF THE AS SESSEE THAT THE SAID EXPENSES ARE ALLOWABLE ON ACCOUNT OF PENSION BEING PAID TO THE EMPLOYEES IS NOT ADMISSIBLE AT THIS JUNCTURE. THE ALTERNATE PLEA OF THE ASSESSEE THAT THE SAID DEDUCTION IS ALSO ALLOWABLE UNDER SECTION 36(1)(XII) OF THE ACT WAS ALSO REJECTED AS THE ASSE SSEE WAS CARRYING ON ITS BUSINESS WITH PROFIT MOTIVE AND WAS NOT CARRYIN G ON THE BUSINESS FOR DEVELOPMENT WORKS AS IS THE REQUIREMENT UNDER SECTI ON 36(1)(XII) OF THE ACT. IN VIEW THEREOF, THE CLAIM OF THE ASSESSEE VI S--VIS DEDUCTION ON ACCOUNT OF CONTRIBUTION TO PENSION FUND WAS UPHELD BY THE ASSESSING OFFICER IN THE SECOND ROUND OF ASSESSMENT PROCEEDIN GS. 7. BEFORE THE CIT (APPEALS) THE CLAIM OF THE ASSESS EE WAS THAT THE DEDUCTION ON ACCOUNT OF PAYMENT OF PENSION TO THE E MPLOYEES DURING THE YEAR SHOULD BE ALLOWED IN THE HANDS OF THE ASSESSEE AS THE SAID EXPENDITURE HAS BEEN INCURRED DURING THE COURSE OF CARRYING ON THE BUSINESS. THE CIT (APPEALS), ON THE OTHER HAND, HE LD THAT THE CONTRIBUTION TO UN-RECOGNIZED PENSION FUND WAS NOT ALLOWABLE IN VIEW OF THE PROVISIONS OF SECTION 36(1)(IV) & (V) OF THE AC T. FURTHER THE SAID 4 DEDUCTION WAS ALSO NOT ALLOWABLE UNDER SECTION 37 O F THE ACT AS THE SAME WAS NOT ATTRACTED. 8. THE ASSESSEE IS IN APPEAL AGAINST THE ORDERS OF THE AUTHORITIES BELOW. THE LEARNED A.R. FOR THE ASSESSEE POINTED O UT THAT ADMITTEDLY THE PENSION FUND OF THE ASSESSEE WAS NOT RECOGNIZED AND IN THE LATER YEARS THE AMOUNT WAS TRANSFERRED TO THE P.F. HOWEVER, BE FORE THE CIT (APPEALS) THE PLEA FOR THE YEARS UNDER APPEAL WAS D IFFERENT THAT THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD PA ID CERTAIN AMOUNTS ON ACCOUNT OF PENSION TO ITS RETIRING EMPLOYEES AND TH E DETAILS IN RESPECT OF WHICH ARE AVAILABLE AT PAGES 41 AND 39 OF THE PAPER BOOK FOR THE RESPECTIVE YEARS AND THE SAID AMOUNT WAS CLAIMED AS ALLOWABLE DURING THE YEAR UNDER CONSIDERATION. THE LEARNED A.R. FOR THE ASSESSEE FURTHER POINTED OUT THAT DURING ASSESSMENT YEAR 2002-03, TH E CONTRIBUTION TO PENSION FUND WAS RS.1,21,97,699/- AND PAYMENT ON AC COUNT OF PENSION WAS RS.22,89,137/-/ IN ASSESSMENT YEAR 2003-04 THE CONTRIBUTION OF PENSION FUND WAS RS.32,07,989/- AND PAYMENT ON ACCO UNT OF PENSION WAS RS.56,33,188/-. IT WAS POINTED OUT BY THE LEARNED A.R. FOR THE ASSESSEE THAT IN ASSESSMENT YEAR 2003-04 THE DEDUCTION MAY B E RESTRICTED TO THE CONTRIBUTION I.E. RS.32,07,989/-. 9. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFICER AND POINTED OUT THAT THE ASSE SSING OFFICER HAD NOT ALLOWED CLAIM IN THE HANDS OF THE ASSESSEE IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE DELHI HIGH COURT IN SONY INDIA PVT. LTD. [285 ITR 213 (DEL)]. IT WAS FURTHER POINTED OUT BY THE LEARNED D.R. FOR THE REVENUE THAT THE CLAIM OF THE ASSESSEE WAS NOT ALLOWABLE UN DER SECTION 37 OF THE ACT. 5 10. IN REJOINDER, IT WAS POINTED OUT BY THE LEARNED A.R. FOR THE ASSESSEE THAT THE RATIO LAID DOWN IN SONY INDIA PVT . LTD. (SUPRA) WAS NOT APPLICABLE AS THE ISSUE IN THE SAID APPEAL RELATED TO THE GRATUITY FUND AND SUPERANNUATION FUND. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE IN THE FIRST ROUND OF APPEAL BEFORE THE TR IBUNAL WAS AGGRIEVED BY THE ORDER OF THE AUTHORITIES BELOW IN UPHOLDING THE ADDITION REGARDING THE AMOUNT CONTRIBUTED TO PENSION FUND MAINTAINED F OR THE EMPLOYEES. THE SAID CONTRIBUTION TO PENSION FUND WAS NOT ALLOW ED AS DEDUCTION IN THE HANDS OF THE ASSESSEE AS THE PENSION FUND WAS N OT RECOGNIZED. THE TRIBUNAL IN ITA NOS.56 & 369/CHD/2006 RELATING TO A SSESSMENT YEAR 2002-03 AND 2003-04 VIDE ORDER DATED 30.9.2008 VIDE PARAS 4 AND 5 OBSERVED THAT THE CONTRIBUTION MADE BY THE ASSESSEE TO ITS PF SCHEME WAS ALLOWABLE EXPENDITURE. HOWEVER, AS THE PENSION SCH EME HAD BEEN SCRAPPED AND THE AMOUNT HAD BEEN PAID OVER TO P.F. SCHEME,, THE IMPLICATION THEREOF WAS REQUIRED TO BE VIEWED AND A S THE SAID ASPECT HAS NOT BEEN CONSIDERED BY EITHER OF THE AUTHORITIES BE LOW, THE MATTER WAS REMITTED BACK TO THE ASSESSING OFFICER TO EXAMINE T HE CLAIM OF THE ASSESSEE AFRESH AND TO PASS AN ORDER IN ACCORDANCE WITH LAW. 12. THE CLAIM OF THE ASSESSEE BEFORE THE ASSESSING OFFICER IN THE SECOND ROUND OF PROCEEDINGS WAS THAT THE SAID AMOUN T WAS FIRST NOT CONTRIBUTED TO A RECOGNIZED PENSION SCHEME AND WAS ALSO NOT CONTRIBUTED TO THE P.F. SCHEME. HOWEVER, THE ASSESSEE DURING T HE YEAR UNDER CONSIDERATION HAD MADE ACTUAL PAYMENTS OF PENSION T O SOME OF THE EMPLOYEES WHO HAD RETIRED DURING THE PERIOD UNDER C ONSIDERATION AND THE SAID AMOUNTS BEING PAID TO THE EMPLOYEES SHOULD BE ALLOWED AS A 6 DEDUCTION IN THE HANDS OF THE ASSESSEE AND THE DETA ILS IN RESPECT THEREOF WERE AVAILABLE IN THE AUDIT REPORT. THE ASSESSING OFFICER AND THE CIT (APPEALS), HOWEVER, REJECTED THE CLAIM OF THE ASSES SEE ON THE PLEA THAT THE ASSESSEE HAD FAILED TO MAKE CONTRIBUTION TO REC OGNIZED PENSION FUND. WE FIND NO MERIT IN THE ORDERS OF THE AUTHORITIES B ELOW SPECIALLY IN CASE WHERE THE MATTER HAS BEEN REMITTED BACK TO THE ASSE SSING OFFICER TO CULL OUT THE FACTS OF THE CASE AND DECIDE THE ISSUE IN A CCORDANCE WITH LAW. IT IS AN ADMITTED POSITION THAT THE PENSION FUND OF TH E ASSESSEE WAS NOT RECOGNIZED AND SUCH FUND SCHEME WAS SCRAPPED AS NO RECOGNITION WAS GIVEN BY THE STATE GOVERNMENT. HOWEVER, THE ASSESS EE MADE AN ALTERNATE PLEA THAT THE AMOUNT WOULD BE CONTRIBUTED TO THE P. F. SCHEME AND IN THE ABSENCE OF THE SAID PENSION SCHEME, ANOTHER PLEA WA S RAISED BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW THAT THE AMOU NT EQUIVALENT TO THE PAYMENT BEING MADE ON ACCOUNT OF PENSION TO THE RES PECTIVE EMPLOYEES RETIRING DURING THE YEAR BE ALLOWED AS DEDUCTION. THE REQUISITE DETAILS OF THE PENSION FUND BALANCE SHEET WERE FILED ALONG WITH AUDITORS REPORT DATED 22.10.2003 WHICH ARE PLACED AT PAGES 4 0 TO 49 OF THE PAPER BOOK. THE PERUSAL OF THE SAID PENSION FUND BALANCE SHEET REFLECTS THAT FOR THE YEAR ENDING 31.3.2002 THE STATUS WAS AS UND ER: (RS.) 1. OPENING OF ACC0UNT-CA-1193 3,000,00 ADMN = HFC EMPLOYEES PENSION FUND 2. OPENING BALANCE 1,41,80,523.51 3. PENSION CONTERIBUTION 1,21,97 ,699.00 (AS PER ANANEXUEE-I) 4. ICIC1 BONDS OF RS=1 , 15 CEORES 1,15,00,000.00 5. INTEREST RECEIVED ON ICICI 15,39,795 .00 BONDS OF RS.1.15 CRORES. (AS PER ANNEXURE-111) 6. RECOVERY-COMMUTED PENSIONER 3,90,511 .00 (AS PER ANNEXURE--11 ) 7. INTEREST CHARGED ON PENSION 15,04,795,00 7 FUND FOR THE YEAR ENDED ON 31.3.2002. (AS PER ANNEXURE -IV) ------------------ TOTAL : 4,13,16,323.51 ( B ) 1. VARIOUS PAYMENTS MADE TO 22,89,137,00 PENSIONERS DURING THE YEAR ENDED ON 31.3.2002 AS PER ANNEXURES-V, VI & VII ATTACHED. 2. BANK BALANCE 3,000.00 3. BALANCE OUTSTANDING 2,75,24,186.51 4. ICICI BONDS OF RS. 1.15 CRORES 1,15,00,00 0.00 TOTAL 4,13,16,323.51 13. SIMILARLY IN ASSESSMENT YEAR 2003-04 THE PENSIO N FUND BALANCE SHEET WAS FILED ON RECORD AND THE STATUS AS ON 31.3 .2003 WAS AS UNDER: (RS.) A) I OPENING BALANCE- CA-02100011938 3,000.00 ADMN HFC EMPLOYEES PENSION FUND II OPENING BALANCE 2,75,24,1 86.51 III PENSION CONTRIBUTION 32,07,989. 00 (ANNEX-I) IV ICICI BONDS OF RS 1.15 CRORE 1,15,00,000.00 V RECOVERY - COMMUTED PENSION 5,07,841.00 (ANNEX-II) VI INTEREST RECEIVED ON ICICI BONDS 10,58,402.00 OF RS 1.15 CRORES (ANNEX-III) VII INTEREST CHARGED ON PENSION FUND 25,02,912.00 FOR THE YEAR ENDED ON 31.03.2003 (ANNEX-IV) ------------------ TOTAL 4,63,04,330.51 B ) I BANK BALANCE 278971.00 AS ON 31.03.2003 + 3000.00 ------------- 2,81,971.00 II VARIOUS PAYMENTS MADE TO PENS I ON ERS 6,33,188. 00 DURING THE YEAR ENDED ON 31.03.2003 8 ( ANNEX-V & VI) III ICICI BONDS OF RS 1.15 CRORE 1,15 ,00,000.00 IV BALANCE OUTSTANDING 29168142 .51 LESS : CH.NO 315360 (-)27897 1.00 DATED 28.3.2003 ---------------- 2,88,89 ,171.51 ISSUED ON 1.4.2003 REALISED ON 2.4.2003 ----------------- TOTAL 4,63,04,330.51 14. ON PERUSAL OF THE ABOVE SAID BALANCE SHEET FOR PENSION FUND REFLECTS THAT THE PENSION CONTRIBUTION FOR THE ASSE SSMENT YEAR 2002-03 WAS RS.1,21,97,699/- AND THE PAYMENTS MADE TO THE P ENSIONERS AS PER ANNEXURES-V,VI AND VII TOTALED TO RS.22,89,137/-. IN ASSESSMENT YEAR 2003-04, THE TOTAL CONTRIBUTION TO THE PENSION FUND WAS RS.32,07,989/- AND THE PAYMENTS MADE TO THE PENSIONERS AS PER ANNE XUREV AND VI TOTALED TO RS.56,33,188/-. WE FIND MERIT IN THE CL AIM OF THE ASSESSEE THAT THE EXPENDITURE INCURRED ON PAYMENTS BEING MAD E TO THE PENSIONERS IS ALLOWABLE IN THE HANDS OF THE ASSESSEE AS REVENU E EXPENDITURE. IN ASSESSMENT YEAR 2002-03 THE TOTAL CONTRIBUTION TO T HE PENSION FUND DURING THE YEAR WAS RS.1.22 CRORES OUT OF WHICH RS. 22,89,137/- WERE ACTUALLY DISBURSED TO THE PENSIONERS AND HENCE THE SAID EXPENDITURE OF RS.22,89,137/- IS ALLOWABLE AS AN EXPENDITURE IN TH E HANDS OF THE ASSESSEE FOR ASSESSMENT YEAR 2002-03. IN ASSESSME NT YEAR 2003-04 THE TOTAL CONTRIBUTION TO THE PENSION FUND WAS RS.32,07 ,989/-. HOWEVER, THE PAYMENTS MADE TO THE PENSIONERS TOTALED TO RS.56,33 ,188/-. WE RESTRICT THE ALLOWANCE OF THE EXPENDITURE IN THE HANDS OF TH E ASSESSEE TO THE EXTENT OF PENSION CONTRIBUTION I.E. RS.32,07,989/- IN ASSESSMENT YEAR 2003-04. IN THE TOTALITY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, WE FIND MERIT IN THE CLAIM OF THE ASSESSEE AND THE EXP ENDITURE OF RS.22,89,137/- IS ALLOWED IN ASSESSMENT YEAR 2002-0 3 AND EXPENDITURE OF RS.32,07,989/- S ALLOWED IN ASSESSMENT YEAR 2003-04 . THE GROUND OF 9 APPEAL RAISED BY THE ASSESSEE IN ITA NO.785/CHD/201 1 IS ALLOWED AND IN ITA NO.945/CHD/2011 IS PARTLY ALLOWED. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.785/CHD/2011 IS ALLOWED AND THE APPEAL IN ITA NO.945/CHD/2011 IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF MARCH, 2014. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 27 TH MARCH, 2014 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH