ACIT, JODHPUR V. The Sirohi Central Co-operative Bank Ltd., SIROHI

ITA 80/JODH/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5216 (ITAT-JODHPUR)
• Duration Of Justice: 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 18-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S K BISSA C A S HRI S L MOURYA
• Keywords: Diversion of income; Commercial expediency
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI N.S. SAINI , HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NO. 80 / JODH /201 5 (ASST. YEAR : 20 1 0 - 11 ) AC IT, CENTRAL CIRCLE - 2 , JODHPUR . VS. THE SIROHI CENTRAL CO OPERATIVE BANK LTD., NH - 14, BY PA SS ROAD, SIROHI . PAN NO. AAALT 0792 J (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.K. BISSA C A. DEPARTMENT BY : S HRI S. L. MOURYA - DR DATE OF HEARING : 1 4 / 0 3 /201 6 . DATE OF PRONOUNCEMENT : 1 4 / 03 /201 6 . O R D E R PER N.S. SAINI , ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 1 , JODHPUR , DATED 12 /0 1 /201 5 . 2. THE GROUND NO.1 OF THE APPEAL READS AS UNDER: - THE CIT(A) HAS ERRED IN DIRECTING TO ALLOW THE PROVISION FOR PACS MANAGER SALARY SINCE THE SAME IS MERE A PROVISION AND NOT ACTUAL EXPENDITURE AND NO PROVISION IS ALLOWABLE AS PER THE ACT. 3 . BRIEF FACTS OF TH E CASE ARE THAT THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE DEBITED A SUM OF RS. 1,76,000/ - AS PROVISION FOR PACS MANAGER SALARY FUND . THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE COULD NOT ESTABLISH THE PURPOSE OF THIS EXPENDITURE IN RELATION TO 2 ITA NO. 80 / JODH /201 5 BUSINESS OF THE ASSESSEE , THEREFORE, HE DISALLOWED THE SAME AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 4 . ON APPEAL , COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE DISALLOWANCE BY OBSERVING AS UNDER: - 4.3 I HAVE CONSIDERED THE ORDER OF THE ASSESSING OFFICER AND SUBMISSION OF THE APPELLANT AS ALSO THE DECISIONS OF HON'BLE ITAT IN THE APPELLANTS CASE FOR AY 2008 - 09 AND 2009 - 10 AND I FIND THAT THE ISSUE WHETHER THE CLAIM OF AMOUNT DEBITED TOWARDS PACS MANAGER SALARY IS AN ALLOWABLE EXPENDITURE OR NOT, HAS BEEN DECIDED IN FAVOUR OF THE APPELLANT BY HON'BLE ITAT BY REFERRING TO DECISION D ATED 22 - 7 - 2011 OF HON'BLE ITAT, JAIPUR BENCH, JAIPUR IN THE CASE OF RAJASTHAN STATE CO - OPERATIVE BANK LTD, JAIPUR IN ITA NO. 1277/JAIPUR/2010. THE RELEVANT OBSERVATIONS MADE IN ITA NO. 32/JODH/2012 FOR AY 2008 - 09 ARE REPRODUCED HEREINUNDER: - 2.6 AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTIES AND THE MATERIALS AVAILABLE ON RECORD, IT IS NOTICED THAT SIMILAR IS SUE HAS BEEN DECIDED BY THE COORDINATE BENCH IN THE AFORESAID REFERRED TO CASE OF ACIT VS RAJASTHAN STATE COOPERATIVE BANK LTD., JAIPUR. IN THE SAID CASE ON SIMILAR ISSUE, THE ADDITION WAS DELETED BY THE ID. CIT(A) BY OBSERVING AS UNDER: - ALLOWABILITY OF CONTRIBUTION BY THE APEX BANK FOR PAC MANGERS SALARY IS A STATUTORY LIABILITY WHICH IS CRYSTALLIZED AT THE END OF EVERY YEAR. THE CONTRIBUTION HOWEVER, ONCE MADE BECOME AT THE DISPOSAL OF REGISTRAR OF COOPERATIVE SOCIETY WHICH IS PAYABLE AS AND WHEN DEMAND ED BY THE REGISTRAR COOPERATIVE SOCIETY ALONGWITH INTEREST ON IT. THUS, IT IS NOT CONTINGENT LIABILITY BUT A STATUTORY LIABILITY WHICH IS CRYSTALLIZED AT THE END OF EVERY YEAR AND HENCE THE LIABILITY IS ALLOWABLE.' 2.7 AGAINST THE SAID ORDER, THE DEPARTMEN T PREFERRED AN APPEAL IN ITA NO. NO.1277/JAIPUR/2010 WHEREIN VIDE ORDER DATED 22 - 07 - 2011, THE ORDER OF THE ID. CIT(A) WAS UPHELD BY OBSERVING IN PARA 3.6 OF THE SAID ORDER AS UNDER: - 3.6 WE HAVE HEARD BOTH THE PARTIES. THE HON'BLE APEX COURT IN THE CASE O F SRI VENKATA SATYANARAYANA RICE MILL CONTRACTORS CO. VS CIT, 223 ITR 101 HAS STATED THAT IT IS TO BE SEEN AS TO WHETHER THE PAYMENT IS COMPULSORY FOR THE ASSESSEE TO MAKE OR NOT BUT WHETHER IT WAS EXPENDED OUT OF CONSIDERATION OF COMMERCIAL EXPEDIENCY. AN Y CONTRIBUTION MADE BY THE ASSESSEE TO A FUND WHICH DIRECTLY CONNECTED OR RELATED TO CARRYING ON ASSESEE'S BUSINESS OR WHICH RESULTS IN BENEFIT TO THE ASSESEE'S BUSINESS HAS TO BE REGARDED AS DEDUCTION ALLOWABLE U/S 37 OF THE ACT. THE DECISION OF HON'BLE A PEX COURT IN THE CASE OF ASSOCIATED POWER CO. LTD. VS CIT 3 ITA NO. 80 / JODH /201 5 (SUPRA) IS NOT APPLICABLE. THE HON'BLE APEX COURT HELD THAT APPLICATION OF THE DOCTRINE OF DIVERSION OF INCOME BY REASON OF OVERRIDING TITLE IS NOT APPLICABLE IN THAT CASE AS THE RESERVE IS OUT OF T HE REVENUES OF THE UNDERTAKING AND REACH THE ELECTRICITY COMPANY AND IS NOT DIVERTED AWAY FROM IT. HOWEVER, IN THE INSTANT CASE, THE AMOUNT IS TO BE CONTRIBUTED TO A FUND AND THE FUND IS NOT BEING MANAGED BY THE ASSESSEE. THE ASSESSEE MAY BE TRUSTEE OF THA T FUND BUT IT CANNOT APPLY THE FUND AS PER HIS OWN WILL. THE INTEREST, IF ANY, EARNED ON THIS FUND IS ALSO TO BE CREDITED TO THAT FUND. IT IS THEREFORE, CLEAR THAT FUNDS STAND DIVERTED AT THE SOURCE AND THEREFORE, THIS CANNOT BE CONSIDERED AS AN APPROPRIAT ION OF INCOME BUT IT IS AN EXPENDITURE. THUS THE ID. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION. 2.8 SINCE THE FACTS OF THE PRESENT CASE ARE SI MILAR TO THE FACTS INVOLVED IN A FO RESAID REFERRED TO CASE, SO RESPECTFULLY FOLLOWING THE ORDER DATED 22 - 07 - 2011 OF THE ITAT JAIPUR BENCH IN ITA 1277JP/2010 FOR THE ASSESSMENT YEAR 2007 - 08 IN THE CASE OF ACIT VS RAJASTHAN STATE COOPERATIVE BANK LTD., JAIPUR, THE ADDITION MADE BY THE AO AND SUSTAINED BY THE ID. CIT(A) IS DELETED. 4.4 FROM THE ABOVE FINDINGS, IT IS CLEAR THAT AMOUNT DEBITED TOWARDS PACS MANAGER SALARY FUND IS AN ALLOWABLE EXPENDITURE. SINCE FACTS OF THE PRESENT CASE ARE SIMILAR AND IDENTICAL TO THAT OF CASE OF RAJASTHAN STATE COOPERATIVE BANK LTD. AND ASSESSEES OWN CASE IN AY 2008 - 09 AND 2009 - 10 , THEREFORE RESPECTFULLY FOLLOWING THE ABOVE DECISIONS OF HON'BLE ITAT, IT IS HELD THAT AMOUNT DEBITED TOWARDS PACS MANAGER SALARY FUND IS AN ALLOWABLE EXPENDITURE AND THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DENYING THE SAME. THE ADDITION OF RS. 1,76,000/ - MADE ON THIS ACCOUNT IS DELETED. T H E GROUND OF APPEAL IS ALLOWED. 5. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE ASSESSING OFFICER, WHEREAS AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUPPORTED THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). 6 . WE FIND THAT THE DISA L LOWANCE WAS DELETED BY THE COMMISSIONER OF INCOME TAX (APPEALS) BY FOLLOWING THE ORDER OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF ASSESSEE ITSELF DATED 16/01/2013 PASSED IN ITA NO. 32/JODH/2012 IN THE ASSESSMENT YEAR 2008 - 09 . DEPARTMENTAL REPRESENTATIVE COULD NOT POINT OUT ANY GOOD REASON TO NOT TO FOLLOW THE ABOVE QUOTED ORDER OF THE TRIBUNAL, HENCE, WE FIND NO GOOD REASON TO INTERFERE WITH THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 4 ITA NO. 80 / JODH /201 5 WHICH IS CONFIRMED AND THE GRO UND OF APPEAL OF THE REVENUE IS DISMISSED. 7. THE GROUND N O .2 OF THE APPEAL OF THE REVENUE READS AS UNDER: - THE CIT (A) HAS ERRED IN DIRECTING TO ALLOW LEAVE ENCASHMENT POLICY PREMIUM AS THE PREMIUM PAID TO LIC WAS FOR CREATING OF FUND AND LIC WILL NOT PAY IT DIRECTLY TO EMPLOYEES OF THE ASSESSEE BANK BUT TO THE ASSESSEE ITSELF. 8. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER AFTER RECEIVING THE DIRECTION FROM THE JCIT , RANGE - 2, JODHPUR GIVEN NOTICE UNDER SEC. 144A OF THE ACT VIDE LETTER NO. 966 DATED 23/03/2013 , MADE DISALLOWANCE OF RS. 37,12,037/ - ON ACCOUNT OF LEAVE E NCASHMENT POLICY PREMIUM EVEN THOUGH , THE SAME WAS DECIDED IN FAVOUR OF THE ASSESSEE IN THE ASSESSMENT YEAR 2008 - 09 BY THE TRIBUNAL VIDE ITS ORDER DATED 16/01/2013 PASSED IN ITA NO. 32/JODH/20123 . I N O R D E R TO KEEP THE ISSUE ALIVE , THE REVENUE HAD PREFERRED THE APPEAL BEFORE THE HON'BLE HIGH COURT. 9. ON APPEAL , COMMISSIONER OF INCOME TAX (APPEALS) FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESS MENT YEAR 2008 - 09 AND 2009 - 10 , VACATED THE DISALLOWANCE. 10. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE ASSESSING OFFICER , WHEREAS AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUPPORTED THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). 11. WE FIND THAT THE DEPARTMENTAL REPRESENTATIVE COULD NOT BRING ANY MATERIAL ON RECORD TO SHOW THAT WHY THE ORDER OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE ITSELF PASSED IN THE ASSESSMENT YEAR 2008 - 09 & 2009 - 10 IN ITA NOS. 32/JODH/2015 AND 351/JODH/2015 , ORDER DATED 16/01/2013 AND 19/02/2013 RESPECTIVELY , SHOULD NOT BE FOLLOWED IN THE 5 ITA NO. 80 / JODH /201 5 YEAR UNDER APPEAL. HE ALSO COULD NOT BRING ANY MATERIAL ON RECORD TO SHOW THAT THE ABOVE ORDERS OF THE TRIBUNAL WERE VARIED IN APPEAL BY ANY HIGHER FOR U M, HENCE, WE FIND NO GOOD REASON TO INTERFERE WITH THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) WHICH IS CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 12. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON MONDAY , THE 1 4 TH DAY OF MARCH , 201 6 AT JODHPUR . S D / - S D / - (GEORGE MATHAN) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER D ATED : 1 4 TH MARCH , 201 6 . VR/ - COPY TO: 1. THE ASSESS E E. 2. THE REVENUE. 3. THE CIT 4. THE CIT(A) 5. THE D.R . 6. GUARD FILE. BY ORDER