M/s. Karur Vysya Bank Ltd., Karur V. ACIT, Trichy

MA 206/CHNY/2013

• Counselvise Citation: [2014] 124 COUNSELVISE.COM (IT) 1351 (ITAT-CHENNAI)
• Duration Of Justice: 17 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 10-01-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 1999-2000
• Appeal Filed On: 23-12-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: N QUADIR HOSEYN
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI [BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMB ER AND SHRI S. S. GODARA, JUDICIAL MEMBER] M.P.NO.206/MDS/2013 [IN I.T.A.NO.902/MDS/2010] ASSESSMENT YEAR : 1999-2000 M/S THE KARUR VYSYA BANK LTD ERODE ROAD KARUR 639 002 VS THE ASSTT. COMMISSIONER OF INCOME-TAX COMPANY CIRCLE I TRICHY [PAN AAACT 3373 J ] (APPELLANT) (RESPONDENT) PETITIONER BY : SHRI N. QUADIR HOSEYN, ADVOCATE RESPONDENT BY : SHRI S. DASGUPTA, JCIT DATE OF HEARING : 10-01-2014 DATE OF PRONOUNCEMENT : 10-01-2014 O R D E R PER S.S.GODARA, JUDICIAL MEMBER THE INSTANT PETITION U/S 254(2) OF THE INCOME-TA X ACT, 1961 (IN SHORT THE ACT), HAS BEEN FILED BY THE ASSESS EE SEEKING MODIFICATION/RECTIFICATION OF THE ORDER DATED 17.1. 2013 PASSED BY THE TRIBUNAL. 2. IN THE COURSE OF HEARING, THE ASSESSEE DRAWS OUR A TTENTION TO THE FINDINGS IN THE ORDER DATED 17.1.2013 TO CON TEND THAT QUA M.P.NO.206/13 :- 2 -: GROUND NO.VI ADJUDICATED IN THE IMPUGNED ASSESSMENT YEAR, THE DISALLOWANCE REGARDING ALLOWABILITY OF PROVISION FO R REVISION CONSEQUENT TO WAGE SETTLEMENT OF THE EMPLOYEES HAS BEEN WRONGL Y UPHELD. IT HAS BEEN FURTHER PLEADED THAT THE RELEVANT CASE LAWS, I NTER ALIA, BHARATH EARTH MOVERS LTD VS CIT [2000] 245 ITR 428(SC) HAVE ALSO NOT BEEN CONSIDERED IN THE RIGHT PERSPECTIVE. 3. PER CONTRA, THE REVENUE ARGUES THAT THE TRIBUNAL HAS ALREADY CONSIDERED THE AFORESAID JUDGMENTS IN DECID ING THE ISSUE AGAINST THE ASSESSEE. THUS, NO INTERFERENCE IS CA LLED FOR. 4. WE HAVE CONSIDERED ARGUMENTS OF THE PARTIES. FIR ST OF ALL, WE DEEM IT APPROPRIATE TO REPRODUCE BELOW THE RELEV ANT FINDINGS IN THE ORDER DATED 17.1.2013 SOUGHT TO BE MODIFIED: GROUND NO. VI 29. IN THE ASSESSMENT PROCEEDINGS, THE ASSESSING O FFICER HAD NOTICED SCHEDULE 16 OF PROFIT AND LOSS ACCOUNT, WHE REIN THE ASSESSEE HAD RAISED CLAIM OF ` 3,5155,372/- AS ARREARS OF WAGES ON ACCOUNT OF PAY REVISION OF ITS EMPLOYEES. AFTER EXAMINING ASSESSEES EXPLANATION, THE ASSESSING OFFICER ARRIV ED AT FOLLOWING CONCLUSIONS:- 1) THE VI BIPARTITE SETTLEMENT BETWEEN BANK EMPLOYE ES ASSOCIATION/ FEDERATION AND ENDED ON 31.10.97, NEGO TIATIONS WERE STARTED DURING THE FINANCIAL YEAR 1998-99 TO F IX NEW SCALES OF PAY AND ALLOWANCES FOR VII BIPARTITE SETTLEMENT. 2) MEMORANDUM OF UNDERSTANDING WAS SIGNED BETWEEN T HE EMPLOYEES ORGANIZATION AND INDIAN BANK ASSOCIATION ON 11.03.99. M.P.NO.206/13 :- 3 -: 3) NEW SCALE OF PAY EFFECTED FROM 01.11.97 ONWARDS . 4) FINALLY SETTLEMENTS WERE REACHED ON 14.12.99 FOR OFFICERS AND ON 27.3.2000 FOR WORKMEN TO GIVE EFFECT TO REVI SED SCALES OF PAY ETC. FOR THE PERIOD FROM 01.04.98 AND 01.11.97 RESPECTIVELY. ACCORDINGLY, THE ASSESSING OFFICER HELD THAT THE LI ABILITY WAS CONTINGENT ONE INSTEAD OF BEING CALLED AN ASCERTAIN ED LIABILITY. THEREFORE, IN THE ASSESSMENT ORDER, HE DISALLOWED A SSESSEES CLAIM. IN APPEAL, THE CIT(A) HAS ALSO UPHELD ASSESS ING OFFICERS FINDING BY OBSERVING AS FOLLOWS: 11.3 FROM THE FACTS OF THE CASE IT IS SEEN THAT TH E APPELLANT HAS CLAIMED THIS WAGE REVISION AS A PROVISION ONLY. ACC ORDINGLY, THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE SAME. THE ORDER OF THE ASSESSING OFFICER NEEDS NO INTERFERENCE HENCE CONFI RMED. HOWEVER, TO MEET THE END OF THE JUSTICE THE APPELLANT IS ENTITL ED FOR THIS CLAIM ON THE BASIS OF ACTUAL PAYMENT. THEREFORE, THE ASSESSEE HAS RAISED THE INSTANT GROU ND. 30. ON BEHALF OF THE ASSESSEE IT HAS BEEN VEHEMENTL Y ARGUED THAT THE ASSESSING OFFICER AS WELL AS THE CIT(A) IN THE INSTANT CASE HAVE WRONGLY REJECTED THE ASSESSEES CLAIM OF MAKING PROVISION FOR PAY REVISION OF ITS EMPLOYEES DESPITE THE FACT THAT THE LIABILITY IN QUESTION STOOD DULY ASCERTAINED. I N SUPPORT OF THE SUBMISSIONS, CASE LAW REPORTED AS [2000] 245 ITR 42 8 (SC) OF BHARAT EARTH MOVERS VS. CIT HAS ALSO BEEN REFERRED. 31. IN RESPONSE, THE SUBMISSIONS OF THE REVENUE AR E THAT THE CIT(A) HAS RIGHTLY REJECTED ASSESSEES CONTENTION R EGARDING LIABILITY IN QUESTION. IN ADDITION TO THIS, THE DR HAS ALSO PLACED RELIANCE OF COORDINATE BENCH DECISION OF ITAT, CHEN NAI IN I.T.A. NO. 1866/MDS/2006 DECIDED ON 02.06.2008 TITLED AS A CIT VS. INDIAN OVERSEAS BANK AND PRAYED FOR UPHOLDING CIT(A )S FINDINGS. 32. WE HAVE HEARD RIVAL CONTENTIONS ADVANCED BY BO TH PARTIES AND ALSO PERUSED THE RELEVANT FINDINGS OF THE ASSES SING OFFICER AS WELL AS CIT(A). WE HAVE ALSO GONE THROUGH CASE L AW CITED. THE ASSESSEE IS A BANKING COMPANY AND THE IMPUGNED ASSESSMENT YEAR IS 1999-2000. THE RELEVANT ACCOUNTI NG PERIOD IS 01.04.1998 TO 31.03.1999. AS IT TRANSPIRES FROM THE M.P.NO.206/13 :- 4 -: ASSESSMENT ORDER, SOME NEGOTIATIONS HAD TAKEN PLACE BETWEEN THE BANKS ASSOCIATION AND EMPLOYEES ORGANIZATIONS R EGARDING HIKE IN WAGES. ON 14.12.1999 AND 27.03.2000, THE WA GES OF OFFICERS AND WORKMEN RESPECTIVELY WERE REVISED IN P URSUANCE TO VII BIPARTITE SETTLEMENT. IT IS THEREFORE, CLEAR TH AT THE DECISION TO ENHANCE THE WAGES WAS ONLY ARRIVED IN THE MONTH OF DECEMBER, 1999 AND MARCH, 2000 I.E. NOT IN THE ACCOUNTING PER IOD OF THE IMPUGNED ASSESSMENT YEAR. THE CASE OF THE ASSESSEE IS THAT SINCE THE MOU BETWEEN THE WORKERS AND BANKS WAS SET TLED ON 11.03.1999 [IN THE ACCOUNTING PERIOD], THE LIABILIT Y STOOD ASCERTAINED. WE ARE UNABLE TO ACCEPT THIS ARGUMENT ADVANCED BY THE ASSESSEE. WE NOTICE FROM THE CASE LAW CITED BY THE REVENUE IN THE CASE OF INDIAN OVERSEAS BANK (SUPRA) , THIS VERY ISSUE HAD ARISEN I.E. THE LIABILITY IN FURTHERANCE TO MOU DATED 11.03.1999 AND VII BIPARTITE SETTLEMENT. IN THE SA ID CASE, THE COORDINATE BENCH AFTER EXAMINING THE ISSUE IN DETAI L HAD DECIDED THAT CONSEQUENT LIABILITY WAS NOT AN ASCERT AINED LIABILITY. THE RELEVANT OBSERVATIONS OF THE COORDINATE BENCH A RE REPRODUCED HEREIN BELOW: 12. THE NEXT ISSUE RELATES TO THE QUESTION WHETHE R THE COMMISSIONER (APPEALS) WAS CORRECT IN COMPUTING THE BOOK PROFIT UNDER SECTION 115JA OF THE ACT BY DISALLOWING THE PROVISION FOR WAGE RE VISION, PROVISION FOR SEVERANCE PAY AND ESTIMATED EXPENDITURE UNDER SECTI ON 14A OF THE ACT. 13. IN REGARD TO WAGE REVISION WE HAVE HEARD THE R IVAL SUBMISSIONS. THE ASSESSEE MADE A CLAIM OF RS.25 CRORES TOWARDS T HE AD HOC PROVISION MAD FOR WAGE REVISION. THE ASSESSING OFFI CER DISALLOWED THE SAME TREATING IT AS CONTINGENT LIABILITY. 14. THE LEARNED COUNSEL FOR THE ASSESSEE PLACED BE FORE US A MEMORANDUM OF UNDERSTANDING DATED 11-3-1999. IT IS STATED IN THE SAID MEMORANDUM THAT THE UNITED FORUM OF BANK UNIONS AGR EED TO WITHDRAW THE STRIKE CALL AND OTHER FORMS OF AGITATI ONS WITH IMMEDIATE EFFECT. AT THE EARLIEST POSSIBLE OPPORTUNITY FORMAL NEGOTIATIONS WITH THE WORKMEN UNIONS AND OFFICERS' ASSOCIATIONS SHALL BE UNDERTAKEN ON A MUTUALLY AGREED DATE. THE SEVENTH BIPARTITE SETTLEMENT TOOK PLACE AT A LATER DATE. THE LEARNED COUNSEL FOR THE ASSESSEE AR GUED THAT THE PROVISION WAS MADE CONSEQUENT UPON THE BIPARTITE SE TTLEMENT ENTERED INTO DURING THE RELEVANT ACCOUNTING PERIOD. WHEN A PROVISION HAD BEEN MADE ON THE ESTIMATED BASIS IN THE ACCOUNTS, THE SA ME SHOULD BE ALLOWED AS DEDUCTION FROM PROFITS OF THE YEAR. IN R EGARD TO THE LIABILITY TO PAY THE ARREARS AS WELL AS THE ADDITIONAL WAGES ARISEN TO THE ASSESSEE DURING THIS YEAR ON THE BASIS OF THE MEMORANDUM THE EXACT M.P.NO.206/13 :- 5 -: QUANTIFICATION WAS NOT AVAILABLE AND AS SUCH AN ADH OC PROVISION WAS MADE. THE OVERALL LOAD WAS LIMITED TO 12.25% OF THE WAGE BILL. 15. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMIT TED THAT THE PROVISION WAS MADE ONLY ON ESTIMATED BASIS IN AN AD HOC MANNER. QUANTIFICATION WAS DONE IN THE NEXT ACCOUNTING PERI OD. THE ASSESSEE WAS NOT IN A POSITION TO ASCERTAIN THE LIABILITY DU RING THE RELEVANT ACCOUNTING PERIOD. AS SUCH THE PROVISION CANNOT BE CONSTRUED TO BE AN ASCERTAINED LIABILITY WITHIN THE MEANING OF SECTION 115JA OF THE ACT. IT WAS FURTHER STATED THAT CONTRACTUAL LIABILITY CRYST ALLISES ONLY WHEN THE SETTLEMENT IS MADE. FOR THIS PROPOSITION RELIANCE W AS PLACED ON THE DECISIONS OF THE HON'BLE JURISDICTIONAL HIGH COURT RENDERED IN THE CASE OF TAMIL NADU SMALL INDUSTRIES DEVELOPMENT CORPORAT ION LTD. VS CIT, 242 ITR 122 AND IN THE CASE OF CIT VS. SESHASAYEE I NDUSTRIES LTD., 242 ITR 691. 16. IN THE CASE OF ALEMBIC CHEMICAL WORKS LTD. VS. DCIT, 266 ITR 47(GUJ.) IT WAS HELD THAT IN THE CASE OF THE ASSESS EE FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING A LIABILITY IS SAID TO BE PROPERLY INCURRED WHEN THE DISPUTE BETWEEN THE PARTIES IS AM ICABLY SETTLED OR FINALLY ADJUDICATED, WHERE THE LIABILITY IN QUESTIO N IS NOT A STATUTORY LIABILITY. 17. IN THE PRESENT CASE WE FIND THAT THE LIABILITY IN QUESTION CANNOT BE CONSTRUED TO BE A STATUTORY LIABILITY. IT CAN ON LY BE TERMED AS A CONTRACTUAL LIABILITY, AS IT EMANATES OUT OF A CONT RACT. THE MEMORANDUM OF UNDERSTANDING IS ONLY A PRELUDE TO THE CONTRACT. ACTUALLY THE CONTRACT WAS ENTERED INTO IN THE SUBSEQUENT YEAR ON THE BASI S OF THE MEMORANDUM OF UNDERSTANDING. THEREFORE, IN OUR OPIN ION THE LIABILITY DID NOT CRYSTALLISE IN THE YEAR UNDER CONSIDERATION . IT CAN BE ALLOWED ONLY CONSEQUENT UPON ITS CRYSTALLISATION WITHIN THE FRAMEWORK OF LAW. SUBJECT TO THIS REMARK WE UPHOLD THE IMPUGNED ORDER ON THIS COUNT. ALTHOUGH THE ASSESSEE HAS ALSO CITED CASE LAW OF BH ARAT EARTH MOVERS (SUPRA), BUT IN OUR OPINION, SINCE THE ISSUE BEFORE THE HONBLE APEX COURT WAS AS TO WHETHER THE AMOUNT ALR EADY SET APART TO MEET LIABILITY ON ACCOUNT OF LEAVE ENCASHM ENT OF THE EMPLOYEES COULD HELD TO BE ASCERTAINED LIABILITY. I N THE SAID CASE, THE GUIDELINES REGARDING LEAVES IN QUESTION ALREADY EXISTED IN THE RELEVANT ACCOUNTING PERIOD. THEREFORE, THEIR LORDSH IPS HAD ALLOWED THE CLAIM OF THE ASSESSEE WHICH IS NOT THE FACTUAL POSITION IN THE INSTANT CASE. CONSEQUENTLY; AND MOR E SO, IN VIEW OF THE FACT THAT THE ISSUE PERTAINING TO SAME VERY BIPARTITE SETTLEMENT AND PAY REVISION IN RESPECT OF SIMILAR U NDERTAKING ALIKE THE ASSESSEE HAS BEEN DECIDED IN FAVOUR OF TH E REVENUE, M.P.NO.206/13 :- 6 -: WE SUBSCRIBE TO THE SAME OBSERVATIONS OF THE COORDI NATE BENCH AND HOLD THAT THE LIABILITY ON ACCOUNT OF PAY REVIS ION AS CLAIMED BY THE ASSESSEE IS NOT ASCERTAINED ONE. HENCE, WE A FFIRM THE FINDING OF THE CIT(A). ACCORDINGLY, THE GROUND IS DECIDED AGAINST THE ASSE SSEE. 5. COMING TO ASSESSEES ARGUMENTS, WE FIND THAT THE TRIBUNAL HAS NOT ONLY CONSIDERED THE AFORESAID CASE LAW BUT ALSO FOLLOWED THE CO-ORDINATE BENCH DECISION DATED 2.6.2008 IN CASE OF THE INDIAN OVERSEAS BANK REGARDING THE LIABILITY ARISING FROM THE VERY BIPARTITE SETTLEMENT. IN THESE CIRCUMSTANCES, WE HOLD THAT T HE PLEA OF THE ASSESSEE TO MODIFY/RECTIFY THE ORDER DATED 17.1.201 3 AMOUNTS TO REVIEWING THE FINDING ALREADY GIVEN WHICH IS NOT PE RMISSIBLE UNDER THE PROVISIONS OF THE ACT. 6. THE ASSESSEES MISCELLANEOUS PETITION STANDS DISMI SSED. ORDER PRONOUNCED ON FRIDAY, THE 10 TH OF JANUARY, 2014, AT CHENNAI. SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (S. S. GODARA) JUDICIAL MEMBER DATED: 10 TH JANUARY, 2014 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR