STATE BANK OF INDIA V. THE JOINT COMMISSIONER

ITA/756/2017

AI Insights

The case involves the State Bank of India (formerly State Bank of Mysore) appealing against the order of the Income Tax Appellate Tribunal which upheld the disallowance of provisions made for transitional liabilities related to Home Travel Concession (HTC), Leave Fare Concession (LFC), Silver Jubilee Awards, and Resettlement Expenses for the Assessment Year 2008-09. The primary contention was whether these provisions were contingent liabilities and thus not deductible under section 37(1) of the Income Tax Act, 1961. The Tribunal had affirmed the decision of the Commissioner of Income Tax (Appeals), leading to the appeal in the High Court. The High Court found procedural inadequacies in the Tribunal's handling of the assessee's submissions and remitted the case for a fresh evaluation.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 726759 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 26-05-2021
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K V ARAVIND
• Assessee Lawyers: T SURYANARAYANA
• Keywords: Actuarial Calculation; Actuarial certificate; Contingent Liability; Leave Fare Concession; Transitional liability; Home Travel Concession; Silver Jubilee Awards; Re-settlement expenses
• Section: 37(1); 260-A

Judgement Text

"1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 26TH DAY OF MAY 2021 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR.JUSTICE HEMANT CHANDANGOUDAR I.T.A. NO.756 OF 2017 BETWEEN: STATE BANK OF INDIA (FORMERLY STATE BANK OF MYSORE) LOCAL HEAD OFFICE COMPLIANCE DEPARTMENT 4TH FLOOR, 65, ST. MARKS ROAD BENGALURU-560001 REP. HEREIN BY ITS DEPUTY GENERAL MANAGER & CFO LOCAL HEAD OFFICE, BENGALURU MR. RAMESH CHANDRA GOKULAPALAN PAN No.AACCSO155P. ... APPELLANT (BY SRI. T. SURYANARAYANA, ADV.,) AND: 1. THE JOINT COMMISSIONER OF INCOME TAX LARGE TAX PAYERS UNIT JSS TOWERS, 100 FEET ROAD BANASHANKARI III STAGE BENGALURU-560085. 2. THE COMMISSIONER OF INCOME-TAX, LARGE TAXPAYERS UNIT 2 LARGE TAX PAYERS UNIT JSS TOWERS, 100 FEET ROAD BANASHANKARI III STAGE BENGALURU-560085. ... RESPONDENTS (BY SRI. K.V. ARAVIND, ADV.,) - - - THIS I.T.A. IS FILED UNDER SECTION 260-A OF I.T.ACT, 1961 ARISING OUT OF ORDER DATED 28.04.2017 PASSED IN ITA NO.388/BANG/2013, FOR THE ASSESSMENT YEAR 2008-09, PRAYING TO: I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. II. ALLOW THE APPEAL AND SET ASIDE THE IMPUGNED ORDER PRONOUNCED ON 28.4.2017 BY THE TRIBUNAL IN ITA NO.388/BANG/2013 (ANNEXURE-C) FOR ASSESSMENT YEAR 2008-09, TO THE EXTENT QUESTIONED HEREIN. III. PASS SUCH OTHER ORDERS OR FURTHER ORDERS AS THIS HON'BLE COURT DEEMS FIT TO PASS ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN THE INTEREST OF JUSTICE AND EQUITY. THIS I.T.A. COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: JUDGMENT Mr.T.Suryanarayana, learned counsel for the assessee. Mr.K.V.Aravind, learned counsel for the revenue. This appeal under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’, for short) has been filed by the assessee against the order dated 3 28.04.2017 passed by the Income Tax Appellate Tribunal. The subject matter of the appeal pertains to Assessment Year 2008-09. The appeal was admitted by a Bench of this Court vide order dated 06.12.2017 on the following substantial questions of law: \"a) Whether on the facts, in the circumstance and on the grounds and contentions urged, the Tribunal was right in merely upholding the findings of CIT(A) without independently examining the facts and material on record which demonstrates the scientific method adopted for ascertaining the transitional liability of Home Travel Concession (HTC) and Leave Fare Concession (LFC), Silver Jubilee Awards and Re- settlement expenses? b) Whether on the facts and circumstances of the case the Hon'ble Tribunal was correct in upholding the finding that the provision created for transitional liability for Home Travel Concession (HTC) and Leave Fare Concession (LFC), Silver Jubilee awards and Re-settlement expenses are contingent in nature and not ascertained, without appreciating the material on record and thus rendered a perverse finding? c) Whether on the facts, in the circumstances and on the grounds and 4 contentions urged the Tribunal was justified in upholding the order of the lower authorities disregarding the actuarial certificate prepared by the actuarial valuer and actuarial calculation computed based on reliable factors? d) Whether on facts and circumstances of the case the Hon'ble Tribunal was right in disallowing the deduction claimed in respect of transitional liability although such expenditure is incurred wholly and exclusively for the purpose of the business of the Appellant and hence should be an admissible expenditure under section 37(1) of the Act? 2. Facts leading to filing of this appeal briefly stated are that the appellant filed its return of income for the Assessment Year 2008-09 and declared the income of Rs.4,46,01,43,740/-. The said return was selected for scrutiny and an order of assessment was passed by the Assessing Officer on 07.12.2010 by which taxable income was determined at Rs.5,31,30,96,281/-. The Assessing Officer disallowed the provision created by the assessee on 5 the ground that the same is contingent in nature. The provision was disallowed in respect of the following: a. Transitional liability on leave fare concession / home travel concession. b. Transitional liability on silver jubilee awards to employees and c. Transitional liability on resettlement expenses 3. The assessee thereupon filed an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals), by an order dated 27.12.2012, affirmed the order passed by the Assessing Officer. The assessee thereupon filed an appeal before the Income Tax Appellate Tribunal. The Tribunal, by an order dated 28.04.2017, has upheld the order of the Commissioner of Income Tax (Appeals). In the aforesaid factual background, this appeal has been filed. 4. Learned counsel for the assessee submitted that the assessee had filed written submissions before the Tribunal. A true copy of which has also been filed before this Court. It is further submitted that the assessee has also relied on several 6 case laws. However, the Tribunal, without independently accepting the submissions made on behalf of the assessee, has, in a cryptic and cavalier manner, affirmed the order passed by the Commissioner of Income Tax (Appeals). It is further submitted that in the facts and circumstances of the case, the matter deserves to be remitted to the Tribunal for decision afresh. 5. On the other hand, learned counsel for the revenue has submitted that the Commissioner of Income Tax (Appeals) has dealt with the submissions raised on behalf of the assessee elaborately and the Tribunal has affirmed the order passed by the Commissioner of Income Tax (Appeals). It is also urged by the learned counsel for the revenue that no interference is warranted with the order of the Tribunal in the facts and circumstances of the case. 6. We have considered the submissions made on both sides and have perused the record. The Tribunal is the final fact finding authority. It is trite law that the Tribunal, while deciding the appeal, has to advert to the submissions made 7 by the parties and record the findings independently on the submissions made before it. In the instant case, the Tribunal, in paragraphs 21 and 22, has held as under: \"21. In this appeal, the dispute is regarding disallowance of transitional liability on Leave Fare concession (LFC), Home Travel Concession (HTC) are Rs.3,01,77,794/-. Transitional liability towards silver jubilee awards are Rs.1,44,45,000/- and transitional liability of various resettlement expenses Rs.1,80,00,000/-. On these aspects, categorical finding has been given by the 1d CIT(A) on page No.14 of his order that the uncertainty which is introduced in these process will naturally reflect on the provision created by bank and rendered it uncertain. He has also given a finding that it may be noted that information pertaining to possible places of travel, number of employees/family members likely to avail the benefit are not an input in the actuarial valuation process. Regarding various judgments cited before him, he has given categorically finding that these judgments are in respect of mattes of gratuity or leave encashment or terminal benefit of the employees where the statistical tool of actuarial valuation based on predictable date of employees age, date of joining and scale of pay can provide 8 grist for prediction with reasonable certainty and thereby making the nature of liability as non contingent but same does not prevail in the present case of the assessee where multiple variable factors impinge upon the individual decisions leading to collective uncertainty at the level of the bank for the purpose of provisioning. 22. In view of these facts, it is seen that making the provision for transitional liability without uncertainty is not possible in respect of these expenses and, therefore, these transitional liabilities are rightly held as contingent liability. Hence, we find no reason to interfere with the order of the CIT(A) on these issues.\" 7. Thus, from perusal of the aforesaid provisions, it is apparent that the Tribunal has not adverted to the submissions made on behalf of the assessee which is evident from the written submissions, a copy of which has been produced before us. The Tribunal has affirmed the findings of the Commissioner of Income Tax (Appeals) in a cryptic and cavalier manner. Therefore, in the fact situation of the case, it is not necessary for us to answer substantial question 9 of law Nos.2 to 4. The substantial question of law No.1 is answered in favour of the assessee. The order passed by the Tribunal is quashed and the matter is remitted to the Tribunal to afford an opportunity of hearing to the parties and to consider the submissions made on behalf of the parties. It is made clear that this Court has not expressed any opinion on merits. In the result, the appeal is disposed of. Sd/- JUDGE Sd/- JUDGE RV "