STATE BANK OF MYSORE, V. ADDL.C.I.T.,

ITA 388/BANG/2013

AI Insights

The case involves the State Bank of India (formerly State Bank of Mysore) appealing against the disallowances made by the Assessing Officer and confirmed by the CIT(Appeals) regarding provisions made for Leave Fare Concession (LFC), Silver Jubilee Awards, and Resettlement Expenses for the assessment year 2008-09. The Tribunal, after considering the submissions and the actuarial valuations provided, reversed the decisions of the lower authorities, allowing the deductions claimed by the bank. The Tribunal's decision was influenced by precedents set in similar cases involving the State Bank of India and the provisions of Accounting Standard AS 15.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 717223 (ITAT-BANGALORE)
• Duration Of Justice: 12 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 22-03-2013
• Other Referred Cases: State Bank of India in ITA No.3644/Mum/2016 & 4563/Mum/2016, State Bank of India vs. State Bank of Mysore
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: NINAD A. PATADE
• Keywords: Valuation report
• Section: 143(3); 12; 2; 260A

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH : BANGALORE BEFORE SHRI PRASHANT MAHARISHI, VICE PRESIDENT AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER ITA No.388/Bang/2013 Assessment year: 2008-09 State Bank of India, (Erstwhile State Bank of Mysore) Financial Reporting & Taxation Department, 3rd Floor, Corporate Centre, Madam Cama Road, Nariman Point, Mumbai – 400 021. (PAN: AACCS 0155P) Vs. The Additional Commissioner of Income Tax, Large Taxpayers Unit, Bangalore. APPELLANT RESPONDENT Appellant by : Shri Ninad A. Patade, CA Respondent by : Shri Shivanand Kalakeri, CIT (DR)(ITAT), Bengaluru. Date of hearing : 12.06.2025 Date of Pronouncement : 11.08.2025 O R D E R Per Prashant Maharishi, Vice President 1. This appeal filed by State Bank of India (Erstwhile State Bank of Mysore) [assessee/appellant] for the assessment year 2008-09 , which was originally decided by the coordinate Bench of ITAT by order dated 28.4.2017 , challenged before the Hon’ble High Court of Karnataka Printed from counselvise.com ITA No.388/Bang/2013 Page 2 of 12 u/s. 260A of the Act and the Hon’ble High Court is pleased to pass an order in ITA No.756 of 2017 dated 26.5.2021. 2. Vide para 6.2 of the order the Hon’ble High Court extracted the order of the of the Tribunal at para 21 & 22 and vide para 7 of the order the Hon’ble High Court has held that the Tribunal has not adverted to the submission made on behalf of the assessee and affirmed the findings of the ld. CIT(A) in a cryptic and cavalier manner. Accordingly the substantial questions of law Nos. 2 to 4 were not answered, but Q.No. 1 was answered in favour of assessee. 3. Accordingly the Hon’ble High Court quashed the order of the Tribunal and the matter was remitted back to the Tribunal to afford an opportunity of hearing to the parties and to consider the submissions. 4. Accordingly, this appeal is heard on 12.6.2025 on the grounds of appeal as under:- “1. Transitional liability on Leave Fare Concession (\"LFC\") / Home Travel Concession (\"HTC\") — Rs. 3,01,77,794/- a) The learned Commissioner of Income Tax (Appeals) [\"CIT(A)\"] erred in confirming the disallowance made by the Assessing Officer (\"AO\") towards provision for LFC and HTC, being the long term employee benefits, with the contention that the same are in the nature of unascertained and contingent liabilities. b) The learned CIT(A) ought to have appreciated that the liability towards LFC and HTC is not contingent in nature as it was computed in accordance with the revised accounting standard 15 (Accounting for Retirement Benefits in the Financial Statements) issued by the Institute of Chartered Accountants of India, compliance with which is mandatory for the Bank. Printed from counselvise.com ITA No.388/Bang/2013 Page 3 of 12 c) The learned CIT(A) erred in disregarding the methodology adopted in the actuarial valuation report to determine the quantum of the liability towards LFC and HTC, and thereby concluding that the said liability is contingent in nature. d) The learned CIT(A) ought to have appreciated that the liability in respect of LFC and HTC is in the nature of present liability which has to be performed in future and thus is not in the nature of contingent liability. e) The learned CIT(A) ought to have appreciated that since the said provision is made only for the benefit of the employees of the Bank, the same is eligible for deduction while computing the business profits of the Bank. 2. Transitional liability towards silver jubilee awards — Rs. 1,44,45,000/- a) The learned CIT(A) erred in confirming the disallowance made by the AO towards provision for silver jubilee awards, being the long term employee benefits, with the contention that the same is in the nature of unascertained and contingent liability. b) The learned CIT(A) ought to have appreciated that the liability towards silver jubilee awards is not contingent in nature as it was computed in accordance with the revised accounting standard 15 (Accounting for Retirement Benefits in the Financial Statements) issued by the Institute of Chartered Accountants of India, compliance with which is mandatory for the Bank. c) The learned CIT(A) erred in disregarding the methodology adopted in the actuarial valuation report to determine the quantum of the liability towards silver jubilee awards, and thereby concluding that the said liability is contingent in nature. d) The learned CIT(A) ought to have appreciated that the liability in respect of silver jubilee awards is in the nature of present liability which has to be performed in future and thus is not in the nature of contingent liability. e) The learned CIT(A) ought to have appreciated that since the said provision is made only for the benefit of the employees of the Printed from counselvise.com ITA No.388/Bang/2013 Page 4 of 12 Bank, the same is eligible for deduction while computing the business profits of the Bank. 3. Transitional liability of resettlement expenses — Rs. 1,80,00,000/- a) The learned CIT(A) erred in confirming the disallowance made by the AO towards provision for resettlement expenses, being the long term employee benefits, with the contention that the same is in the nature of unascertained and contingent liability. b) The learned CIT(A) ought to have appreciated that the liability towards resettlement expenses is not contingent in nature as it was computed in accordance with the revised accounting standard 15 (Accounting for Retirement Benefits in the Financial Statements) issued by the Institute of Chartered Accountants of India, compliance with which is mandatory for the Bank. c) The learned CIT(A) erred in disregarding the methodology adopted in the actuarial valuation report to determine the quantum of the liability towards resettlement expenses, and thereby concluding that the said liability is contingent in nature. d) The learned CIT(A) ought to have appreciated that the liability in respect of resettlement expenses is in the nature of present liability which has to be performed in future and thus is not in the nature of contingent liability. e) The learned CIT(A) ought to have appreciated that since the said provision is made only for the benefit of the employees of the Bank, the same is eligible for deduction while computing the business profits of the Bank.” 5. Originally it was State Bank of Mysore [SBM] which got merged with State Bank of India [SBM] and thus the appeal is pertaining to State bank of Mysore , but now the appellant is State bank of India. 6. Briefly stated the facts of the case show that SBM is a subsidiary of SBI and governed by State Bank of India (Subsidiary Banks) Act, Printed from counselvise.com ITA No.388/Bang/2013 Page 5 of 12 1959. It filed return of income for AY 2008-09 on 28.9.2008 at a total income of Rs.446,01,43,740. This return was picked up for scrutiny and assessment order u/s. 143(3) of the Act was passed on 07.12.2010. Thereafter the assessee challenged the same before the CIT(Appeals), LTU, Bangalore, who passed his appellate order on 27.12.2012 allowing the appeal of the assessee partly. Therefore, the assessee is in appeal on the issues decided against the assessee. 7. We have carefully considered the rival contentions and perused the orders of the ld. lower authorities and also of the Hon’ble High Court and proceed to decide these issues on the basis of submissions made by the assessee before us as well as on earlier occasions and considering the arguments of the ld. DR. 8. The first issue is with respect to the disallowance of Leave Fare Concession [LFC] amounting to Rs.301,77,794. The issue is dealt with at para 8 of the assessment order. The facts show that assessee has debited Rs.8.75 crores towards transitional liability of LFC. The AO asked the assessee to furnish actual expenditure incurred out of above provisions , which was stated to be Rs.5,73,22,206. Therefore, the AO was of the view that out of the total provision of Rs.8.75 crores only a sum of Rs.5,73,22,206 has crystallised and the balance sum of Rs.3,01,77,794 is a contingent liability not ascertained liability and therefore cannot be allowed as a deduction. 9. The ld. CIT(A) considered this issue at para 7.A of his appellate order. In para 7.7 he held that LFC is reimbursed to the employees towards Printed from counselvise.com ITA No.388/Bang/2013 Page 6 of 12 fare incurred by them on travel along with their dependent family. This can be availed only in a block of 4 years. The provision of such liability would require sufficiently prior knowledge by the Bank of how many employees from different pay grades will avail these benefits in a particular year and the destinations to which they will travel. According to him, the provision is having multiple variations, permutations & combinations. He therefore held that the above provision is contingent in nature and confirmed the disallowance. 10. The ld. AR submitted a detailed note on this issue and stated that the assessee should be allowed the above deduction. The assessee also relied on the decision in the case of State Bank of India in ITA No.3644/Mum/2016 & 4563/Mum/2016 being cross appeals for the same assessment year decided on 3.2.2020. The assessee submitted that this issue is squarely covered in favour of assessee by para 25 to 29 of that decision. He submitted that on identical facts and circumstances, the provision on account of Leave Travel, Home Travel, sick leave and casual leave was disallowed which was challenged as per ground No.2.1 and restricted by the ld. CIT(A), was deleted by the coordinate Bench. He further referred to para 32 holding that on account of transitional provisions of Accounting Standard AS 15, the above deduction is allowable. It was further held that it is an ascertained liability based on actuarial valuation on scientific basis and not contingent in nature and therefore allowable. 11. The ld. DR supported the order of ld. lower authorities. Printed from counselvise.com ITA No.388/Bang/2013 Page 7 of 12 12. We have considered the rival contentions and find that the issue involved in this appeal is squarely covered by the decision of the coordinate bench in the case of State Bank of India (supra) wherein on identical facts and circumstances of the case the coordinate Bench has deleted the disallowance of Leave Travel and Home Travel provision holding it to be not contingent, but ascertained liability and also in accordance with AS-15. As in the absence of any difference between the facts and circumstances of the case of these 2 cases, respectfully following the decision of the coordinate Bench, we direct the ld. AO to delete the disallowance of Rs.3,01,77,794 on account of Leave Travel / Home Travel Concession to the employees holding it to be not contingent, but ascertained liability. Accordingly ground No.1 of the appeal is allowed. 13. The 2nd ground of appeal is with respect to allowability towards Silver Jubilee Awards of Rs.1,44,45,000. The brief facts show that assessee has claimed deduction of Rs.1.53 crores towards transitional liability of Silver Jubilee Awards. This provision was made for giving Silver Jubilee Awards to the employees in appreciation of their performance based on certain parameters. This is given to employees upon the successful completion of 25 years of service in the Bank and also subjected to the applicable rules and conditions of the Bank. This provision was made in terms of AS 15 accounting for retirement benefits in the financial statement on the actuarial valuation certificate. The claim of award was also shown to the AO. The ld. AO held that the actual expenditure incurred is Rs.8,55,000 only and therefore the Printed from counselvise.com ITA No.388/Bang/2013 Page 8 of 12 balance sum of Rs.1,44,45,000 is in the nature of contingent liability unascertained and therefore cannot be allowed. 14. The ld. CIT(A) confirmed the action of the AO holding that the liability is contingent and further the data considered for actuarial valuation are fluctuating and could not have been determined with reasonable certainty. He further held that the attrition rate should have been factored in for the purpose of the provision. 15. The ld. AR submitted that this is a definite liability determined on the basis of actuarial valuation and further the provision is made on the basis of reasonable estimate considered all these factors in accordance with the provisions of AS-15 and therefore it should have been allowed. 16. The ld. DR vehemently supported the order of the ld. lower authorities and submitted that the above deduction claimed by the assessee is merely a provision which is contingent in nature. 17. The ld. AR submitted that identical issue is considered by the coordinate Bench in the case of State Bank of India wherein the Silver Jubilee Award of Rs.1.22 crores was disallowed on identical basis. The coordinate Bench has allowed this expenditure holding it to be definite and not contingent. 18. We have carefully considered the rival contentions and perused the orders of the ld. lower authorities. We find that identical issue arose in the case of State Bank of India wherein the employee benefit of Printed from counselvise.com ITA No.388/Bang/2013 Page 9 of 12 Rs.143.40 crores was in question and one of the item was provision of Silver Jubilee Award of Rs. 1.22 crores. These facts are considered by the coordinate Bench at para 25 onwards, where the CIT(A) himself has allowed the above claim which is not contested by the Revenue. In para 31 of the order, it was stated that the CIT(A) allowed items at sl.No.4 which is Silver Jubilee Award of Rs.1.22 crores. 19. Even otherwise, looking at the nature of expenditure which are supported by actuarial valuation certificate and further which is made in terms of provisions of AS 15, could not have been held to be a contingent liability. 20. Accordingly we direct the ld AO to allow the claim of the assessee of Rs.1,44,45,000 on account of Silver Jubilee Awards. Accordingly ground No.2 of the appeal is allowed. 21. Ground No.3 of the appeal is a transitional liability of resettlement expenses of Rs.1.80 crores. This liability has been claimed by the assessee towards provision of resettlement expenses which represent the cost of transportation incurred by the employees at the time of retirement for shifting from the present work location to other place where he intends to settle down. The maximum amount of reimbursement is also subject to salary and in accordance with the Rules framed by the Bank. The employee can also avail such kind of facility only once. The above provision was computed based on the actuarial valuation certificate giving break up of TA, logistic expenses, number of employees due to retire, their name and other particulars, Printed from counselvise.com ITA No.388/Bang/2013 Page 10 of 12 average of expenditure incurred and also attrition rate. The ld. AO held it to be contingent liability and did not allow the deduction. Further, the ld. CIT(A) also held that actuarial valuation certificate is generic and therefore it does not consider the fluctuating nature of components and therefore the provision cannot be determined with reasonable certainty and confirmed the disallowance. 22. On appeal before us, the assessee reiterated the same arguments which were made before the lower authorities. The ld. AR also submitted that identical issue arose in case of resettlement expenses in the decision of State Bank of India wherein the CIT(A) did not make any disallowance. 23. The ld. DR vehemently supported the orders of ld. lower authorities. 24. We have carefully considered the rival contentions and find that the resettlement liability is for the benefit of employees which has been provided for on the basis of actuarial valuation certificate which considered the travel expenses, logistic expenses, no. of employees, details of salary calculation, average of expenditure incurred in the past 7 years, attrition rate of 1% including 7 days of halting allowance and further the average distance of 600 kms. Was also part of the actuarial valuation. If the reasonable estimate is made in accordance with AS- 15, same could not have been stated to be unascertained or contingent liability. The ld. CIT(A) is not correct in rejecting the same and putting various other factors for valuation. There may always be some factors which somebody can dispute so far as the provision is Printed from counselvise.com ITA No.388/Bang/2013 Page 11 of 12 concerned. The provision is estimated over the liability which will arise in the hands of the assessee. Even otherwise, it was allowed in the case of State Bank of India, now the parent entity, but allowed in the hands of the assessee. It is not the claim of the Revenue that the actuarial valuation made by the assessee is substantially incorrect or based on incorrect presumption. It is merely stated that many factors have not been considered. In view of the above facts, we hold that the provision made by the assessee based on actuarial valuation is an ascertained and not contingent liability and therefore could not have been disallowed. 25. Accordingly the orders of the ld. lower authorities are reversed and the ld. AO is directed to delete the disallowance. Accordingly ground No.3 of the appeal is allowed. 26. In the result, the appeal of the assessee is allowed. Pronounced in the open court on this 11th day of August, 2025. Sd/- Sd/- ( SOUNDARARAJAN K. ) ( PRASHANT MAHARISHI ) JUDICIAL MEMBER VICE PRESIDENT Bangalore, Dated, the 11th August, 2025. /Desai S Murthy / Printed from counselvise.com ITA No.388/Bang/2013 Page 12 of 12 Copy to: 1. Appellant 2. Respondent 3. Pr. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore. Printed from counselvise.com "