TMI Blog2012 (12) TMI 1045X X X X Extracts X X X X X X X X Extracts X X X X ..... ue are directed against the order of the learned CIT (A), Hubli dated 30.11.2011. The relevant assessment year is 2008-09. I. ITA No.117/B/12 AY 2008-09 By the assessee Bank: 2. The assessee-Bank has, in its grounds of appeal, raised 8 grounds. However, all the grounds relate to the solitary issue whether the authorities below were not justified in disallowing ₹ 79,88,196/- being provision for leave encashment. II. ITA No.232/B/12 AY 2008-09 By the Revenue: 3. The Revenue in its grounds of appeal, raised five grounds. Ground N0.5 being general in nature and no specific issue is involved, it doesn t require any adjudication. The remaining grounds relate to the following issues, namely: (1) (Ground Nos.1,3 4) that the CIT (A) had erred in treating the investment made by the assessee Bank in securities as stockin- trade; (2) (Ground No.2) that the CIT (A) also erred in allowing the premium paid for purchase of a capital asset to be amortized and allowed as revenue expenditure. 4. As the issues raised by both the parties pertaining to the same assessee as well as the same assessment year, for the sake of clarity and convenience, they were hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the case of Bharat Earth Movers Ltd (BEML) v. CIT 162 CTR 325 (SC). The facts of the appellant s case is clearly distinguishable from that of BEML s case, since in the case of BEML, the company had created a fund for leave encashment separately and then had made a claim of the same. In the appellant s case, no such fund was created and it is merely a provision and a book entry out of which no payments also have been made. In the circumstances, when no funds are created as in the case of BEML, provision for accrued leave salary remains a contingent liability and, therefore, not permissible deduction. The liability of encashment of leave will arise only when an employee may not go leave and instead apply for encashment. In view of this, the addition made by the AO on account of the privilege leave encashment of ₹ 52,35,008/- is sustained 8. Agitated, the assessee has come up with the present appeal. During the course of hearing, the submissions made by the learned AR are summed up as under: - that the authorities below have failed to appreciate that the provision for leave encashment is ascertained liability and has been provided on the basis of an actuarial valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee s submission and also extensively quoting the rulings of the (i) Hon ble Supreme Court n the case of BEML (supra); and (ii) the Hon ble Calcutta High Court in the case of Exide Industries Ltd (supra), the Hon ble Bench of this Tribunal in ITA Nos.146 224/Bang/2011 dated 15.6.2012 had recorded its findings as under: 6.3.3. In view of the facts and circumstances of the case as discussed above and in accordance with the ratio and reasoning laid down by the Hon ble Apex Court in the case of BEML (supra) and the fact that the Hon ble High Court of Calcutta in the case of Exide Industries Ltd (supra) struck down the provisions of s. 43B(F) of the Act, we are of the considered view that the assessee s claim for deduction of the provision for privilege leave encashment is not a contingent liability and is to be allowed .. 9.1. As the issue under consideration is similar to that of the one which has been discussed above and also in conformity with the ratio laid down by the Hon ble Apex Court in the case of BEML (supra), we are of the considered view that the assessee s claim for deduction of the provision for privilege leave encashment was not a contingent liabil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 3.12.2008 in ITA No.122/Bang/2008 in the case of Corporation Bank in assessment year 2004-05, where it was held that the decision of the Hon ble Supreme Court in the case of United Commercial Bank v. CIT (1999) 240 ITR 355 was directly applicable to this issue. In the case, the Hon ble Supreme Court has held that preparation of the balance sheet in accordance with statutory provisions will not disentitle the assessee from submitting the income-tax return on its real taxable income in accordance with the method of accounting it adopts consistently and regularly. For the purpose of income-tax, what is to be taxed is real time which is to be deduced on the basis of the accounting system regularly maintained by the assessee. The method by which the assessee bank is valuing securities by treating them as stock-in-trade is in accordance with the accounting principles and the revenue itself is treating the profit on maturity of such securities as business income. Therefore, such securities cannot be treated as capital assets. Following the above decision of the Hon ble Supreme Court and in line with its decision dated 24.1.2008 in ITA No.253/Bang/2007 in the case of ACIT (LTU) v. Vij ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the judgment of Hon ble jurisdictional High Court in the case of ING Vysya Bank (Supra) has been challenged before the Hon ble Supreme Court by the assessee-bank and SLP has been admitted. A copy of the order of Hon ble Apex Court admitting the SLP is placed on record. It was, therefore, pleaded that in view of the above scenario, the present issue be restored on the file of the AO with a specific direction to decide the issue only after the outcome of the ruling of the Hon ble Supreme Court in the case of ING Vysya Bank Ltd (supra). 13. We have carefully considered the submissions of both the parties and also perused the relevant case records. 13.1. As pointed out by the learned DR, in the case of CIT v. ING Vysya Bank Ltd., a similar issue to that of the present one was placed before the Hon ble jurisdictional High Court for consideration. After taking into account the contentions of either party, the Hon ble Court in its ruling in ITA No.2886/2005 dated 6.6.2012 had held thus: 31 .It is, therefore, held that all holdings of a banking institution in the form of investment in securities does not automatically acquire the characteristic of stock-in-trade. As t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile of the Assessing Officer. In order to avoid multiplicity of proceeding, it is preferable that the Assessing Officer keeps the matter in abeyance until the Hon ble Supreme Court decides the very same issue in the case of ING Vysya Bank and to take appropriate decision in accordance with law. It is ordered accordingly. 13.3. We would like to place on record that our above directions are in conformity with the following judicial views: (i) CIT Another v. M/s Dhruv Co., in ITA No.938 of 2006 dated 10.8.2011 of the Hon ble High Court of Karnataka; (ii) CIT v. S.N. Wodeyar (HUF), Mysore in T.R.C. NO.17/2000 dt: 21.11.2007 of the Hon ble High Court of Karnataka; (iii) ITO v. M/s. Bangalore Club in ITA No.562/Bang/06 dated 29.6.2010 of the ITAT, Bangalore; (iv) M/s. Bangalore Club v. ITO in ITA No.919/Bang/2011 dated: 17.7.2012 (AY 2007-08) of the ITAT, Bangalore. 14. The other grievance of the Revenue relates to the stand of the CIT (A) in allowing the premium to be amortized and allowed as revenue expenditure. 14.1. In this connection, we would like to recall the findings of the earlier Bench in the assessee s own case for the AY 2007-08 on a similar issue ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
