TMI Blog2022 (10) TMI 220X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Hon ble Supreme Court in the case of Textool Co. Ltd. [ 2009 (9) TMI 66 - SUPREME COURT ] respectfully following the provisions laid down by the Hon ble Supreme Court, the addition as made by the AO and as confirmed by the CIT(A) in respect of contribution to LIC master policy in respect of the gratuity fund stands deleted. Disallowance under other provisions being Pay Arrears - HELD THAT:- As noticed that the computation of the revision of pay has been made by the assessee for 31 months and the same has been accepted by the AO for a period of 27 months, obviously the computation is on scientific basis, it is not an unascertained liability. The liability has crystalised. In these circumstances, in line with the principle laid down in the case of Bharat Earth Movers Ltd. [ 2000 (8) TMI 4 - SUPREME COURT ] disallowance of the provisions for pay arrears as made by the AO and as confirmed by the CIT(A) stands deleted. Addition under the head other provisions - this amount consisted of two figures, one is ex-gratia to the deceased employee and the second is provision for fraud - CIT(A) has enhanced the assessment by making the disallowance on the ground that these were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded therein by the Tribunal, the denial of claim of deduction u/s.80P of the Act by the AO and the confirmation of the same by the ld. CIT(A) stands upheld. This ground of assessee is dismissed. - ITA No.72/CTK/2018 - - - Dated:- 21-9-2022 - Shri George Mathan, Judicial Member And Shri Arun Khodpia, Accountant Member For the Assessee : Shri B.K.Mohapatra, CA/AR For the Revenue : Shri M.K.Gautam, CIT-DR ORDER PER BENCH : This is an appeal filed by the assessee against the order of the CIT(A)-1, Bhubaneswar, dated 03.11.2017 passed in I.T.Appeal No.0538/14-15, for the assessment year 2010-2011, on the following grounds :- 1. That the Order of the learned Commissioner of Income Tax (Appeals)-l, Bhubaneswar { CIT(Appeals) dated 03.11.2017 in enhancing the assessment and dismissing the appeal, is against the principles of natural justice, contrary to facts, arbitrary, excessive, erroneous and bad, both in the eye of law and on facts. 2. Disallowance u/s. 14A Rs. 2,01,724/- a. That on the facts and in the circumstances the case, the order of the learned CIT (Appeals) in confirming the disallowance of Rs.2,01,724/- U/S.14A of the Act is contrar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts, excessive, erroneous and bad in law. e. Without prejudice to Ground (a) and (d) above, in any case, in the alternative, the actual amount paid of Rs.15,00,000/- in the accounting year 2009-10 towards audit fees and expenses ought to be allowed. 4. Disallowance of Contribution to Recognised Gratuity Fund Rs. 1,21,62,000/- a. That the learned CIT (Appeals) has misconstrued/mis-appreciated the facts and the confirming of disallowance of Rs.l,21,62,000/- under payment to LIC Gratuity Fund is contrary to facts, arbitrary, erroneous and bad, both in the eye of law and on facts. b. That the learned CIT (Appeals) has failed to appreciate that the payment in respect of the said of Rs.l,21,62,000 having been made to LIC (an approved Gratuity Fund) any disallowance u/s.43B of the Act. c. That the learned CIT (Appeals) has misconstrued/mis-appreciated the facts that the payment of Rs.l,21,62,000/- made to LIC is not an approved Gratuity Fund and thereby the confirming of disallowance of the said Rs.l,21,62,000/- is unjustified, arbitrary, contrary to facts, erroneous and bad in law. 5. Disallowance under Other provisions (Pay arrears)-Rs.1,63,26,134/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justice, arbitrary, excessive, erroneous and bad, both in the eye of law and on facts. d. That on the facts and in the circumstances of the case, the aforesaid Rs.1,15,00,000/- in respect of Exgratia to deceased employee' being fully allowable under the Act ought not have been added/ disallowed. e. That on the facts and in the circumstances of the case, the aforesaid Rs.29,77,000/- in respect of write off of loss due to 'fraud being fully allowable under the Act ought not have been added/ disallowed. f. That without prejudice to Grounds ( a to e ) above, the Learned Assessing Officer after examination and verification having allowed the said sum of Rs.1,44,77,000/-, the learned CIT(Appeals), is not justified and has erred in holding that Rs.1,44,77,000/- is not allowable 7. Denial of claim of deduction u/s. 80P of the I.T.Act a. That on the facts and in the circumstances the case, the sustaining of the disallowance of claim of deduction of Rs.12,38,49,656/- u/s.80P of the IT Act by the learned CIT(Appeals) is arbitrary, erroneous, bad, both in the eye of law and on facts and legally untenable. b. That the learned CIT(Appeals) holding that, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brought in effect during the relevant assessment year, no disallowance could be made in the hands of the assessee. 3.2 In reply, ld. CIT-DR vehemently supported the order of the AO and CIT(A). It was submitted that the investment in the mutual funds and shares was to an amount of Rs.7,24,58,000/-, and it could not be said that there was no expenses involved. It was submitted that the assessee has earned an exempt income of Rs.7,03,354/-. It was submitted that 0.5% was a reasonable amount. It was submitted that various benches of the Tribunal has been upholding the disallowance even at 1% percentage. It was submitted that the order of the CIT(A) is liable to be upheld. 3.3 We have considered the rival submissions. 3.4 As has been held by the Hon ble Supreme Court in the case of Godrej Boyce Manufacturing Co. Ltd (supra), in the assessment year 2010-2011 as the provisions of rule 8D had not been made workable, no disallowance to be made under Section 14A r.w.r.8D as a computation machinery was not available. Thus, the addition made by the AO and as confirmed by the CIT(A) under Section 14A r.w.r.8D stands deleted. 4. Ground No.3 relates to disallowance under Deduction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gratuity Trust. It was the submission that this is not an approved fund. 5.3 We have considered the rival submissions. 5.4 As it is noticed that the issue is now squarely covered by the decision of the Hon ble Supreme Court in the case of Textool Co. Ltd. (supra), respectfully following the provisions laid down by the Hon ble Supreme Court, the addition as made by the AO and as confirmed by the CIT(A) in respect of contribution to LIC master policy in respect of the gratuity fund stands deleted. 6. Ground No.5 is relating to disallowance under other provisions being Pay Arrears. 6.1 It was the submission that the AO had disallowed the provision relating to the arrears of pay in respect of four months being from April to July 2010. It was submitted that the computation sheet has been produced before the AO and the arrears provision for the employees and sub-staff for a total amount of Rs.12,65,27,546/- was shown. The computation was for a period of 31 months being from November, 2007 to July, 2010. On the ground that the computation included a period beyond the Financial Year 2009-2010 relevant to assessment year 2010-2011, the AO disallowed the provision in respect of A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that when the fraud alleged was not proved, automatically the provision was also reduced in respect of the said fraud alleged. It was the submission that the provisions has to be made when a fraud is alleged, failing which a true and fair picture of the assessee s financial stand would not be clear. It was the further submission that this provisions of fraud is made on the basis of the Circular issued by the controlling bank being NABARD. Therefore, the ld. AR submitted that the same is liable to be allowed. 7.3 In reply, ld. CIT-DR submitted in respect of provision of ex-gratia to deceased employee that the same has been paid in the subsequent year and if at all is to be allowed it could be considered in the year of payment. In respect of provision for fraud, it was the submission that the provision is made on an allegation; obviously the amount is not crystalised. If at all a deduction is called for, the deduction may be granted in the year in which the amount is quantified and the payment is made on the ground of such fraud. 7.4 We have considered the rival submissions. 7.5 In respect of the issue of ex-gratia to the deceased employee, admittedly, the employee had exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year 2012-2013 in ITA No.420/CTK/2016, order dated 19.03.2018, wherein the coordinate bench of the Tribunal has in paras 7 to 9 held as follows :- 7. We have heard the rival submissions, perused the orders of lower authorities and materials available on record. The sole matrix of the issue involved in this case as to whether the assessee is a co-operative Bank or Society and consequently whether the deduction u/s.80P is available to the assessee. On perusal of the assessment order, we find that the Assessing Officer has not dealt on the claim of the assessee being not a co-operative Bank but denied the deduction relying on the provisions of section 80P(4) of the Act. Whereas the CIT(A) has dealt on the issue and the submission of the assessee and relied on judicial decisions and upheld the action of the Assessing Officer. The CIT(A) while considering the issue held that the assessee is a Regional Rural Bank ,which is deemed to be a co-operative society as per the provisions of RRB Act and for the purpose of Income Tax Act and since the main function of the assessee is involved in the banking business and, therefore, not entitled for deduction u/s. 80P of the Act. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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