2016 (5) TMI 1472 - AT - Income Tax

Non deduction of tds u/s 194C printing and stationary expenses - Disallowance u/s 40(a)(ia) - Held that - All the expenses related to printing and stationary on the basis of particular specification given by the assessee and the assessee had paid VAT on it. The Board circular No. 681 dated 08/3/1994 referred by the AR of the assessee is squarely applicable. Accordingly such payments are not covered U/s 194C of the Act. Case of CIT-XVII Delhi Vs Silver Oak Laboratories P. Ltd. (2010 (8) TMI 839 - SUPREME COURT) is also squarely applicable including other cited cases of the assessee. Alternatively the assessee s claim is allowable on paid basis as relied upon in the case of CIT Vs. Vector Shipping Services (P) Ltd. (2013 (7) TMI 622 - ALLAHABAD HIGH COURT). These facts had not been controverted by the DR during the course of hearing. Therefore we allow the assessee s appeal on this ground. Disallowance of provisions of gratuity - Held that - The facts of the present case and similar additions were made in A.Y. 2008-09 by the ld Assessing Officer which has been deleted by the Coordinate Bench in assessee s own by relying on the Hon ble Supreme Court decision in the case of CIT Vs Textool Co. Ltd. 2009 (9) TMI 66 - SUPREME COURT . The assessee had applied before the ld CIT Kota but approval of the prescribed authority is pending. Therefore there is no lack on the part of the assessee. Accordingly this ground of the assessee is allowed. Addition of pension leave salary - amount allowable only as paid before due date of return - Held that - CIT(A) wrongly concluded that amount paid on 03/2/2009 had been included in provision. However as per paper book submitted by the assessee this amount of 5, 92, 714/- was paid over and above 43, 57, 530/-. The ld DR has not controverted the facts and figures therefore we allow the assessee s appeal on this ground. Not allowing the provision of agreement arrears - Held that - This issue has been considered by the Coordinate Bench in assessee s own case for A.Y. 2008-09 which is squarely applicable on the facts and circumstances of the case for the year under consideration. Therefore by respectfully following the order of the Coordinate Bench we allow the assessee s appeal on this ground. Interest addition - difference in disclosing the interest - credit of TDS had been given on interest payment - Held that - The assessee had admitted this difference on the basis of 26AS and disclosed the differences of interest income of 78, 563/- in A.Y. 2010-11 and there is no revenue loss if the same amount is considered in A.Y. 2010-11 by the assessee. The Hon ble Supreme Court decision in the case of Excel Industries (2013 (10) TMI 324 - SUPREME COURT) is squarely applicable. Therefore we delete the addition confirmed by the ld CIT(A). Addition of excess cash reserve - This amount is not payable on expenditure - CIT(A) restricted this addition of 34, 489/- by observing that as per balance sheet as an amount of 96, 342/- had been shown as excess cash reserve. This amount is not payable on expenditure - Held that - this issue is considered by the Hon ble ITAT in assessee s own case in A.Y. 2008-09 wherein it has been held that reserve account in balance sheet has been created on the liability side. The same represents the excess cash found as per books which the bank is required to repay to the legitimate person on a proper claim. Thus it is an amount in trust held by the bank it is not credited to P 94, 84, 740/- as leave salary encashment fund under Funds and Reserve in the balance sheet as against Rs. Nil shown in the assessment year 2008-09 - Held that - Assessing Officer had made addition by making disallowance U/s 43B(f) of the Act by taking amount from the balance sheet which is grossly incorrect and without even going through his own action on the same issue for the expenditure claimed in the P&L account. It is a clerical mistake before the ld CIT(A) who had verified from the record which has also been clarified during the course of hearing by the ld AR which has not been controverted by the ld DR. - Decided in favour of assessee

Summary

Issues Involved:
1. Validity of the assessment order under Section 143(3).
2. Disallowance of expenses and addition under Section 40(a)(ia).
3. Disallowance of provision of gratuity.
4. Disallowance of pension leave salary.
5. Disallowance of provision of agreement arrear.
6. Addition of interest income.
7. Addition due to excess cash received.
8. Charging of interest under Section 234B.
9. Initiation of penalty proceedings under Section 271(1)(c).
10. Deletion of disallowance on account of Ganesh Mahotasava expenses.
11. Deletion of addition on account of leave salary encashment fund under Section 43B(f).

Detailed Analysis:

1. Validity of the assessment order under Section 143(3):
The assessee argued that the assessment order was bad in law and against the principles of natural justice. However, this ground was not pressed during the hearing and was dismissed as not pressed.

2. Disallowance of expenses and addition under Section 40(a)(ia):
The assessee, a Cooperative Bank, was scrutinized under Section 143(3). The Assessing Officer disallowed expenses totaling ?6,34,114/- for non-deduction of TDS on payments exceeding ?20,000/- under various heads like printing and stationary, legal fees, conveyance, tent house expenses, and payments to Anand Pushap Bahndar. The CIT(A) confirmed the addition, emphasizing the intention of TDS provisions to ensure compliance. The assessee contended that these were sales transactions subject to VAT, supported by CBDT Circular No. 681 and the Supreme Court ruling in CIT-XVII, Delhi Vs Silver Oak Laboratories P. Ltd. The Tribunal allowed the assessee's appeal, citing the Board's circular and the Supreme Court decision, and also noted that the amounts were paid during the year, referencing CIT Vs. Vector Shipping Services (P) Ltd.

3. Disallowance of provision of gratuity:
The Assessing Officer disallowed the provision of gratuity amounting to ?8,72,000/- due to the lack of approval from the prescribed authority, which was upheld by the CIT(A). The Tribunal referenced its own decision in the assessee's case for A.Y. 2008-09, supported by the Supreme Court ruling in CIT Vs Textool Co. Ltd., and allowed the assessee's appeal, noting that the approval was pending and there was no fault on the assessee's part.

4. Disallowance of pension leave salary:
The Assessing Officer disallowed ?15,32,714/- out of the total pension leave salary expenses of ?58,90,244/-, which the CIT(A) partially allowed, confirming ?9,24,253/-. The Tribunal, upon reviewing the paper book and noting the payment details, concluded that the CIT(A) wrongly included an amount paid on 03/2/2009 and allowed the assessee's appeal.

5. Disallowance of provision of agreement arrear:
The Assessing Officer disallowed ?13,18,153/- as a provision for agreement arrear, confirmed by the CIT(A) on the grounds of it being a contingent liability. The Tribunal referenced its decision in the assessee's case for A.Y. 2008-09, which recognized the crystallization of salary arrears through an agreement, and allowed the appeal.

6. Addition of interest income:
The Assessing Officer added ?89,563/- for undisclosed interest income from SBI, which the CIT(A) corrected to ?78,563/-. The assessee claimed this amount was included in A.Y. 2010-11 to avoid double taxation. The Tribunal, citing the Supreme Court's decision in CIT Vs. Excel Industries Ltd., deleted the addition.

7. Addition due to excess cash received:
The Assessing Officer added ?96,342/- for excess cash reserve, which the CIT(A) reduced to ?32,489/-. The Tribunal referenced its decision in the assessee's case for A.Y. 2008-09, treating the excess cash as a balance sheet item held in trust, and allowed the appeal.

8. Charging of interest under Section 234B:
This ground was deemed consequential to the above findings.

9. Initiation of penalty proceedings under Section 271(1)(c):
This ground was considered premature and not decided upon.

10. Deletion of disallowance on account of Ganesh Mahotasava expenses:
The Assessing Officer disallowed ?45,000/- for Ganesh Mahotasava expenses, which the CIT(A) allowed, recognizing it as business-related publicity and staff motivation. The Tribunal upheld the CIT(A)'s decision, referencing similar cases where such expenses were deemed allowable.

11. Deletion of addition on account of leave salary encashment fund under Section 43B(f):
The Assessing Officer added ?94,84,714/- for leave salary encashment fund, which the CIT(A) deleted, identifying it as a clerical mistake. The Tribunal upheld the CIT(A)'s decision, noting the clarification provided by the assessee.

Conclusion:
The Tribunal allowed the assessee's appeal on multiple grounds, citing relevant case laws and precedents, while dismissing the revenue's appeal. The judgment emphasized the importance of proper documentation, adherence to accounting standards, and the application of judicial precedents in tax assessments.