2018 (2) TMI 1155 - HC - Income Tax

Amortization of premium on securities held by the bank under category of Held Till Maturity - whether a revenue expenditure? - Held that - Issue urged herein stands concluded against the Revenue and in favour of the Respondent Assessee by virtue of the decision of this Court in CIT Vs. Thane Bharat Sahakari Bank Ltd. 2015 (3) TMI 1026 - BOMBAY HIGH COURT Addition of excess provisions made which remained a provision and not utilized even in the immediately succeeding year - Held that - It is a settled position as held in E.D. Sasoon Co. Ltd. Vs. CIT 1954 (5) TMI 2 - SUPREME Court that profits of a business implies a comparison between the state of a business at two different / specific dates separated by a year. The comparison between two dates given as the extent of profits / loss. Thus normally accounts are made up every year. In this case accounts have to accounted at 31 March of each year. The Assessee had made a provision on 31 March 2009 i.e. at the end of the previous year relevant to subject assessment year i.e. 2009-10 and determine profit as on 31 March 2003. Thus the position as exists on 31 March 2009 is due to be considered and not any other date. Appeal admitted on question 3) - Whether on the facts and in the circumstances of the case and in law, Tribunal was justified in deleting the addition made by the Assessing Officer on account of voluntary retirement payments made to the staff at the time of their leaving the employment without taking into account Section 35DDA of the Act ?

Summary

Issues:
1. Amortization of premium on securities as revenue expenditure
2. Treatment of excess provisions made by the Assessee
3. Treatment of voluntary retirement payments without considering Section 35DDA of the Act

Analysis:

Issue 1: Amortization of premium on securities as revenue expenditure
The Revenue challenged the Tribunal's decision on whether amortization of premium on securities held by the bank under 'Held Till Maturity' should be treated as revenue expenditure. The Court noted that this issue had already been decided in favor of the Assessee in a previous case. The Court cited the decision in CIT Vs. Thane Bharat Sahakari Bank Ltd., stating that the issue was already concluded against the Revenue. Therefore, the Court did not entertain this question.

Issue 2: Treatment of excess provisions made by the Assessee
The Assessee had made a provision of Rs. 11.18 Crores for various payments, but the Assessing Officer disallowed an amount of Rs. 38.63 Crores as the provision was not utilized. The CIT (Appeals) found that the provision made by the Assessee at the end of the financial year was correct and deleted the disallowance. The Revenue appealed to the Tribunal, which upheld the CIT (A)'s decision. The Court found the CIT's reasoning sound, emphasizing the importance of comparing the state of a business at specific dates separated by a year. Since the provision was made at the end of the relevant previous year, the Court held that the provision as on that date should be considered. Therefore, the Court concluded that this issue did not raise any substantial question of law and did not entertain it.

Issue 3: Treatment of voluntary retirement payments
The Assessee made voluntary retirement payments to staff without considering Section 35DDA of the Act. The Tribunal had deleted the addition made by the Assessing Officer in this regard. The Court admitted the appeal on this issue, indicating that a substantial question of law was involved. The Court directed the Registry to communicate the order to the Tribunal for further proceedings.

In conclusion, the Court dismissed the first two issues as they did not raise substantial questions of law, while admitting the appeal on the third issue for further consideration.