2018 (3) TMI 1572 - AT - Income Tax

Reopening of assessment - change of opinion - taxability of interest on fixed deposits with the societies - Held that - On the issue of change of opinion it is apparent that Assessing Officer iin original assessment proceedings has not applied his mind to the taxability of interest on fixed deposits with the societies. Even otherwise it is a judicial decision which has been rendered by ITAT Hyderabad Bench based on which the reopening is initiated. Any judicial decision by the courts and tribunal if it is rendered subsequent to the passing of the Assessment order and if reopening is initiated of the concluded assessment, according to us, same cannot be called as change of opinion. In view of above facts we do not find any infirmity in the order of the ld CIT(A) in upholding the reopening of the assessment. In the result ground No. 1 of the appeal is dismissed. Addition on account of the interest income earned by the cooperative society Sirecila, Hyderabad on special reserve fund created and maintained by the society - Held that - The above addition has been confirmed by the ld CIT(A) holding that decision of the coordinate bench binds him. Similar is the situation with us. If the assessee is agreed with the order of the ITAT Hyderabad Bench decision which has rendered certain findings, the assessee should have challenged the same before Hon ble High Court. Apparently, it was not done. We have no authority to say anything on the correctness of that decision, it binds us judicially. Further, when on examination of the rules and the all other criteria related to the creation of special reserve fund and its control the coordinate bench has held that interest has accrued in the hands of the appellant. Before us except reiterating the same facts the ld AR has not produced any other evidence or any evidence of decision of the higher forum where the order of the coordinate bench is challenged by the assessee. In this circumstances we also respectfully following the decision of the coordinate bench based on which reopening has been initiated, we also confirm the addition Addition with respect to those societies whose confirmation of offering the interest income in the hands of those societies was finished by those societies - Held that - In absence of those certificates the additions were confirmed. The ld Departmental Representative could not point out any infirmity in the order of ld CIT(A). We are also of the considered view when the income has been offered by those societies in their own hand it cannot be taxed in the hands of the assessee. In the result we do not find any merit in the appeal of the revenue hence, we dismiss all the three grounds of appeal. Addition u/s 14A - Held that - AO is directed to restrict the disallowance u/s 14A to the extent of 0.5% of the average value of the investment as provided under Rule 8D. Accordingly, ground No. 1 of the appeal is partly allowed. Disallowance for provision of post retirement, medical expenses of the staff - addition holding that the liability of the assessee is contingent in nature - CIT(A) deleted addition holding that the claim for provision for post retirement medical benefit is an ascertain liability - Held that - The post retirement medical benefit provision has been created by the assessee in accordance with accounting standard 15 relating to employees benefit. The above provision was made on actuarial valuation in accordance with the post retirement medical scheme. CIT(A) allowed the above claim holding that such provision is accrued liability and not contingent in nature. He relied upon the decision of the coordinate bench in Bokaro Power Supply Co. Ltd Vs. DCIT (2013 (1) TMI 782 - ITAT DELHI). Where the provision has been created on the basis of actuarial calculation on a scientific basis the liability is not contingent but definite. We do not find any infirmity in the order of the ld CIT(A) Taxability of interest income on special reserve funds - Held that - We confirm the finding of the ld CIT(A) in deleting the above addition as assessee has produced proper confirmation with respect to the various societies who have offered the interest income on special reserve fund in their hands - Revenue appeal dismissed.

Issues Involved:
1. Validity of reopening of assessment.
2. Deletion of additions related to interest income not offered to tax.
3. Taxability of interest income earned by cooperative societies.
4. Disallowance of provision for post-retirement medical expenses.
5. Disallowance under Section 14A of the Income Tax Act.

Issue-wise Analysis:

1. Validity of Reopening of Assessment:

In ITA No. 3009/Del/2014 for AY 2005-06, the reopening of the assessment was challenged. The CIT(A) quashed the reassessment proceedings based on a similar case for AY 2004-05 where the Delhi High Court quashed the reassessment proceedings. The Tribunal upheld the CIT(A)’s decision, noting that the issue was identical to the earlier case, and thus, the appeal by the revenue was dismissed.

2. Deletion of Additions Related to Interest Income Not Offered to Tax:

For AY 2006-07, the revenue's appeal (ITA No. 3010/Del/2014) contested the deletion of ?93,73,987/- out of a total addition of ?1,25,74,387/- made by the AO on account of interest accrued to various cooperative societies. The CIT(A) deleted the addition for societies that had already offered the interest income in their hands. The Tribunal upheld this deletion, noting that the revenue could not point out any infirmity in the CIT(A)’s order.

3. Taxability of Interest Income Earned by Cooperative Societies:

The assessee's appeal for AY 2006-07 (ITA No. 3078/Del/2014) contested the addition of ?90,70,673/- and ?32,01,000/- on account of interest income earned by cooperative societies. The CIT(A) upheld these additions based on the decision of the ITAT Hyderabad Bench, which held that such income accrued to the assessee. The Tribunal confirmed this addition, stating that the judicial decision binds them and the assessee should have challenged it before a higher forum.

4. Disallowance of Provision for Post-Retirement Medical Expenses:

For AY 2009-10, in ITA No. 3011/Del/2014, the revenue contested the deletion of ?4,09,33,800/- made by the AO on account of provision for post-retirement medical expenses. The CIT(A) deleted the disallowance, stating that the provision was an ascertained liability based on actuarial valuation. The Tribunal upheld this decision, referencing the Delhi High Court’s stance that such provisions, when based on scientific calculations, are definite liabilities.

5. Disallowance Under Section 14A of the Income Tax Act:

For AY 2009-10, in ITA No. 3079/Del/2014, the assessee contested the disallowance under Section 14A. The AO had computed a disallowance of ?2,24,99,273/-. The CIT(A) confirmed the addition with corrections. The Tribunal partly allowed the assessee's appeal, directing the AO to restrict the disallowance to 0.5% of the average value of investments, as the assessee had sufficient interest-free funds to cover the investments.

Conclusion:

In summary, the Tribunal upheld the CIT(A)'s decisions on quashing the reassessment proceedings for AY 2005-06, deleting certain additions related to interest income for AY 2006-07, and confirming the taxability of interest income in the hands of the assessee based on judicial precedents. The Tribunal also upheld the deletion of the provision for post-retirement medical expenses for AY 2009-10 and partly allowed the assessee's appeal on disallowance under Section 14A.

← Previous Next →