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2022 (10) TMI 220 - AT - Income TaxDisallowance u/s.14A r.w.r. 8D - HELD THAT - As has been held by the Hon ble Supreme Court in the case of Godrej Boyce Manufacturing Co. Ltd 2017 (5) TMI 403 - SUPREME COURT 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. Disallowance under Deduction on Audit Fees - HELD THAT - As it is noticed that the assessee has paid the audit fees before the due date of filing of the return and it has also been recognised by the AO in the assessment order, we are of view that the addition made on the ground that it is a provision, is not called for. In the circumstances, the addition made by the AO and as confirmed by the CIT(A) under the head Deduction on Audit Fees stands deleted. Disallowance on contribution to the recognised Gratuity Fund - HELD THAT - 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. 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 only provisions - HELD THAT - For issue of ex-gratia to the deceased employee, admittedly, the employee had expired during the relevant assessment year. On the demise of an employee, the ex-gratia due to him is automatically computed. The amount is crystalised immediately on the demise of an employee. In fact, on the demise of an employee attempt is made to mitigate the financial loss to the family of employee at the earliest. This is but a social responsibility. Therefore, it cannot be said that this amount has not been crystalised nor can it be said that it is liable to be allowed only in the year of payment. In view of the provision of the Hon ble Supreme Court in the case of Bharat Earth Movers Ltd. 2000 (8) TMI 4 - SUPREME COURT as the amount has been crystalised, we are of the view that the said amount is an allowable expenses. Thus, the addition as made by the ld. CIT(A) for enhancement of provision with regard to ex-gratia to the deceased employee for the relevant assessment year stands deleted. For issue of provision for fraud as noticed that the said amount is not crystalised in any manner whatsoever. The provision is made on the basis of allegation. This allegations needs to be verified. It needs to be proved. An attempt for recovery must be made from the persons, who have committed the fraud. Where the fraud amount is recovered is not known. Obviously, it cannot be said that the liability is crystalised - we find strength in the submission of the ld. CIT-DR that the same is allowable in the year in which the amount has been written off from the books of accounts on account of fraud - disallowance as made by the CIT(A) under the head provision for fraud would have to be verified and consequently, it is restored to the file of AO for verification as to the amount that is liable to be allowed on actual determination on account of fraud. Accordingly, ground No.6 is partly allowed for statistical purposes. Denial of claim of deduction u/s.80P - As submitted assessee is a cooperative society doing business of retail banking and is entitled to deduction u/s.80P - HELD THAT - As it is noticed that the issue in respect of claim of deduction u/s.80P is squarely covered by the decision of the coordinate bench of the Tribunal in assessee s own case for A.Y.2012-2013 2018 (3) TMI 955 - ITAT CUTTACK respectfully following the findings recorded 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.
Issues Involved:
1. Principles of natural justice and enhancement of assessment. 2. Disallowance under Section 14A of the Income Tax Act. 3. Disallowance of deduction on audit fees. 4. Disallowance of contribution to recognized gratuity fund. 5. Disallowance under other provisions (pay arrears). 6. Enhancement and addition under other provisions. 7. Denial of claim of deduction under Section 80P of the Income Tax Act. Detailed Analysis: 1. Principles of Natural Justice and Enhancement of Assessment: The appellant contended that the order of the CIT(A) in enhancing the assessment and dismissing the appeal was against the principles of natural justice and arbitrary. However, this ground was not argued by the appellant's representative and was not separately adjudicated. 2. Disallowance under Section 14A of the Income Tax Act: The appellant challenged the disallowance of Rs. 2,01,724/- under Section 14A. The AO had applied Rule 8D, which was not applicable for the assessment year 2010-2011. The Tribunal referred to the Supreme Court's decision in Godrej & Boyce Manufacturing Co. Ltd., which held that Rule 8D was not operational during the relevant assessment year. Consequently, the disallowance made by the AO and confirmed by the CIT(A) was deleted. 3. Disallowance of Deduction on Audit Fees: The appellant argued against the disallowance of Rs. 15,00,000/- for audit fees, contending that the amount had already been paid before the due date of filing the return. The Tribunal noted that the audit fees of Rs. 16,17,336/- had been paid before the due date and recognized by the AO. Hence, the disallowance was deemed unnecessary and was deleted. 4. Disallowance of Contribution to Recognized Gratuity Fund: The appellant contested the disallowance of Rs. 1,21,62,000/- paid to the LIC Gratuity Fund. The Tribunal referred to the Supreme Court's decision in Textool Co. Ltd., which allowed deductions for payments made directly to LIC towards employees' group gratuity fund. Therefore, the disallowance made by the AO and confirmed by the CIT(A) was deleted. 5. Disallowance under Other Provisions (Pay Arrears): The appellant disputed the disallowance of Rs. 1,63,26,134/- for pay arrears. The Tribunal observed that the computation for pay revision was made on a scientific basis and was not an unascertained liability. Referring to the Supreme Court's decision in Bharat Earth Movers Ltd., the Tribunal held that the liability was crystallized and deleted the disallowance. 6. Enhancement and Addition under Other Provisions: The appellant challenged the enhancement of Rs. 1,44,77,000/- under other provisions, which included ex-gratia to deceased employees and provision for fraud. The Tribunal held that the ex-gratia amount was crystallized upon the employee's demise and was allowable. However, the provision for fraud was not crystallized and required verification. The Tribunal restored this issue to the AO for verification. 7. Denial of Claim of Deduction under Section 80P: The appellant argued against the denial of deduction under Section 80P, contending that it was a cooperative society. The Tribunal referred to its earlier decision in the appellant's case for the assessment year 2012-2013, which held that Regional Rural Banks are not entitled to deduction under Section 80P. The Tribunal upheld the denial of the deduction. Conclusion: The appeal was partly allowed for statistical purposes, with specific disallowances being deleted and others being upheld or restored for further verification. The Tribunal's decision was pronounced in the open court on 21/09/2022.
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