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2023 (7) TMI 1448 - AT - Income TaxDeduction u/s 36(1)(viia)(a) - CIT(A) directing the AO to allow the deduction claimed u/s 36(1)(viia)(a) only to the extent of 7.5%, on account of provision for bad and doubtful debts - HELD THAT - This Tribunal in assessee s own case in for the Assessment Year 2017-18, 2022 (7) TMI 1389 - ITAT SURAT whereby the issue of relating to deduction claimed u/s 36(1) (viia) and provision for doubtful debts, created against standard assets have been discussed and adjudicated in favour of assessee. Disallowance of reimbursement of medical expenses and tea allowance - Revenue argued that medical expenses and tea expenses are deleted by CIT(A) without considering the fact that it is not reimbursement of expenses - HELD THAT - As a matter of fact, the said allowance to meet their medical expenses is forming part of the Gross Salary, but the statutory deduction for such medical allowance is allowable upto Rs.15,000/-, each on employee, there is no requirement to make TDS on such payment. The records for such medical allowance/reimbursement is voluminous and bulky, therefore all the documents could not be furnished by the assessee during the assessment proceedings. The declarations on sample basis containing therein the payment of reimbursement/allowance for the actual medical expenses incurred by such employees were submitted before the AO. On perusal of paper submitted along with explanation, there is list of 63 branches and amount as per each branch. Likewise, there is list of all branches having figures of other reimbursement - In respect of other allowances we note that it is nothing but the tea allowance given to the employees for their expenditure on tea and coffee in performance of their duties during the banking hours only and thus, it is the part of the office expenses and not in the nature of any allowance forming part of the salary. We note that reimbursement of medical expenses and Tea allowance has been incurred while doing the business and therefore it is allowable expenses. Both expenses are allowed in earlier as well as subsequent assessment years under section 143(3) of the Act by the assessing officer. Therefore, no infirmity in the order of CIT(A) in deleting the addition hence we dismiss the ground No.4 raised by the Revenue. Disallowance of expenses towards Employees contribution to provident fund/shortfall - CIT(A) allowed claim - HELD THAT - It is very much evident that in case of any Shortfall in maintaining the Interest Rate in the Provident fund of the employees, it is the responsibility of the Employer. Further, the creation of Employees Provident Fund Trust is Statutory Duty of the employer. The assessee co-operative bank has fulfilled all its statutory liability towards the Employees Provident Funds Act and hence, the payment made towards maintenance of Statutory Interest Rate is allowable expenditure u/s 37(1) - CIT(A) in his order rightly allowed the same. However, the assessing officer in his order without verifying the records available with him i.e. the computation of income that amount contributed to the Staff Provident Fund (Interest) is tax paid amount and held that the expenditure made from such fund is not allowable u/s 37(1) of the Act. We note that the records and documents produced before the AO, were also produced before the CIT(A) by the assessee and every details are explained to the CIT(A) and after considering the material on records and the facts of the case, as well as the legal position of the case, the CIT(A) has rightly allowed the claim of the assessee, therefore we do not find any infirmity in the conclusion reached by ld CIT(A). Hence, we confirm the findings of CIT(A) and dismiss ground raised by the revenue. Disallowance of gift expenses to staff, director, customers - HELD THAT - Actual break up of expenses pertaining to gifts for each category of receipts is not given. The expenses incurred for gifts to Directors of assessee bank to employees of the Government Departments are not allowable expenses within the meaning of sec 37 and explanations. Since there is no bifurcation given, therefore ld CIT(A) estimated 50% of above as expenses incurred for giving such disallowable gifts. We note that small gifts given to customers of the bank on the occasion of new year and Dewali festivals are kind of expected and traditional expenses, hence reasonable expenses were allowed by CIT(A). How ever gift given to directors of assessee bank and government employees are not allowable expenses u/s 37 of the Act. Hence conclusion reached by CIT(A), therefore, are correct, hence we dismiss ground no.6 raised by the Revenue and we also dismiss ground No.2 raised by the assessee. TDS u/s 194C - payment towards the purchase of internet bandwidth being the transactions falls within the ambit of sale of Goods Act , as the payments towards the technical services - HELD THAT - AO has asked the assessee to submit a copy of ledger account for these expenses, however the assessee did not furnish the same before the assessing officer, which was specifically asked from the assessee to submit before AO. Besides, the nature of expenditure was not explained by the assessee before the lower authorities. Therefore, we are of the view that one more opportunity should be given to the assessee to explain the nature of expenditure before the assessing officer. We remit this issue back to the file of the assessing officer to examine the ledger account and nature of expenditure. The assessee is also directed to submit the ledger account and the documents to explain the nature of expenditure. Hence, ground raised by the assessee, is treated to be allowed for statistical purposes.
Issues Involved:
1. Deletion of disallowance under Section 36(1)(viia) of the Income Tax Act. 2. Deletion of addition on account of provision for Bad and Doubtful debts. 3. Disallowance of reimbursement of medical expenses and tea allowance. 4. Disallowance of expenses towards Employees' contribution to provident fund/shortfall. 5. Partial deletion of disallowance of gift expenses. 6. Disallowance for failure to deduct TDS under Section 40(a)(ia) read with Section 194C. 7. Alleged unaccounted interest income. Issue-wise Detailed Analysis: 1. Deletion of disallowance under Section 36(1)(viia): The Tribunal addressed the Revenue's contention that the disallowances are not covered by Section 36(1)(viia) and should be sustained. The Assessee argued that the CIT(A) should have allowed the deduction at the rate of 10% instead of 7.5%. The Tribunal referred to its previous decision in the Assessee's case for AY 2017-18, where it was adjudicated that the deduction under Section 36(1)(viia) is allowable for the provision for bad and doubtful debts, including those against standard assets. Following the principle of consistency, the Tribunal upheld the CIT(A)'s decision to delete the disallowance and allowed the deduction at 7.5%. 2. Deletion of addition on account of provision for Bad and Doubtful debts: The Tribunal noted that the provision for bad and doubtful debts, including those against standard assets, is allowable under Section 36(1)(viia). This was consistent with previous decisions and the statutory provisions. The Tribunal upheld the deletion of the addition made by the AO on this account. 3. Disallowance of reimbursement of medical expenses and tea allowance: The Tribunal examined the nature of the medical expenses and tea allowance, noting that these were part of the gross salary and office expenses, respectively. It was observed that the medical allowance was paid as per an agreement between the employees' union and the bank, and there was no requirement to deduct TDS on such payments. The tea allowance was considered part of office expenses. The Tribunal found no infirmity in the CIT(A)'s decision to delete the disallowance of Rs.87,57,430/-. 4. Disallowance of expenses towards Employees' contribution to provident fund/shortfall: The Tribunal reviewed the statutory requirements under the Provident Fund Rules, which mandate the employer to cover any shortfall in maintaining the statutory interest rate. The Assessee had created a fund from post-tax profits for this purpose. The Tribunal upheld the CIT(A)'s decision to allow the expenditure of Rs.29,00,000/- under Section 37(1) of the Act, dismissing the Revenue's ground. 5. Partial deletion of disallowance of gift expenses: The Tribunal evaluated the gift expenses claimed by the Assessee, which included gifts to staff, directors, customers, and others. The CIT(A) had allowed a portion of these expenses while disallowing the rest on an estimated basis. The Tribunal found the CIT(A)'s approach reasonable, allowing traditional and expected expenses while disallowing gifts to directors and government employees. The Tribunal upheld the partial deletion of Rs.6,98,375/- and dismissed the related grounds raised by both the Revenue and the Assessee. 6. Disallowance for failure to deduct TDS under Section 40(a)(ia) read with Section 194C: The Tribunal remitted the issue back to the AO for re-examination. The Assessee had failed to provide the ledger account and explain the nature of the expenditure during the assessment proceedings. The Tribunal directed the Assessee to submit the necessary documents to the AO for a proper evaluation of the expenditure of Rs.13,48,049/-. 7. Alleged unaccounted interest income: The Tribunal noted that the Assessee had not adequately explained the inclusion of interest income of Rs.65,07,102/- in the P&L account. Given the lack of clarity, the Tribunal remitted the issue back to the AO, directing the Assessee to provide sufficient evidence to explain the income. The ground was allowed for statistical purposes. Conclusion: The appeal filed by the Assessee was partly allowed for statistical purposes, while the appeal filed by the Revenue was dismissed. The Tribunal emphasized consistency with previous decisions and statutory provisions in its judgment.
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