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TMI Blog2012 (9) TMI 750X X X X Extracts X X X X X X X X Extracts X X X X ..... - SHRI N.V. VASUDEVAN, AND SHRI JASON P. BOAZ, JJ. Assessee By : Shri S. Parthasarathi. Revenue By : Shri Farahat Hussain Qureshi. O R D E R Per Shri Jason P. Boaz : These are two cross appeals, one by the assessee and the other by Revenue, are against the order of the Commissioner of Income Tax (Appeals), Hubli dated 23.12.2010 for Assessment Year 2007-08. 2. The facts of the case, in brief, are as under : 2.1 The assessee, a co-operative bank, filed its return of income for Assessment Year 2007-08 on 31.7.2007 admitting taxable income of Rs. 23,87,45,000. The return was processed under section 143(1) and the case was taken up for scrutiny by issue of notices under section 143(2) and 142(1) of the Income Tax Act, 1961 (herein after referred as 'the Act'). The Assessing Officer after excamining the case, completed the assessment by an order under section 143(3) of the Act on 29.12.2009 determining the income of the assessee at Rs. 29,40,17,881 and in doing so made the following disallowances : i) Amortisation of premium paid on purchase of Govt. Securities. Rs.4,84,11,629 ii) Actuarial Valaution of privilege leave en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance is arbitrary, excessive and ought to be deleted in toto and reduced substantially. 6. For these and such other grounds that may be urged at the time of hearing, the appellant prays that the appeal may be allowed. 5. The grounds of appeal at S.Nos.5 6 are general in nature and no adjudication is called for thereon. 6.1 The grounds of appeal raised at S.Nos.1 to 4 challenge the finding of the learned CIT(A) in upholding the disallowance of provision made by the assessee for privilege leave encashment of Rs.52,35,008 by holding it to be a contingent liability which had not crystallized and therefore not allowable as a deduction. 6.2 The learned counsel for the assessee reiterated the arguments and contentions put forth in the grounds of appeal. The learned counsel for the assessee further contended that the learned CIT(A) ought to have appreciated the ratio of the Hon'ble Apex Court decision in the case of BEML Vs. CIT (245 ITR 428) in its correct perspective. The learned counsel for the assessee brought to our notice the decision of the Hon'ble High Court of Calcutta in the case of Exide Industries Ltd. Another Vs. UOI Others reported in (2007) 292 ITR 470 (Cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leave encashment was made by invoking the provisions of section 43B(f) of the Act. We find that in the case of Exide Industries Ltd. (supra), the Hon'ble Court while considering the issue of allowability of encashment of leave had struck down the provisions of section 43B(f) of the Act as being arbitrary and unconscionable and in paras 10 to 13 thereof have held as under : 10. The said section had undergone several changes from time to time and on each and every occasion the legislature came out with the objects and reasons disclosed therefor. In 1990 deduction on account of unpaid loan to any public financial institution or a State financial institution was roped in. By a further amendment in 1996 unpaid loan of scheduled bank was also incorporated. On each such occasion objects and reasons were disclosed. While inserting Clause (f) no special reasons were disclosed. His Lordship held that such disclosure was not mandatory. We do not have any reason for disagreement on such issue provided the subject amendment could be termed as in furtherance to widen the scope of the original section on the identical objects and reasons as disclosed at the time of enacting the original p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legislature was not entitled to bring such amendment. They were within their power to bring such amendment. However, they must disclose reason which would be consistent with the provisions of the Constitution and the laws of the land and not for the sole object of nullifying the apex Court decision. 11. In this regard the observation of the apex Court in the case of Bharat Earth Movers (supra) is quoted below: The law is settled: if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty though the actual quantification may not be possible. If these requirements are satisfied the liability is not a contingent one. The liability is in praesenti though it will be discharged at a future date. It does not make any difference if the future date on which the liability shall have to be discharged is not certain.... Applying the abovesaid settled principles to the facts of the case at hand we are satisfied that the provision made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of Rs.4,84,11,629 made by the Assessing Officer in respect of amortization of premium on purchase of Govt. securities in accordance with the CBDT s Instruction No.17 vide para 2(vii) dt.26.11.2008. The learned counsel for the assessee also placed reliance on the decision of the co-ordinate bench of this Tribunal in the case of Sir M. Vishveshwaraya Co-operative Bank Ltd. Vs. JCIT in ITA No.1122/Bang/2010 dt.11.5.2012 ( a copy of which is placed on record.) The learned counsel for the assessee drew our attention to para 4 to para 8 of this order in which an identical issue on amortization of premium on investments was exhaustively considered by this Tribunal after which it held that the assessee was entitled to such deduction. In these circumstances, the learned counsel for the assessee prayed that since the decision of the Tribunal is squarely applicable to its case, and is in its favour, Revenue s appeal on this point is liable to be dismissed. 7.4 We have heard both parties and have carefully perused and considered the material on record and the judicial decisions cited of various benches of the Tribunal in respect of the assessee s claim for deduction on account of expend ..... X X X X Extracts X X X X X X X X Extracts X X X X
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