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TMI Blog2012 (12) TMI 717X X X X Extracts X X X X X X X X Extracts X X X X ..... te the above said disallowance - in favour of assessee. Disallowance of Staff Welfare Expenditure – Held that:- Amount contributed by it on behalf of its employees was treated as salary income in the hands of respective employees and income tax was also deducted there on. The amount accumulated in the name of employees were collectively accounted as “Staff Welfare Scheme” and the accumulated balance was not invested any where else. Instead, the assessee itself has used such contributions for its own business purpose. Thus, the net effect of this arrangement is that the amounts credited to the “Employees Welfare Scheme a/c” represents the amounts collected from employees only. The assessee has also provided for interest on the liability a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nancial company engaged in the business of advancing money on the security of gold. It is also engaged in trading of shares and securities. During the year under consideration, it purchased 10.25% Government of India 2021 securities for an amount of Rs.12,64,00,000/-, the face value of which was Rs.10.00 crores. At the year end, the assessee valued the above said security at Rs.12,28,58,300/- and claimed the diminution in the value amounting to Rs.35,41,700/- as expenditure. Both the tax authorities disallowed the said claim of the assessee. The assessee had claimed a sum of Rs.8,10,572/- under the head Staff welfare expenses , which consisted of contribution made to and also interest paid on an account named Staff welfare scheme . The AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .11,81,25,000/-, meaning there by the assessee has further reduced the value during the year ending 31.3.2007 and 31.3.2008. It is not known whether the AO has made similar disallowances in those years or not. Be that as it may, this information proves the fact that the assessee has treated the purchase of Government of India Security as Current investment only and has been valuing the same at the end of each year under the policy viz., the cost or market value which ever is less. The assessee has sold the above said security in the financial year ending 31.3.2009 for an amount of Rs.12,86,69,300/- and has accounted for the entire profit of Rs.1,05,44,300/- as its income. The said profit of Rs.1,05,44,300/- includes the amount claimed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso deducted there on. The amount accumulated in the name of employees were collectively accounted as Staff Welfare Scheme and the accumulated balance was not invested any where else. Instead, the assessee itself has used such contributions for its own business purpose. Thus, the net effect of this arrangement is that the amounts credited to the Employees Welfare Scheme a/c represents the amounts collected from employees only. The assessee has also provided for interest on the liability amount held under the Staff welfare scheme a/c and claimed the same as expenditure. 13. According to the AO, the said Staff Welfare scheme would fall in the category of any other fund for the welfare of employees as specified in sec. 2(24)(x) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crued there on at the time of retirement. It is also submitted that the assessee is deducting TDS from such interest payments. It is only possible to identify the accumulated balance in the name of each of the employee and pay the same only if the sub-ledger of the Staff welfare scheme is available. Hence, in our view, the Staff welfare scheme a/c can only be taken as a creditor account and not as welfare scheme account as defined in sec. 2(24)(x) of the Act. Accordingly, we agree with the final decision reached by the Ld CIT(A) on this issue. Consistent with the view taken in assessment year 2004-05, we agree with the decision reached by Ld CIT(A) on this issue. Accordingly we uphold the relief granted by Ld CIT(A) on this issue. 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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