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TMI Blog2015 (8) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... ings the Assessing Officer noticed that the assessee has made claim on account of premium paid to LIC for group gratuity scheme amounting to Rs. 16,50,766/-. It seems that the matter had traveled to the Tribunal in earlier round and the same was set aside to the file of Assessing Officer for reexamination. The findings of the Tribunal has been extracted by the Assessing Officer at para 2.1 which is as under: "We have considered the rival submission carefully. It is pointed out by the assessee that the Gratuity Scheme of its employees have been set up by way of a Deed dated 07.04.1986 effective from 01.03.1983. It is also observed that the necessary application has been made to the Commissioner seeking approval in the month of May, 1987. It is also seen that the Gratuity Scheme has been finalized by the assessee in collaboration with the LIC of India, a public financial institution. The assessee is a Himachal Pradesh Government undertaking. The application seeking approval made to the Commissioner in May, 1987 has not been disposed of, as has been contendd by the appellant before the lower authorities as well as before us. In any case, there is no order declining the recognition. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed a sum of Rs. 16,50,766/-. 4 On appeal before the Ld. CIT(A) it was mainly submitted that similar sum had been allowed in the past and therefore same may be allowed during these years. It was also submitted that premiums were made as per Rule 101 of IT Rules, 1962 and payment has been made for the purpose of payment of gratuity to irrevocable trust. Further the assessee has applied in the prescribed form for approval of funds, therefore the claim of the assessee should be allowed. 5 The Ld. CIT(A) after examining the submissions observed that the Assessing Officer has clearly observed that no application was pending in the office of the Ld. Commissioner for approval as per the communication. Further there is no provision of deeming approval in schedule IV of IT Act relating to approval of gratuity funds. In this background the addition made by the Assessing Officer was confirmed. 6 Before us. the Ld. Counsel for the assessee reiterated the submissions made before the Assessing Officer and the Ld. CIT(A). He further submitted that the Tribunal has clearly observed that such payments have been allowed in past, therefore following the rule of consistency, such payment should be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee by way of contribution towards an approved gratuity fund provided the same is under an irrevocable trust". A plain reading of section 36(1) (iv) and (v) makes it manifest that deductions there under are admissible only if the employer pays the contributions towards a recognized provident fund, an approved superannuation fund or an approved gratuity fund. The provisions of a taxing statute have to be interpreted strictly applying the rule of literal interpretation. Nothing can be added or substituted by implication or intendment. If Parliament has made deductions towards provident fund, superannuation fund or gratuity fund admissible only in cases where such funds are approved, granting deduction of amounts pad into unapproved funds under the cover of section 37 may defeat the legislative intent and frustrate the very purpose underlying the specific provisions made thereunder. The assessee entered into an agreement with the LIC and made contributions towards gratuity and superannuation funds for the benefit of its employees. The assessee made an application to the Commissioner for approval of the fund under the Employees Group Gratuity Scheme (corporate and factory ) w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the query it was submitted that proviso to clause (i) of Explanation to Sec 115JB is not applicable because provision made was already added to the profits of the concerned year. The Assessing Officer did not find force in the submissions and observed that since MAT provision contained in Section 115 JB and 115 JA were self contained code in itself, therefore said proviso is applicable only if the provision originally made had been added to the book profit u/s 115 JA or Section115 JB. It was also observed that out of the total accumulated provisions of Rs. 27.24 crores made in the earlier years, provisions to the extent of Rs. 20.29 crores were such that no amount withdrawn from the same and credited to the profit and loss account in subsequent years could in any case be deductible from the book profits u/s 115 JB as "provision for non performing loans written back". Out of the balance provisions of Rs. 6.95 crores, the ITAT had already allowed deductions in assessment years 2003-04 and 2004-05 to the extent of Rs. 4.75 crores. For the present assessment year 2005-06 therefore the provisions written back could be deductible, if at all, only to the extent of Rs. 2.20 crores. Howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of doubtful debts. Therefore these are clearly the provisions made in the earlier years and in the present year the assessee has withdrawn certain sum out of this provision and therefore the same are deductible in terms of proviso to clause (i) to Sec 115 JB. In fact identical issue came up for consideration of the Hon'ble High Court of Himachal Praddesh and the same was decided on the basis of para 32 to 35 which is as under: "32. We have given our deep and thoughtful consideration to the rival contention of the parties and have also gone through the records. It was not disputed by either of the parties before the ITAT that 2,37,76,034/- represents provisions for non-performing assets created in earlier years by debiting to the Profit & Loss Appropriation account ( not by debit to Profit & Loss Account) and credited to the Profit & Loss Account for the instant assessment year. The Explanation (i) to Section 115JB reads as follows: "Explanation.1- For the purposes of this section, "book profit" means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (2)........... and as reduced by- ** (i) the amount with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per profit and loss account. 35. Now, adverting to the facts and applying the aforesaid provisions to the present case, it would be seen that it had not been disputed before the ITAT that the sum of 2,37,76,034/- represents the provision for non-performing assets created earlier years, not out of reserve created before 01.04.1997. Therefore, the same had to be reduced for computation of book profit in accordance with section 115JB. The ITAT has come to categorical findings of fact that following provisions were available for credit to the profit and loss account, which had been made after 01.04.1997 and not prior to it:- F.Y. Amount of provision (Rs. Crores) 1998-99 1.98 1999-00 1.76 2000-01 4.48 2001-02 0.91 2002-03 0.03 Therefore, in the given facts and circumstances, we have left with no option but to uphold the order passed by the ITAT." Respectfully following the above, we decide this issue in favour of the assessee and direct the Assessing Officer to allow the assessee to reduce the amount withdrawn from reserve from the book profits. 14 In the result, appeal of the assessee in ITA No. 1226/Chd/2010 is partly allowed. ITA No. 1227/Chd/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al before the Ld. CIT(A) submissions made before the Assessing Officer were reiterated and the Ld. CIT(A) did not find force in them and confirmed the disallowance. 18 Before us. The Ld. Counsel for the assessee submitted that the amount was paid to LIC on the basis of particular scheme and the amount was calculated as premium on the basis of valuation done by the LIC. He contended that this expenditure is basically allowable u/s 37 and it is against the actual liability calculated by the LIC and therefore the amount is allowable even under clause (f) of Sec 43B if the amount was paid the same was allowable. 19 On the other hand, Ld. D.R for the revenue supported the order of the Ld. CIT(A). 20 After considering the rival submissions we find force in the submissions of the Ld. Counsel for the assessee. The amount has not be paid by way of provision but by way of premium under a particular scheme under which the Insurance company had computed the leave encashment dues. Therefore it cannot be called a payment towards a provision. In any case once the payment has been made the same is allowable under clause (f) of Sec 43B. Otherwise also the issue stands settled in favour of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of CIT V. A.P. Industrial Infrastructure Corporation Ltd., 175 ITR 361. 22 On appeal the submissions made before the Assessing Officer were reiterated and reliance was placed on the decision of CIT V. Karnataka Urban Infrastructure Development and Finance Corp, 284 ITR 582 as well as the order of Chandigarh Bench of the Tribunal in case of H.P. Government Energy Development Agency, Shimla V ACIT, ITAs No. 737, 738 and 739/Chd/2009. The Ld. CIT(A) did not find force in the same and confirmed the order of the Assessing Officer. 23 Before us, the Ld. Counsel for the assessee reiterated the submissions made before the Ld. CIT(A). He filed a copy of ASIDE scheme and invited our attention to clause (iv) wherein Government of India has clearly directed that any interest accrued on the deposits made in scheduled bank should be utilized for the purpose of scheme which has been later on used for the purpose of scheme. Therefore interest never accrued to the assessee. In any case the issue is covered by the decision of Chandigarh Bench of the Tribunal in case of H.P. Government Energy Development Agency, Shimla V ACIT (supra). He also relied on the decision of Karnataka High Court in case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a city account directly. On the question whether the interest on the bank deposits was taxable and it was held as under: "The assessee, the Karnataka Urban Infrastructure Development and Financial Corporation, a Government company owned by the State of Karnataka, was involved in projects of development of infrastructure and was appointed the nodal agency for the implementation of the mega city scheme worked out by the Planning Commission for development of urban infrastructure to Bangalore city. The funds received by it from the Government of India were deposited with banks for the period they were not utilized. The interest earned on these deposits was transferred to the mega city account directly. On the question whether the interest on these bank deposits was taxable. Held, that there was no profit motive as the entire fund entrusted and the interest accrued on the deposits in the bank, though in the name of the assessee, had to be applied only for the purpose of welfare of the nation as provided in the guidelines. The whole of the funds belonged to the State Exchequer and the assessee had to channelise them to the objects of the Centrally sponsored scheme of infrastructural ..... X X X X Extracts X X X X X X X X Extracts X X X X
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