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TMI Blog2016 (6) TMI 731X X X X Extracts X X X X X X X X Extracts X X X X ..... And Smt. Beena A. Pillai, JM For the Assessee : Sh. K. Sampath Adv. Raj Kumar, Adv For the Revenue : Sh. Ramesh Chand, C.I.T, DR ORDER Per Bench The appeals by the assessee i.e. Punjab National Bank for the Assessment Years 2006-07, 2007-08 and 2008-09 are directed against the separate orders of the ld. CIT(A)-XVII, New Delhi dated 15.09.2009, 31.01.2011 and 25.07.2011 respectively. While in the case of Punjab Sind Bank the appeals for the assessment years 2006-07, 2007-08, 2008-09 and 2009-10 are directed against the orders of the CIT(A)- XVII, New Delhi dated 30.06.2009, 27.12.2010, 25.10.2012 and 18.03.2013 respectively. 2. Common issues are involved in these appeals which were heard together so these are being disposed off by consolidated order for the sake of convenience and brevity. At the first instance, we will deal with the appeal of Punjab National Bank in ITA No. 4493/Del/2009 for the assessment year 2006-07. Only effective ground raised in this appeal reads as under : 2. That on facts and in the circumstances of the case and in law the authorities below erred in holding that statutory contribution to Pension Fund in a sum of ₹ 471 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7157773.72 37297586.33 37157773.72 DEC 05 37282375.08 37822542.80 37282375.08 JAN 06 35987241.43 37716772.17 35987241.43 FEB 06 35903843.77 36897560.17 35903843.77 MARCH 06 43460767.59 36303638.83 43460767.59 Addl. Contb. Madeby bank during the year 4310000000.00 YEAR 393892891.49 404265329.53 4703892891.49 5. The claim of the assessee was that the contributions to approved Pension Fund of ₹ 431 crore were not liable to fringe benefit tax (FBT) and accordingly no provision for FBT on such contribution was considered necessary. The AO also found that the assessee had not paid FBT u/s 115 WB(1)(C) on any contribution by the employer to any approved superannuation fund for employees. 6. The AO asked the assessee to explain t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on such expenditure as is actually incurred for the purposes referred to in sub section 2 of section 115 WB. For example, if an employer has incurred ₹ 1000 towards travel, of which ₹ 200 is disallowed under section 37 of the Income Tax Act on the plea that it is bogus , Fringe Benefit Tax will be payable on 20 per cent of ₹ 800 (Rs. 1000- ₹ 200). 11. Assuming that Fringe Benefit Tax is levied on contribution made to superannuation fund, the inferences which can be drawn out of this is that employer-employee relationship exists in respect of such constitution but this relation ship has not been accepted while making order u/s 143(3). Thus, on one hand it is accepted that contribution towards superannuation fund is not an alalowable expenditure and on the contrary it is proposed to be treated as allowable expenditure for the purpose of Fringe Benefit Tax because then only Fringe Benefit Tax can be levied. This ambiguity in treatment of an expenditure should not be made. Suppose, Contribution of ₹ 100 crores to Pension Tax @ 33.66% Fund disallowed under Income Tax Act If disallowed under fringe benefit tax Tax @ 33.66% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,330/- was added to the value of fringe benefit of the assessee. 9. Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted as under :- 1. Section 19 of Banking Companies (Acquisition and Transfer of undertaking) Act, 1980 gives power to board of the bank to make regulations on various matters including on the following : the establishment and maintenance of superannuation, pension, provident or other funds for the benefit of officers or other employees of the corresponding new bank or of the dependents of such officers or other employees and the granting of superannuation allowances, annuities and pensions payable out of such funds. The aforesaid powers of the board are exercisable in the following manner: The Board of Directors of a corresponding new bank may, after consultation with Reserve Bank of India and with the previous sanction of the Central Government, [by notification in the official gazette] make regulations, not inconsistent with the provisions of this Act or any scheme made thereunder, to provide for all matters for which provision is expedient for the purpose of giving effect to the provisions fo this Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing for pension fund by employee, his balance in provident fund (employer s contribution) is transferred to pension fund. Accordingly, the bank s contributions to Pension Fund are in lieu of bank s contributions towards the provident fund. (Refer Paper Book page no. 6 for CBDT letter dated 03.01.1996) III. As held by Hon ble Supreme Court in the case K.P.Varghese v/s ITO (1981) 131 ITR 597 (SC) [Refer paper book page no. 7-23]. The speech made by the mover of Finance Bill explaining the reasons for introduction of the bill can certainly be referred to for the purpsoe of ascertaining the mischief sought to be remedied by the legislation and the object and the purpose for which the legislation was enacted. 10. The assessee also referred to the extract of the Budget Speech of the Finance Minister relating to the Fringe Benefit Tax introduced in the Finance Bill, 2005, which has been reproduced at page no. 5 and 6 of the impugned order for the cost of repetition, the same is not reproduced herein. It was further stated that contribution to pension fund of the bank was not voluntary but statutory and it was not for high-end employees / high-end managers but was applicable ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of the appellant contributions in the pension fund have been made in lieu of PF. I do not find any force in the argumetns of the Ld. AR and inclined to agree with the finding of the AO because when the provisions of the statute are straight, then it is settled principle of law that in such a scenario different interpretation in the lgiht of circumstantial facts and evidences are not requried. It is noted that the provisions of section 115WB(1)(c) clearly covers the contributions made to superannuation fund. Therefore, it is held that the AO has correctly made the addition on account of contributions made in pension fund by the appellant. Accoridngly, the addition made by him on this account is justified, hence, the same is confirmed. Now the assessee is in appeal. 12. The ld. Counsel for the assessee reiterated to the submissions made before the authorities below and further submitted that the amount paid towards Pension Fund in lieu of Provident Fund was a statutory liability of the assessee and the provisions of Section 115WB (1)(c) of the Act were not applicable because it was not a fringe benefits by way of any contribution by the employer to approved super ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he value of fringe benefits shall be the aggregate of the following namely : -- (a) -- ---- -- (b) The amount of contribution referred to in clause (c) of subsection( 1) of section 115WB which exceeds one lakh rupees in respect of each employee; Extract of Section 17(2) as amended by Finance (No.2) Act, 2009. Salary , perquisite and profits in lieu of salary defined. 17. For the purposes of sections 15 and 16 and of this section, - (1) salary includes . . . . . . . . (2) perquisite includes (vii) the amount of any contribution to an approved superannuation fund by the employer in respect of the assessee, to the extent it exceeds one lakh rupees; and 9.2. Contribution as defined in Part-A of Fourth Schedule in Cluase-2 is as under : 2. In this Part, unless the context otherwise requires,- (i) employer means ; (a) employee means ; (b) contribution means any sum credited by or on behalf of any employee out of his salary, or by an employer out of his own moneys, to the individual account of an employee, but does not include any sum credited as interest; PART-B Definit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... security or shares. The fair market value will mean the value determined in accordance with the method as may be prescribed by the Board. (b) By inserting sub-clause (vii) to provide that perquisite shall also include the amount of any contribution to an approved superannuation fund by the employer in respect of the assessee, to the extent it exceeds one lakh rupees. (c) By inserting sub-clause (vii) to provide that perquisite shall also include the value of any other fringe benefit or amenity as may be prescribed . 16. From the aforesaid series of amendments and clarification it can be said that any amount which is contributed to an individual account of an employee to the extent of Rs. One lakh is excluded from the purview of Fringe Benefit Tax from assessment year 2007-08. 17. On a similar issue, the coordinate bench of the ITAT Hyderabad vide order dated 16.7.2014, in the case of Andra Bank Hyderabad vs. DCIT Circle 1 (1) Hyderabad (Supra) referred to the decision of the coordinate bench dated 27.11.2009 in the case of Rajasthan Rajya Vidyut Prasaran Nigam Ltd., which analysed this issue and held as under :- The above principle of interpretation laid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 10% per month on the pay of the employee, which contribution was hitherto being made to the PF account. (ii) The accumulated contributions of the bank to the Provident Fund and interestaccrued thereon up to the date of such transfer in respect of the employee ; (iii) Additional annual contribution to the Fund as required to secure payment of pensionary benefits to the members of the Fund, based on actuarial investigation of the Fund as at 31st March of every financial year. 19. In the present case, nothing is brought on record to substantiate that the contribution in the Pension Fund of the assessee bank was over and above the contributions to gratuity and provident fund. Moreover, in the absence of the Pension Scheme, the assessee would have continued to contribute the stipulate amount to the Provident Fund account of the employees and such stipulated contributions would not have attracted fringe benefit tax. In our opinion, the contributions made by the assessee bank to the Pension Fund Scheme is only to secure pension payments which is its statutory obligation. Therefore, the assessee bank has established a superannuation Scheme for the purpose of providi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e worse than expected, the employer's obligation may increase. In view of the above, it is apparent that the contribution paid by the assessee bank is mainly made up of two components, firstly to meet the cost of the accruing benefits during the year and secondly, an adjustment for any deficit or surplus in the scheme at the time for the past year(s). Accordingly, in view of the above arguments and given the nature of the 'Defined Benefit Scheme', it is not possible to derive the contribution on a per employees basis which may be used for income tax purposes. 12. In the case of Royal Bank of Scotland Inre, 45 Taxman.com 283, the Authority for Advanced Rulings has analysed the defined benefit scheme and held that in the defined benefit scheme employer s contribution to the superannuation fund assures only future benefit to employees and they did not get any vested right at the time of making contribution to the fund. In the context of analyzing the tax deducted at source provisions, it was held that such contribution need not be treated as chargeable perquisite in the hands of employee until they are entitled to receive it. The Hon ble AAR followed the principles l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o allow the claim of the assessee and not to consider the impugned contribution of the assessee to the Pension Fund as a Fringe Benefit provided by the assessee to its employees. During the course of hearing, no other decision was brought to our notice. Similar issue is involved in ITA Nos. 1826 and 4254/Del/2011 for the assessment years 2007-08 and 2008-09, therefore, our findings given in the former part of this order in respect of ITA No. 4493/Del/2009 for the assessment year 2006-07 shall apply mutatis mutandis. 22. In the appeals relating to Punjab and Sind Bank, New Delhi in ITA Nos. 3869/Del/2015, 1363/Del/2011, 6379/Del/2012 and 2981/Del/2013 for the assessment years 2006-07, 2007-08, 2008-09, 2009-10 respectively, the issue involved is identical as was involved in the case of Punjab National Bank in ITA no. 4493/Del/2009 for the assessment year 2006-07 (Supra), therefore, the findings given in former part of this order shall apply with the same force. 23. One another issue relating to charging of interest u/s 115WJ and 234 D has been raised in the appeals of Punjab and Sind Bank, New Delhi. As regards to this issue, it was a common contention of both the parties th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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