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TMI Blog2014 (8) TMI 1127X X X X Extracts X X X X X X X X Extracts X X X X ..... excessive. 4. Under the facts and circumstances, Ld. A.O. has erred by disallowing Rs. 37,88,000/- of PACS Manager Fund, further, CIT(A) erred by sustaining the same. The disallowance made is unjustified, illegal or excessive. 5. Under the facts and circumstances, the Ld. A.O. has erred by making addition of Rs. 10,631/- on account of excess cash reserve, further, CIT(A) erred by sustaining the same. The addition made is unjustified, illegal or excessive. 6. Under the fact and circumstances, the Ld. A.O. has erred by charging interest U/s 234B. The appellant totally denies its liability of charging of any such interest. The interest, so charged, being contrary to the provisions of law and facts, may kindly be deleted in full. 7. That under the facts and circumstances of the case, Ld. A.O. has erred by initiating penalty proceedings U/s 271(1)(c) of the Act. 8. That the appellant craves your indulgence to add, amend or alter all or any grounds of appeal before or at the time of hearing." Departmental appeal in ITA No. 1051/JP/2011 "On the facts and in the circumstances of the case, the learned CIT(A) has erred in:- deleting disallowance of Rs. 40,00,000/- on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax Act, it has been held as allowable expenditure. iv. The Delhi Bench of ITAT in the case of Keihin Penalfa Ltd. Vs. ACIT vide ITA No. 4309/Del./2011 and 4937/Del./2012, has followed above referred judgment of the Supreme Court and granted the relief wherein also payment as made to LIC towards Group Gratuity Fund. v. In view of the above, the claim of the Appellant of the payment made to LIC towards Group Gratuity Fund is allowable under Section 36(1)(v) and disallowance made by Ld. A.O. and confirmed by CIT(A), deserves to be deleted. 6. Apropos ground No. 3 of appeal in respect of salary paid to staff on account of revision of wages was made consequent to settlement between the assessee, union staff, Registrar. Thereafter, the Finance Department of State Government approved the same and directed the Registrar to implement the settlement. Wages Revision Settlement initially was arrived on 11.10.2008 and thereafter, after incorporating the conditions suggested by the Finance Department, it was approved on 21.11.2008 by the Registrar and who directed to implement the same. The said wages settlement is known as 13th Wages Settlement. It is effective from the period 1.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the assessee has to create the PACS fund amounting Rs. 43.29 lacs to comply with the statutory requirement. The beneficiaries under PACS are working for the assessee, which is Central Cooperative Bank. This fact has not been denied by the Assessing Officer. However, he held that the calculations of the PACS fund by assessee to be not correct, which was held to be on the basis of loan disbursed during the year. The Ld. A.O. to arrive at the amount of such contribution first took the amount of loan distributed during financial year 2007-08 amounting to Rs. 8450.57 Lacs and reduced therefrom outstanding loan amount at the end of the year amounting to Rs. 9533.44Lacs and on resultant Rs. (-) 1082.87Lacs (Rs. 8450.57 Lacs - Rs. 9533.44 Lacs)applied 0.5% and worked out the amount of contribution to Rs. 5.41 Lacs and disallowed the remaining amount Rs. 37.88 Lacs (Rs. 43.29 Lacs - Rs. 5.41 Lacs).Perusal of the relevant Rule 27 (Kh), makes it clear that there is no stipulation, which says that loan disbursed during the year must be reduced from outstanding loan amount. Therefore, such exercise and formula applied by Ld. A.O. is not according to the said Rule. Further, Ld. A.O. used the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear that the word used is "and" not "whichever is less", therefore, both the amounts shall be eligible as provision under this Section and even by applying said Section, the Appellant will further eligible for provision of Rs. 95.33 Lacs being 10% of the advance outstanding at the end of the year. 11. From these contentions, it is clear that even by applying, Section 36(1)(viia), Appellant is eligible for making provision of Rs. 99.68 Lacs(Rs. 4.02 Lacs + Rs. 95.33 Lacs) as against provision made of Rs. 43.29 Lacs by the Appellant. 12. Without prejudicial to the above, it is contended that undoubtedly; fund has been created to ensure the timely payment of the salary of the Manager of Primary Agricultural Credit Societies working under the Appellant Bank. The business and recovery of the loan of the bank are depends upon the performance of the PACS and their working Managers. Therefore, such fund is created for commercial benefit of the Appellant Bank and wholly and exclusively for the business. The fund as created, can be used strictly according to the Rules,2003 or as per instruction of the Registrar, Cooperative Societies, the Appellant Bank cannot use the fund as its own. Sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e". The policy was taken to pay its employees. As per estimates of LIC the total liability of the Appellant Bank towards leave encashment already accrued stood at Rs. 83,57,029/- as on 31.03.2008. However, Appellant paid Rs. 40,00,000/- by the end of FY 2007-08 and accordingly debited only Rs. 40,00,000/- to its Profit & Loss Account against said payment. It is pertinent to note that after contribution of premium, the Appellant has no control over the same. Further, the employee's of the Appellant are entitled to take the money on account of leave encashment directly from LIC under said policy on account of their leave encashment. Thus, it ensured the timely payment of the dues of the employees, irrespective of the financial health of the bank at the time of payment. This benefited the employees by assuring their leave encashment payments. The expenses claimed for leave encashment is towards actual payment made and not against the provision. Leave encashment is payable on the period of services already rendered, for which employees are entitled for leave encashment, however, it is payable periodically or at the time of retirement. Thus, a certain liability crystallized on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d No. 2 of the assessee is allowed. Apropos ground No. 3, there is no dispute on the facts that the amount of payment of arrears of salary in question was made consequent to the 13th wage settlement with all the stake holders. The genuineness of the payment is not challenged. The assessee is governed by regulatory laws of Rajasthan Cooperative Societies Act. The assessee's liabilities towards wage revision having accrued and cryslatised by way of agreed settlement, the same is an allowable business expenditure as per Income Tax Act. The AS-I and II further supports the accounting done by the assessee in this behalf. Our views are fortified by the above referred judicial pronouncements cited by the learned counsel and mentioned at para above. Respectfully following the Hon'ble Supreme Court and various other Hon'ble High Courts judgments, we hold that the assessee is eligible for deduction of provision of wage settlement of Rs. 20.00 lacs. In view of the above, ground No. 3 of the assessee is allowed. Apropos ground No. 4, the reasons for the payment have been narrated above, which have not been controverted by the learned D.R.. This emphasizes the fact that the assessee being ..... X X X X Extracts X X X X X X X X Extracts X X X X
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