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TMI Blog2018 (5) TMI 1934X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the RBI. If the assessee has complied with the provision as per RBI Guidelines, the relief may be given to the assessee by providing adequate opportunity of being heard to the assessee. Thus Ground No. 2 (I) of the assessee is allowed for Statistical purposes. Disallowance of insurance premium paid to LIC and others towards leave encashment liability - HELD THAT:- Assessee drew our attention to the decision of ITAT Jaipur Bench in the case Jhalawar Kendriya Sahakari Bank Ltd vs ACIT [ 2014 (8) TMI 1127 - ITAT JAIPUR] wherein the Bench has allowed the benefit of Group leave encashment Scheme to the Bank - AR of the assessee further submitted that the assessee has discharged its liability towards leave encashment scheme, the same is therefore, allowable as expenditure u/s 37(1) of the Act. Taking into consideration the above facts and circumstances of the case and the decisions relied upon by the ld.AR of the assessee, it will be in the interest of equity and justice to restore the issue to the file of the AO for afresh adjudication. The assessee is directed to submit the written submission alongwith relevant details before the AO. Thus Ground No. 2(ii) of the assessee is allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oing through the remand report dated 25-10-2017 alongwith the enclosures, I am convinced that approval to convert the case of the appellant from ''limited scrutiny'' to ''complete scrutiny' was granted by the Pr. CIT, Ajmer vide letter No. Pr.CIT/AJM/ITO(Tech)/16-17/2022 dated 30-11-2017. Therefore, I find no merit in the ground raised by the appellant. Accordingly, this ground is dismissed. 2.2 We have heard the rival contentions and perused the materials available on record. We have also taken into consideration the written submission of the assessee but we did not find it controverting the decision of ld. CIT(A) on the issue of converting the case of the assessee from ''limited scrutiny'' to ''complete scrutiny''. It is noted that the ld. CIT(A) has explicitly dealt with the issue in his order which does not require any interference. Hence, the Ground No. 1 of the assessee is dismissed. 3.1 Apropos Ground No. 2 (1) of the assessee, the facts as emerges from the order of the ld. CIT(A) are as under:- ''8.3 I have gone through the assessment order, statement of facts, grounds of appeal, written submission, remand report and rejoinder carefully. This issue has already been d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cords vis-àvis the oral submissions, we are of the considered opinion that ground no. 2 stands covered in favour of the assessee vide order of ITAT, Chennai Bench as discussed in the above excerpt. We have gone through the copy of the Tribunal Order referred above and are convinced that this ground stands covered in favour of the assessee. The relevant portion of the order of the Tribunal (supra) is reproduced as under:- ''8. Now the second question which arises for determination before us is whether the assessee has created any reserve/provision for bad and doubtful debts? The AR has contended that the assessee has created provision for bad and doubtful debts under nomenclature 'Reserve for NPA'. The terminology 'Reserve for NPA' has been used by the assessee in accordance with the RBI directions. As is evident from the assessment order, the assessee has indeed created 'Reserve for NPA'. For claiming benefit under the provisions of Section 36(1)(viia)(a) the condition to be satisfied is: that provision for bad and doubtful debts should have been made by the bank eligible to claim such deduction. Cooperative Banks do not strictly follow the provisions of Banking Regula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 35,19,00,000 less ₹ 99,76,056). Brief facts of the case are that the AO during the course of assessment proceeding requested the assessee bank to furnish the information relating to the amount of leave encashment and confirm as to whether the amount of leave encashment shown in P&L a/c is actually paid to the employees. If the same is paid to the employees then the assessee bank shall furnish the documentary proof for the same. The assessee bank submitted reply of the above query vide letter No. 18028 dated 29-12-2016 which has been considered by the AO. However, the AO did not find the assessee bank's reply acceptable on the following grounds:- (i) It is seen that the assessee bank has been claiming this deduction on the basis of investment made for this purpose with the LIC, Bajaj Allianz, future generali, Aviva, HDFC, India first and Birla. Any payment for leave encashment in future has to be made out of that fund. However, no such deduction is allowable under any of the provisions of the Income Tax Act and deduction if any has to be allowed only on the actual payment made to the employees. (ii) The contention of the assessee bank was duly considered but was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious decisions relied upon by the appellant carefully. In the decision given by the ITAT Delhi 'H' Bench in the case of the Nainital Bank, the amount paid to LIC on account of leave encashment was allowed as deducting relying on the decision of the Supreme Court in the case of CIT vs Textool Company Ltd (262 iktr 257) and the decision in the case of Associated Electrical Industries (India) Pvt. Ltd. I have gone through the decision of the Supreme Court in the case of Textool Company Ltd. carefully. The issue decided by the Hon'ble Supreme Court in that case was admissibility of deduction of the payment made to LIC towards gratuity fund u/s 36(1)(v) of the I.T. Act, 1961. The issue of allowability of deduction u/s 43(B)(f) of leave encashment was not there before the Hon'ble Supreme Court. The Hon'ble Supreme Court allowed the claim of the appellant observing as under:- ''Having considered the matter in the light of the background facts, we are of the opinion that there is no merit in the appeal. True that a fiscal statute is to be construed strictly and nothing should be added or subtracted to the language employed in the Section, yet a strict construction of a provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent as investment in Schedule II of the Balance Sheet (₹ 4,35,91,748 and ₹ 5,77,16,828 as on 31-03-2009 and 31- 03-2010 respectively) In the A.Y. 2010-11, the interest accrued on such funds was credited to the Profit & Loss Account under the head ''Other income''. Therefore, I find no justification for claiming investment of same nature as expenditure in the A.Y. 2014-15. 4.14 As per information furnished by the appellant, the actual amount paid towards leave encashment to employees through LIC was ₹ 99,76,056/-, therefore, in view of the discussion made above, the deduction of ₹ 99,76,056/- is held to be allowable u/s 43B(f) because this was the sum payable and actually paid by the assessee as employer in lieu of any leave at the credit of his employee, as specified u/s 43B(f). Accordingly, out of the total disallowance of ₹ 35,19,00,000/- disallowance of ₹ 99,76,056/- is deleted and the remaining disallowance of ₹ 34,19,23,944/- (₹ 35,19,00,000 - ₹ 99,76,056) is hereby confirmed. 4.3 We have heard the rival contentions and perused the materials available on record. During the course of hearing, the ld.AR of the assessee d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the credit of his employees, as specified u/s 43B(f). The interest of ₹ 3,80,89,353/- has accrued to the appellant on the funds parked with the various companies discussed by the AO in the assessment order at page 6 and the appellant has not credited this interest income in the Profit & Loss Account. I am of the considered view that the interest income of ₹ 3,80,89,353/- has accrued to the appellant and credited in the amount of the appellant by the companies, therefore, this income should have been offered for taxation by the appellant in the A.Y. 2014-15. As the appellant has failed to disclose the interest income of ₹ 3,80,89,353/- in return of income of the A.Y. 2014-15, therefore, the assessment of the appellant for the A.Y. 2014-15 is enhanced u/s 251(1) by sum of ₹ 3,80,89,353/-. Penalty proceedings u/s 271(1)© have already been initiated for concealing the particulars of income of ₹ 3,80,89,353/-.'' 5.2 We have heard the rival contentions and perused the materials available on record. This issue is concerned with the issue of leave encashment liability which has been restored back to the file of the AO for afresh adjudication. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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