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TMI Blog2018 (8) TMI 1897X X X X Extracts X X X X X X X X Extracts X X X X ..... licy taken by the assessee was actually received by the assessee or it is just an accounting treatment by the assessee without actual income. If the benefit accrued on the policy is only accumulated to the fund itself which is to be used for discharge of liability on account of Leave Encashment, then such income though assessee has credited in the Profit Loss account would not partake the character of real income but it would be only accumulation of the value of the policy to be used for discharge of the liability on account of leave encashment. In view of the above facts and circumstances of the case, we direct the AO to verify these facts and then allow the claim of the assessee - Appeals of the assessee are allowed for statistical purposes. - ITA Nos. 273 & 274/JP/2018 - - - Dated:- 3-8-2018 - SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SINGH YADAV, AM For the Appellant : Shri Ajay Somani (C.A.) For the Respondent : Shri Raj Mehra (JCIT) ORDER PER VIJAY PAL RAO, J.M. These two appeals by the assessee are directed against two separate orders of ld. CIT (A), Ajmer dated 17.01.2018 and 03.01.2018 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year 2014-15 and the amount of premium was also more than ₹ 14 crores, therefore, the Tribunal remitted the matter to the AO for fresh adjudication after verification of the facts. Whereas for the assessment years 2009-10 and 10-11 the amount of premium is very small in comparison to the assessment year 2014-15 and the entire premium was paid only to the LIC. Hence the ld. A/R has submitted that the claim of the assessee may be allowed by following the earlier decision of the Tribunal in the case of Jhalawar Kendriya Sahakari Bank Ltd. vs. ACIT (supra). He has further submitted that the remanding back of the issue would cause a serious hardship to the assessee as the money of the assessee would remain with the department and the assessee being a small cooperative bank would lose the interest at least @ 6% as the department would pay only 6% per annum interest on the refund as against the cost of the fund is around 12%. Hence the ld. A/R has submitted that the claim of the assessee may be allowed. 3.1. On the other hand, the ld. D/R has submitted that the ld. CIT (A) has followed the order for the assessment year 2014-15 and this Tribunal has already remit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is clearly hit by the provisions of Section 43B(f) of the Act. As the assessee has not made any payment to employees more particularly in view of the provisions of section 43B(f) of the Act, the deduction in respect of expenses claimed by the assessee on account of provisions for leave encashment is not allowable to the assessee. (iv) Moreover the assessee has not furnished the documentary proof that the group leave encashment fund is an approved fund by the competent authority. In view of the above reasons , the provision made for the leave encashment of ₹ 35,19,00,000/-is disallowed and added to the total income of the assessee by the AO. 4.2 In first appeal, the ld. CIT(A) has confirmed the addition of ₹ 34,19,23,944/- by observing as under:- 4.12 ..The appellant has also relied upon the decision of ITAT Jaipur in the case of Jhalawar Kendriya Sahakari Bank. In this case also, the relief was allowed to the appellant on the submission made by the appellant that after contribution of premium, the appellant has no control over the same . (page No 9 of the order). The Tribunal also relied upon the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the employees. In the instant case, it is evident from the findings recorded by the Commissioner and affirmed by the Tribunal that the assessee had absolutely no control over the funds created by the LIC for the benefit of the employees of the assessee and further al the contribution made by the assessee in the said fund ultimately came back to the Textool Employees Gratuity Fund, approved by the Commissioner with effect from the following previous year. Thus the conditions stipulated in Section 36(1)(v) of the Act were satisfied. . Thus I am of the opinion that even the decision of Associated Electrical India Pvt. Ltd is also not applicable in the case under consideration. The appellant has also relied upon the decision of ITAT Jaipur in the case of Jhalawar Kendriya Sahakari Bank. In this case also, the relief was allowed to the appellant on the submission made by the appellant that after contribution of premium, the appellant has no control over the same (Page No. 9 of the order). The Tribunal also relied upon the decision of Hon'ble Supreme Court in the case of Textool Company Ltd and decision of ITAT Delhi in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lwar Kendriya Sahakari Bank Employee Group Leave Encashment Scheme. The facts are mentioned in detail above. The payment of leave encashment is a contractual liability8, a charge on assessee's profit. To ensure timely benefit of leave encashment of employees scheme is devised by the LIC, which works out the leave encashment liability and fixation of premium. The liability is ascertained and crystallized on a scientific method by the LIC. Thus, the assessee's payment of ₹ 40 lacs towards the same is within the framework of the scheme. In our considered view, the same is allowable deduction. This view further supported by the Hon'ble Supreme Court in the case of Textool Co. Ltd (supra) and ITAT judgement in the case of Nainital Bank Ltd (supra). Respectfully following the same, we hold that the assessee is eligible for this deduction. The ld.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 asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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