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TMI Blog2014 (8) TMI 1199X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee filed its return of income for the AY.2009-10 on 28-09-2009 declaring loss of Rs. 38,53,07,482/-. In scrutiny assessment, the Assessing Officer vide order dt.16-11-2011 made addition of Rs. 1,34,33,665/- on account of "Damages for remittance to Pension Fund Trust" and office expenses of the Chairman and assessed the total income of the assessee as (-) Rs. 37,07,38,467/-. On 18-02-2014, the CIT, Salem issued notice u/s.263 to the assessee for the following reasons: "I. PAYMENT OF PENSION FUND TRUST: In the annual report for the F.Y.2008-09, it is seen from Schedule - 'T' under 'A Establishment Charges' (page-59) that the assessee has debited a sum of Rs. 15,59,87,294/- being contribution to Pension Fund Trust. However, in the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tribution remains un-recognized by the competent authorities. Thereby, the contribution of Rs. 15,59,87,294/- made by the assessee to the Tamil Nadu State Transport Corporation Employees Pension Fund Trust, Chennai cannot be claimed as deduction u/s.36(1)(iv). Thus, the non-disallowance of an amount of Rs. 9,79,42,302 [Rs. 15,59,87,294 - Rs. 5,80,44,992] by the Assessing Officer at the time of framing the assessment was erroneous. II. REIMBURSEMENT RECEIVABLE TOWARDS FREE PASSES: In Page No.64 of the Annual Report under Schedule-X, being 'Notes to and forming part of the accounts', under 1A, it is mentioned that the reimbursement towards passes issued to physically handicapped, freedom fighters etc. is not recognized as in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee is following mercantile system of accounting. The assessee is admitting income from reimbursement of free passes in the year of receipt and not in the year of making claim. The assessee cannot follow hybrid system of accounting. 4. Shri G.Baskar, appearing on behalf of the assessee submitted that the assessee has erred in invoking the provisions of section 263 in respect of contribution towards the Employees Pension Fund Trust, as well as, reimbursement of free passes issued to physically handicapped, freedom fighters, etc., The ld.Counsel submitted that the assessee has contributed a sum of Rs. 15,59,87,294/- towards Pension Fund Trust. The Trust namely, Tamil Nadu State Transport Corporation Employees Pension Fund Trust, Chen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing this practice consistently for the past several years and the department has been accepting this method of accounting of reimbursement claims. This is for the first year that the Revenue has raised objection on the issue. 5. Shri Guru Bhashyam, appearing on behalf of the Revenue vehemently opposed the grounds raised by the assessee. The ld.DR submitted that the assessee was supposed to get approval of the fund from the jurisdictional Commissioner or Chief Commissioner of Income Tax. The assessee is having its head office at Salem and is filing its return of income in the jurisdictional range of CIT, Salem. Therefore, the assessee ought to have taken approval of jurisdictional Commissioner to set up pension fund. To support his cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fund. The section does not lay down any specific condition that the fund should be approved by the jurisdictional Commissioner or Chief Commissioner only. In the present case, the assessee is contributing in the Pension Fund Scheme jointly floated by twelve State Transport Corporations operating in different districts of the state of Tamil Nadu. All the State Transport Corporations are signatories to the Trust Deed for setting up of joint State Transport Employees Pension Fund Scheme. It is not in dispute that the said fund has been recognized by the CIT-VII, Chennai. Once the assessee is contributing towards recognized fund, the assessee is entitled to get the benefit for the contributions made to the said fund. 7. The case of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised by the Revenue is that, since the assessee is following mercantile system of accounting, the assessee should offer to tax, reimbursement amount in the year of claim itself. A perusal of the records does not make it clear, whether the assessee is issuing free passes as per the scheme of Department of Social Welfare, Government of Tamil Nadu or Welfare Scheme formulated by its own and is thereafter claiming reimbursement from the Social Welfare Department. The moot point which has to be looked into for including the income in tax net is, 'When does the income crystalises'? In case the assessee is issuing free passes to physically handicapped, freedom fighters etc., under the scheme of Government, the assessee is assured to get the reim ..... X X X X Extracts X X X X X X X X Extracts X X X X
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