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TMI Blog2021 (9) TMI 439X X X X Extracts X X X X X X X X Extracts X X X X ..... the financial year 2012-13, it cannot be said that the assessee cooperative bank has decided to implement and enforce 14th pay commission recommendation in respect of its employees and on same analogy, prior to these two significant events, even the employees were not having any legally enforceable claim to implement 14th pay commission recommendation against the assessee co-operative bank. Crystallization of liability to pay arrears of salary and other payments towards surrender leave, bonus and ex-gratia etc. as per 14th pay commission recommendation arose during the financial year 2012-13 relevant to subsequent assessment year 2013-14 and not during the current financial year 2011-12 relevant to impugned assessment year 2012-13. The assessee co-operative bank therefore shall be eligible to claim the same in the subsequent assessment year 2013-14 and not in the impugned assessment year. AO is well within his jurisdiction to examine all such claims and the assessee is required to justify such claims and demonstrate with reasonable verifiable evidence that such liability has crystallized during the year under consideration. Grounds so taken by the assessee co- operative b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000/- ₹ 9,07,239/- 01.01.2009 to 31.03.2012 (c) Bonus exgratia payments ₹ 8,50,000/- ₹ 7,41,300/- 01.01.2009 to 31.03.2012 4. It was submitted that out of above provisions pertaining to period F.Y. 2011-12 and earlier years w.e.f. 01.01.2009, an amount of ₹ 1,99,91,560/- for salary arrears, ₹ 9,07,239/- for surrender leave payment and Bonus ex-gratia of ₹ 7,41,300/- have been paid as per vouchers enclosed. The A.O. has just denied the claim of assessee for such provisions for the reason that the agreement letter is signed by the concerned management and staff on 16.04.2012 the actual payments are not made by the assessee in the A.Y. 2012-13. 5. It was submitted that no care for following facts legal aspects has been considered. It was submitted that the assessee though follows Mercantile System of Accounting where the income expenses accrued / due theory applies. But it is a matter of Determination Crystallization of Liability as Going Concern of business is more important in Business Exped ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat no doubt, the Registrar, Cooperative Society has directed the assessee to fulfill the wage compromise agreement. However, the agreement between the labour and the assessee management was only signed on 16.04.2012 and even no payments were made by the assessee during the financial year relevant to assessment year 2012-13. It was accordingly submitted that it was a case of provisions towards arrear of salaries which has not crystallized during the year under consideration and has been rightly disallowed by the Assessing Officer. 10. It was further submitted that the ld. CIT(A) on further examination has held that the amount of ₹ 67,13,839/- pertains to the impugned assessment year and the same was allowed by him and the balance addition of ₹ 1,03,36,161/- was confirmed. It was accordingly submitted that there is no infirmity in the order so passed by the ld. CIT(A) and therefore, the grounds taken by the assessee be dismissed. 11. Before we proceed to examine the rival contentions, it would be appropriate to refer to the findings of the ld. CIT(A) which are contained at para 4.1, 4.2 and 4.3 of his order which reads as under:- 4.1 This ground of appeal rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.3 I have gone through the assessment order, statement of facts, grounds of appeal and written submission carefully. It is seen from the details filed by the appellant vide letter dated 22.06.2016 that out of the total arrear of salary of ₹ 1,99,91,560/-, salary of ₹ 67,13,839/- pertain to the period 01.04.2011 to 31.03.2012. The employee-wise working sheet of arrear salary pertaining to the period 01.04.2011 to 31.03.2012 has also been filed by the appellant. As the salary of ₹ 67,13,839/- pertain to the previous year relevant to A.Y 2012-13, hence, it is held that this is a quantified and crystallized liability pertaining to A.Y 2012-13. Therefore, for the purpose of computing income of AY. 2012-13, the arrear salary of ₹ 67,13,839/- pertaining to previous year relevant to A.Y 2012-13 has to be allowed as deduction. Accordingly, out of the total addition of ₹ 1,70,50,000/- made by the AO, addition of ₹ 67,13,839/- is deleted and the remaining addition of ₹ 1,03,36,161/- (₹ 1,70,50,000 ₹ 67,13,839) is hereby confirmed. 12. We have heard the rival contentions and perused the material available on record. It is noted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... implement 14th pay commission recommendation arose on adoption of resolution at its meeting of the Board of Directors read along with execution of agreement with its employees and staff members. Prior to these two significant events which happened during the financial year 2012-13, it cannot be said that the assessee cooperative bank has decided to implement and enforce 14th pay commission recommendation in respect of its employees and on same analogy, prior to these two significant events, even the employees were not having any legally enforceable claim to implement 14th pay commission recommendation against the assessee co-operative bank. Therefore, the crystallization of liability to pay arrears of salary and other payments towards surrender leave, bonus and ex-gratia etc. as per 14th pay commission recommendation arose during the financial year 2012-13 relevant to subsequent assessment year 2013-14 and not during the current financial year 2011-12 relevant to impugned assessment year 2012-13. The assessee co-operative bank therefore shall be eligible to claim the same in the subsequent assessment year 2013-14 and not in the impugned assessment year. 15. It may be that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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