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TMI Blog2019 (4) TMI 2055X X X X Extracts X X X X X X X X Extracts X X X X ..... has erred in not appreciating the reasonable explanation and bonafide act of the appellant assessee on the declaration given by the I.K.G Punjab Technical University. 4. The appellant assessee craves leave to raise and urge any other ground of appal as may be deemed proper at the time of hearing." On the other hand, the revenue has challenged the order of the CIT(A) on the following grounds of appeal: "1. That on the facts and in the circumstances of the case Ld. CIT(A) has erred in law and on facts by deleting the addition of Rs. 1,99,19,242/- without appreciating that Rs. 22,12,519/- was only allowable u/s 43B(f) of the I.T. Act being amount actually paid as Leave Encashment and not the amount paid to LIC, Bajaj Allianz and Metlife plus the interest accrued thereon deposits of Rs. 1,75,78,084/- made by the A.O. on account of Excess Claim by the assessee under the Head "Leave Encashment". 2. That on the facts and in the circumstances of the case Ld. CIT(A) has erred in law and on facts that the provisions of section 43B(f) of the I.T. Act are overriding as the assessee has not made payments only of Rs. 22,12,519/- to the employees whereas he has claimed Rs. 45,43,670/- as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ersity (hereinafter referred to as 'PTU') on their FDR's amounting to Rs. 31 crores (approx.) held with the assesses branch offices at Mansoorwal Dona and Ibban. On a query raised by the A.O wherein the assessee was called upon to furnish the details of the deposits and as to whether TDS was deducted on the interest payments made to the aforementioned institution, it was submitted by the assessee that as PTU had submitted letters that its income was exempt under Sec. 10(23C)(iiiab) of the IT Act, therefore, for the said reason no TDS was deductible from the interest so paid to it. In order to fortify its aforesaid contention the assessee vide its reply dated 09.11.2016 placed on record with the A.O the letters submitted by PTU with the assessee bank. In pursuance to the notice issued under Sec. 133(6) to the director-finance, PTU, the latter vide its letter dated 02.12.2016 inter alia submitted that as the income of the University viz. PTU was exempt under Sec. 10(23C)(iiiab) of the IT Act, therefore, it had not filed its return of income for the year under consideration i.e. A.Y. 2014-15. The A.O after necessary deliberations on the issue under consideration concluded that PTU was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssor in the case of the assessee for the immediately preceding year allowed only the amount actually paid to the employees on account of leave encashment as a deduction, while for the provision made during the year along with the interest accrued on past deposits which were claimed to have been reinvested were added back to its income. In the backdrop of his aforesaid deliberations the A.O made a net addition out of provision for leave encashment of Rs. 1,99,19,242/-. Further, it was noticed by the A.O that the assessee bank had claimed expenses of Rs. 8,85,32,000/- as provisions for bad and doubtful debts. Out of the aforesaid amount Rs. 3,53,47,000/- were the provisions against standard assets. It was noticed by the A.O that the aforesaid amount was not actually paid but only a provision was made for it. It was observed by the A.O that the department in the past was not allowing the provision made against standard assets for the reason that these were the debts which were secured against securities pledged against them. In sum and substance, the A.O held a conviction that the aforesaid debts could not be claimed to have become bad as there were adequate securities against them wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue under consideration had followed the view taken by his predecessor in the preceding years wherein the addition made by the A.O on this account was upheld under Sec. 43B(f) of the IT Act. However, it was further observed by him that on further appeal the issue had been restored back by the Tribunal for the said preceding year for examination after giving an opportunity to the assessee. Adverting to the facts involved in the case of the assessee for the year under consideration, it was observed by the CIT(A) that admittedly the assessee had paid a premium of Rs. 45,53,677/- for a group insurance leave encashment policy taken by it. The CIT(A) observed that the aforesaid amount was disallowed by the A.O on the ground that as the same was a contingent liability, therefore, the same was not allowable as an expense under Sec. 37(1) of the IT Act. The CIT(A) after deliberating on the facts of the case concluded that the payment of premium for group insurance leave encashment policy was an expense that was allowable under Sec. 37(1) of the IT Act. Further, it was observed by him that as the interest accrued on the Group Insurance Leave Encashment Policy was not debited in the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... file return of income as per Sec. 139 of the IT Act, there would be no requirement for tax deduction at source since the income is any way exempt under the income tax act. It was thus the contention of the Ld. A.R that as the assessee bank was not obligated to deduct tax at source on the interest paid on the fixed deposits of PTU, as the latter had by way of certificates filed with the assessee bank claimed that as its income was exempt under Sec. 10(23C)(iiiab), therefore, no TDS was liable to be deducted on the aforesaid interest paid on its deposits. The Ld. A.R adverting to the appeal filed by the revenue submitted that the Grounds of appeal No. 1 and 2 pertaining to deletion by the CIT(A) of the addition of Rs. 1,99,19,242/- made by the A.O on account of provision for leave encashment and also the addition on account of interest accrued on Group Insurance Leave Encashment Policy was squarely covered in favour of the assessee by the order of the ITAT, Amritsar in the case of The Hoshiapur Central Co-operative Bank Ltd. Vs. Dy. CIT, Hoshiarpur (ITA No. 683/Asr/2014; dated 16.07.2018). The Ld. A.R took us through the observations of the Tribunal in context of the aforesaid issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unjab under the Punjab Technical University Act, 1996 (Act 1 of 1997), vide notification dated 16.01.1997 by the Department of Legal and Legislative Affairs, Punjab, solely for the educational purposes, therefore, as per Sec. 10(23C)(iiiab) of the income tax act, 1961 it was not liable to pay tax, hence no tax be deducted at source on the interest on its deposits with the bank. In fact, in reply to the information called for by the A.O under Sec. 133(6) of the IT Act, it was stated by PTU vide its letter dated 02.12.2016 that as it was a university working solely for the purpose of education and government had made substantial contribution/grant in the shape of land which was made available to the university at the various campuses across Punjab for the fulfilment of its objectives, hence its income was exempt under Sec. 10(23C)(iiiab) of the IT Act. We find that as per the CBDT Circular No. 4/2002; dated 16.07.2002-Para 2(ix) as the income of any university or other educational institution referred to in subclause (iiiab) of clause (23C) to section 10 is unconditionally exempt and they are not statutorily required to file return of income as per Sec. 139 of the IT Act, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame, then as per the 2nd proviso of Sec. 40(a)(ia) read with the 1st proviso to Sec. 201(1) of the IT Act, the aforesaid amount would not be liable to be disallowed under Sec. 40(a)(ia) of the Act. The Ground of Appeal No. 1 raised by the assessee is allowed for statistical purposes. 8. The appeal filed by the assessee is allowed for statistical purposes. ITA No. 731/Asr/2017 A.Y. 2014-15 9. We shall now advert to the appeal of the revenue. The revenue has assailed the deletion by the CIT(A) of an addition of Rs. 1,99,19,242/- that was made by the A.O on account of provision for leave encashment and interest accrued on previous investments. On a perusal of the order of the A.O, it stands revealed that the latter after considering the payment made by the assessee for leave encashment to the insurance company and adding the interest accrued on these deposits made earlier and deducting therefrom the amount actually paid as leave encashment during the year under consideration, had made an addition of Rs. 1,99,19,242/-. It is the claim of the A.O that as only a payment of Rs. 15,64,932/- had actually been made to the employees on account of leave encashment, therefore, only this amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowable as an expenditure under Sec. 37(1) of the IT Act. We thus finding ourselves to be in agreement with the view taken by the CIT(A) who had deleted the addition of Rs. 45,53,677/- made by the A.O on account of provisions for leave encashment, uphold his order to the said extent. Insofar the addition of Rs. 1,53,65,565/- on account of interest accrued on Group Leave Encashment Scheme Policy is concerned, we are in agreement with the view taken by the CIT(A) that no addition as regards the said amount could have been made, as the same represents the accretion to the policy amount which had been reinvested in the policy itself and thus to that extent reduced the amount of policy premium payable by the assessee bank. In fact, as the aforesaid interest accrued on Group Leave Encashment Scheme Policy had not been debited in the profit and loss account and stands reinvested in the policy, therefore, the same cannot be added as the income of the assessee. In case if the aforesaid interest would have been credited as income of the assessee, then the same would had also been eligible for a corresponding deduction as having been reinvested in the said policy, therein resulting to no a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f convenience are reproduced below. "36(1)(viia) In respect of any provision for bad and doubtful debts made by (a)a scheduled bank [not being a bank incorporated by or under the laws of a country outside India] or a non-scheduled bank or a co-operative bank outside India] or a primary co-operative agricultural and rural development bank, an amount not exceeding seven and one-half percent of the total income (computed before making any deduction under this clause and Chapter VI-A) and an amount not exceeding ten percent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner. Provided that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at its option, be allowed in any of the relevant assessment years deduction in respect of any provision made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf, for an amount not exceeding five percent of the amount of such assets shown in the books of account of the bank on the last day of the previous year: Provided further that for the relevant asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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