Tribunal grants appeals, directs AO review. Disallowances set aside, interest issues remitted.

The Tribunal allowed both appeals filed by the assessee for statistical purposes, directing the Assessing Officer (AO) to re-examine and reconsider the contested issues. The disallowance of pension payments and non-performing investments written off were set aside, following previous decisions favoring the assessee. The issue of interest charged under Section 220(2) was remitted back to the AO for fresh examination in light of a Supreme Court decision. The interest levied under Section 234D was upheld based on a binding High Court decision.

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Issues Involved:
1. Disallowance of pension paid.
2. Disallowance of non-performing investments written off.
3. Chargeability of interest under Section 220(2).
4. Interest levied under Section 234D.

Detailed Analysis:

1. Disallowance of Pension Paid:
The assessee contested the disallowance of Rs. 3,78,87,559/- claimed as pension payments to retired employees. The Assessing Officer (AO) disallowed this claim, arguing that since the assessee already claimed contributions to the pension fund under Section 36(1)(iv) of the Income Tax Act, the direct pension payments to retired employees could not be claimed again under Section 37. The CIT(A) upheld this disallowance. The assessee argued that the contributions to the pension fund and the direct pension payments were distinct claims, with the latter necessary due to insufficient funds in the pension corpus. The Tribunal referred to a similar case involving Dhanalakshmi Bank, where it was held that direct pension payments, if not duplicated, should be allowed as deductions due to contractual obligations. The Tribunal set aside the CIT(A)'s order and remitted the matter back to the AO for re-examination in light of the Dhanalakshmi Bank decision.

2. Disallowance of Non-Performing Investments Written Off:
The assessee contested the disallowance of Rs. 3,13,11,800/- for writing off non-performing investments. The Tribunal noted that a similar issue had been decided in favor of the assessee in previous years, referencing the Kerala High Court's decisions in the cases of Lord Krishna Bank and Nedungadi Bank. These decisions established that losses on revaluation of securities should be allowed as deductions. The Tribunal directed the AO to delete the disallowance, setting aside the CIT(A)'s order on this issue.

3. Chargeability of Interest Under Section 220(2):
The issue of interest charged under Section 220(2) was contested. The Tribunal noted that the Supreme Court's decision in Vikrant Tyres vs. First ITO (247 ITR 821) (SC) had settled the matter. Since the tax authorities had not examined this issue in light of the Supreme Court's decision, the Tribunal set aside the CIT(A)'s order and remitted the issue back to the AO for fresh examination.

4. Interest Levied Under Section 234D:
The assessee contested the interest levied under Section 234D. The CIT(A) dismissed the claim, following the Kerala High Court's decision in CIT vs. Kerala Chemicals & Proteins Ltd. (323 ITR 584). The Tribunal found no reason to interfere with the CIT(A)'s decision since it was based on a binding jurisdictional High Court decision.

Assessment Year 2004-05:
For the assessment year 2004-05, the issues contested were identical to those in the previous year:
- Disallowance of Pension Payments: The Tribunal set aside the matter to the AO for fresh examination, consistent with the previous year's decision.
- Disallowance of Non-Performing Investments Written Off: The Tribunal directed the AO to delete the disallowance, following the precedent set in earlier years.
- Charging of Interest Under Section 220(2): The Tribunal remitted the issue back to the AO for re-examination in light of the Supreme Court's decision in Vikrant Tyres.

Conclusion:
Both appeals filed by the assessee were allowed for statistical purposes, with directions for re-examination and fresh consideration by the AO on the contested issues. The Tribunal's decisions were consistent with previous judgments and binding High Court rulings.

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