Tribunal decisions on revenue appeals and assessee objections for assessment years 2013-14 and 2014-15

The Tribunal dismissed the revenue's appeal for the assessment year 2013-14 and allowed the assessee's Cross Objection (CO). For the assessment year 2014-15, the Tribunal partly allowed the revenue's appeal and partly allowed the assessee's CO. The Tribunal upheld the CIT(A)'s decision regarding the deduction of actual payments to LIC under the Group Gratuity Scheme but reversed the CIT(A)'s decision on the provision for standard assets, disallowing it as a deductible expenditure.

---

---

Issues Involved:
1. Disallowance of expenditure towards premium paid to LIC under 'Group Gratuity Scheme'.
2. Addition of provision for standard assets.

Detailed Analysis:

1. Disallowance of Expenditure Towards Premium Paid to LIC Under 'Group Gratuity Scheme':

During the assessment proceedings, the Assessing Officer (AO) disallowed Rs. 76,15,159/- debited by the assessee towards premium paid to LIC under 'Group Gratuity Scheme' for the assessment years 2013-14 and 2014-15. The AO found that the contributions should be under a scheme approved by the Chief Commissioner or Commissioner of Income Tax as per Part 'C' to Schedule-IV of the Income Tax Act. Since the scheme was not approved, the sum was disallowed under Sec.36(1)(v) of the Act and added back to the income.

The assessee appealed to the CIT(A), who allowed the payment under Sec.37(1) of the Act, following previous decisions in the assessee’s own case for earlier years. The CIT(A) referenced decisions by the ITAT Hyderabad B-Bench and ITAT Delhi "B" Bench, which held that payments to LIC Group Gratuity Scheme are deductible under Section 37 of the Act, even if the scheme is not approved by the Commissioner of Income Tax.

Aggrieved, the revenue appealed to the Tribunal. The Tribunal upheld the CIT(A)'s decision, referencing the ITAT's decision in the case of Dist. Co-operative Central Bank, Eluru, which allowed similar deductions. The Tribunal reiterated that actual payments to LIC under the Group Gratuity Scheme are deductible as business expenditure under Sec.37(1) of the Act, even if the scheme is not approved.

2. Addition of Provision for Standard Assets:

For the assessment year 2014-15, the AO disallowed Rs. 37 lakhs debited towards standard assets under Sec.37(1), as the provision for standard assets is not an allowable deduction. The CIT(A) deleted the addition, following the ITAT Cuttack Bench's decision in the case of Mayurbhanj Central Cooperative Bank Ltd.

The revenue appealed to the Tribunal, arguing that the issue of provision for standard assets was decided against the assessee in the case of ACIT, circle-2(1) vs Chaitanya Godavari Grameena Bank. The Tribunal agreed with the revenue, stating that the provision for standard assets is not an allowable deduction under Sec.36(1)(viia) of the Act. The Tribunal emphasized that provisions for standard assets are contingent and cannot be equated with provisions for bad and doubtful debts, which are allowable under specific conditions.

The Tribunal cited multiple decisions, including those of the ITAT Chennai and ITAT Hyderabad, which held that provisions for standard assets are not deductible as they are contingent in nature and do not indicate non-recoverability of debt. The Tribunal set aside the CIT(A)'s order and restored the AO's decision, disallowing the provision for standard assets.

Conclusion:

- The Tribunal dismissed the revenue's appeal for the assessment year 2013-14 and allowed the assessee's Cross Objection (CO).
- For the assessment year 2014-15, the Tribunal partly allowed the revenue's appeal and partly allowed the assessee's CO.
- The Tribunal upheld the CIT(A)'s decision regarding the deduction of actual payments to LIC under the Group Gratuity Scheme.
- The Tribunal reversed the CIT(A)'s decision on the provision for standard assets, disallowing it as a deductible expenditure.

The above order was pronounced in the open court on 31st July, 2018.

---