2019 (8) TMI 1406 - AT - Income Tax

Tribunal upholds deletion of broken period interest & retirement payments in staff appeal

The Tribunal upheld the deletion of the addition of broken period interest and voluntary retirement payments made to staff. The appeal by the Revenue was ... Addition on account of broken period interest - HELD THAT:- Tribunal in turn, relying on the ratio laid down by the Hon’ble Bombay High Court in CIT Vs. HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT] had held that broken period interest was allowable as deduction. We hold that the assessee is entitled to claim the deduction on account of broken period interest and dismiss the ground of appeal No.1 raised by Revenue. Disallowance of payments made to retiring staff i.e. on their voluntary retirement - assessee had claimed the said expenditure as ex-gratia payment as in the nature of profits and in lieu of salary, and on the same, TDS was also deducted - AO disallowed the said expenses in view of section 35DDA of the Act and also held that they were not allowed as deduction under section 37(1) - HELD THAT:- This issue also arose before the Tribunal in assessee’s own case in assessment year 2011-12 [2016 (5) TMI 970 - ITAT PUNE] and the Tribunal vide paras 9 to 14 had decided the issue and allowed the claim of assessee. We are referring to the said paras but not reproducing the same for the sake of brevity. Accordingly, we find no merit in the ground of appeal No.2 raised by the Revenue and the same is dismissed. Issues involved:1. Deletion of addition of broken period interest.2. Deletion of addition of voluntary retirement payments made to staff.Analysis of the Judgment:Issue 1: Deletion of addition of broken period interestThe Revenue appealed against the deletion of the addition of broken period interest. The Tribunal referred to previous cases and cited the Hon'ble Bombay High Court's ruling that broken period interest is allowable as a deduction. Relying on this precedent, the Tribunal allowed the deduction for broken period interest claimed by the assessee. The appeal by the Revenue on this issue was dismissed.Issue 2: Deletion of addition of voluntary retirement payments made to staffRegarding the addition of voluntary retirement payments made to staff, the Assessing Officer disallowed the expenses, citing section 35DDA of the Income-tax Act and held that they were not allowable under section 37(1) of the Act. However, the CIT(A) allowed the claim based on a Tribunal ruling in favor of another bank. The Tribunal, in previous cases, had decided in favor of the assessee on similar grounds. Therefore, the Tribunal dismissed the Revenue's appeal on this issue as well.In conclusion, the Tribunal upheld the deletion of the addition of broken period interest and voluntary retirement payments made to staff. The appeal by the Revenue was dismissed, and the order was pronounced on August 19, 2019.