TaxTMI 
TaxTMI 
2013 (9) TMI 38
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....uently if it is found that after payment there are excess provisions then the excess amount is credited to P & L A/c . This being the method of accounting followed regularly by the assessee and therefore, the excess provisions made in earlier year was also required to be credited to the P & L A/c as per the method regularly followed by the assessee. From the balance sheet, the AO noticed that certain amounts were credited during previous year under statutory reserve directly without routing them through the P & L A/c . The details as mentioned by the AO in his order are as under:- (a) Statutory reserve: Opening balance as on 1-04-2006 80,99,16,594.42 Add. Amount received on sale of absolute items 7,578.00 Transferred from old balance of provisions of Branches made before 31-03-06 73,393.25 Old provisions amount of establishment a/c (11202832.40+696819.42) 1,18,99,651.82 Membership fee 4,339.00 2.3 Before the AO, it was submitted that since the above provisions pertain to earlier year when the income was exempt, therefore, reversing of provisions made in earlier year cannot be said to be the income of year in question. The contention of the assess....
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.... credited in the balance sheet. The assessee is required to follow the principle of consistency. The excess provisions so credited are to be considered as part of the income. 2.7 Before us, the ld. AR has made the following submissions. "In this connection it is submitted that it is evident that the said provision was made out from earlier years profits of the assessee bank. The provision is not allowable as deduction when made either from exempt income or taxable income and not includible as income when written off or transferred in any Reserve as it does not partake character of income of the year. In the case of assessee also the provision brought forward from earlier year which is transferred in Statutory Reserve cannot be considered and assessed as income of the year. The provision whether made out of exempted profits or from taxable profits is not relevant at all. It is also not required in law that excess provision when written back should be routed only through P & L A/c and cannot be directly transferred to any Reserve account of assessee. Even for argument sake if it is taken that excess provision is to be written back through P & L A/c in that case also it has to b....
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....eet the liability which has actually arisen and is known on the date of preparation of the balance sheet , it would obviously be a provision. Provisions made against the anticipated loss and contingencies are charges against profits and to be taken into account in course of receipt and P & L A/c in the balance sheet while reserves are appropriation of profits. We are not aware as to how the assessees is crediting amount under reserve and provisions by the assessee. Since the accounts are being audited and are being prepared as per Reserve Bank of India guidelines therefore, we feel that the reserve and surplus are made by the assessee as understood in commercial parlance. 2.9 It is well settled law that entries in the books of accounts are not conclusive. One has to ascertain the taxability on the basis of the provisions of Income Tax Act. Crediting the amount in the balance sheet will not decide the issue that such credits cannot be added to the income. The Hon'ble Apex Court in the following cases have held that book entries are not conclusive. 1. Kedarnath Jute Mfg. Co. Ltd. Vs. CIT,, 82 ITR 363 (SC) 2. CIT Vs. Indian Discount Co. Ltd. 75 ITR 191 (SC) 3. Satluj Cotto....
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....e condition rules, 2003 to contribute 0.15% of average outstanding loans of last year. The copy of this Rules were made available to the ld. CIT(A). Such contribution is compulsory and contributed fund will be held by Apex Bank for and on behalf of Registrar of Cooperative Societies. The liability of contribution for PAC Managers salary is a statutory liability being crystallized at close of every year and the contribution is payable as and when demanded by Registrar of Cooperative Society. The ld. CIT(A) after considering the contention of the assessee allowed the liability after observing as under:- "Allowability of contribution by the Apex Bank for PAC Managers salary is a statutory liability which is crystallized at the end of every year. The contribution however once made become at the disposal of Registrar of Cooperative Society which is payable as and when demanded by Registrar of Cooperative Society alongwith interest on it. Thus, it is not contingent liability but a statutory liability which is crystallized at the end of every year and hence the liability is allowable.'' 3.4 During the course of proceeding before us, the ld. DR drew our attention to the copy of Rules....