TaxTMI 
TaxTMI 
2021 (12) TMI 590
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....sed by the Assessing Officer was erroneous as so far as it was prejudicial to the interest of the Revenue and according to him it required revision. Accordingly, the show cause notice dated 24.01.2020 were issued and served on the assessee. The Ld. Pr. CIT raised the following reasons for revisions in the show cause notice : (i) From the Tax Audit Report clause 21(f), an amount of Rs.1421,52,71,424/- paid by the assessee an employer was qualified as not allowable u/s 40(A)(9) of the Act. The Tax Auditor has stated that during the year under consideration the assessee Bank has debited Rs. 1833, 10,62,361/- crores to the Profit and Loss Account towards contribution to approved Superannuation Fund (Pension Fund) which includes Rs. 1378,39,00,000 on account of change in mortality table 10 1ALM 2006-08 to LIC 1994-96 in the course of actuarial valuation. The Tax Audit also qualitied that in the absence of employee wise data on contribution the amount in excess of 27% has been worked out on overall salary and contribution to pension fund for all the employees including employees who have already superannuated, which works out to Rs.1421.53 crores. Further, in the Annual Report, the Man....
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....ccounting Standard 15 (AS-15) on Employee Benefits. A note to this effect was provided under Para 6.2(b) of the Notes to Accounts contained in the Annual Report for FY 2015-16. 2.2 Section 36(1) (iv) of the Act provides that any sum paid as an employer by way of contribution to an approved superannuation fund subject to limits prescribed for approving the said fund shall be allowed as a deduction while computing income under the head Profits & Gains from Business/Profession (Business Income") 2.3 As per Rule 87, the ordinary annual contribution by an employer to a fund in respect of any particular employee shall not exceed 27% of his salary for the year as reduced by employer's contribution to any provident fund in respect of the same employee for that year. 2.4 From a combined reading of Rule 87 and the definition of contribution, it may be inferred that Rule 87 seeks to limit only those contributions which are determined on an individual employee basis and credited to the individual account of each particular employee. 2.5 The Assessee Bank manages 2 types of schemes for the benefit of its employees: defined contribution scheme and defined benefit scheme. The contribu....
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....note no. 6.2 (b) as under : The Bank has decided to adopt IALM 2006-08 table instead of LIC 1994-96 which was followed till last year in respect of employees benefits. The impact of such change in accounting estimates to the extent of actuarial gain or loss, due to change in mortality table, has resulted in increase in operating expenses by Rs. 1391.25 with consequential increase in net loss by Rs. 909.77 (net of tax impact for the year. 9. In the submissions filed by the assessee it is submitted that the claim of assessee is as per AS-15 and is allowable. Assessee has claimed that provisions of section 36(1) (iv) of the Act and Rule 87 of the Income Tax Rules are not applicable to them. 10. The assessee bank has submitted that provisions of section 36(1)(iv) and Rule 87 of the Act place restrictive limitations on the ordinary annual contributions to the individual accounts of the employees and do not apply to defined benefit schemes. It has placed reliance on the judgement of Hon'ble Bombay High Court in the case of CIT vs. Glaxo Smithkline Pharmaceuticals Ltd. (ITA No.2232/2011 dated 06.03.2013) as well as decision of TAT Hyderabad in the case of Andhra Bank (ITA No. 60....
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....e computed as per the provisions of the Income Tax Act and Accounting Standards do not override the provisions of the Income Tax Act, it is again observed that actuarial valuation has served the purpose of determining the quantum of deposits to be made and not the amount to be claimed as deduction or not. 13. As per the remarks of the Auditor reproduced above, the Assessee Bank is claiming deduction principally on account of the judgement of Hon'ble Bombay High Court and decision of ITAT Hyderabad in the cases cited supra. The facts about the case of CIT vs. Glaxo Smithkline Pharmaceuticals Ltd are different from the facts of the case of the assessee. In the case cited, the Hon'ble Bombay High Court gave the decision in favour of the assessee chiefly relying on and following their own decision in the case of CIT Vs Western India Paper and paperboard Private Limited (189 IT 309). In the latter case the facts are that the company paid contributions to the provident fund of the directors and claimed it as deduction u/s 36(1) (iv) of the Act. On appeal at the stage of High Court, it was held to be not allowable by the Hon'ble Bombay High Court in the decision reported in ....
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....iability ii. In the case decided by Hon'ble High Court referred above, the amount was entirely claimed as deduction so this expenditure was not partly claimed u/s 36(1) (iv) and partly u/s 37 whereas the Assessee Bank is claiming the amount of Rs. 1421.52 crores u/s 37 and rest of the amount u/s 36(1) (iv) of the Act. iii. In case of assessee the Auditor himself is qualifying the amount as not allowable. In view of this, reliance of the Assessee Bank on the judgement cited by them is not correct. 15. Further, such expenses are allowed as deductions u/s 37 of the Act, nature of which is NOT described in sections 30 to 36. The nature of expenditure of assessee viz. contribution to approved superannuation fund is specifically dealt with in section 36(1) (iv) of the Act and assessee is also claiming a part of it (i.e which is excessive of the limits in Rule 87 discussed above) as deduction under the said section. 16. The facts of the case in ITAT Hyderabad in the case of Andhra Bank (ITA No. 601 and 781 also differ from the case of the Assessee Bank in that those cases relate to the issue of Fringe Benefits Tax and not the deductions u/d 36(1) (iv) of tine Act. 17. In v....
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....of revenue. The Appellant Bank prays that the initiation of revision proceedings u/s. 263 is without jurisdiction and bad in law and the resultant order passed u/s. 263 dated March 12, 2020 be quashed accordingly. 6. At the time of hearing, the Ld. AR of the assessee submitted that in the given case, there are two issues involved one relating to provision for pension and second provision for leave encashment. With regard to provision for pension, he brought to our notice page 5 of the Paper Book in which assessee has submitted notes to computation of income (Note No. 1.16) before the Assessing Officer and also assessee has submitted detailed submissions before AO in response to notice u/s 142(1) of the Act and he brought to our notice Annexure to such response submitted before AO and he specifically brought to our notice Annexure 12 of the provision for pension. He explained from the notes submitted before Assessing Officer that assessee has on regular basis followed LIC 94-96 mortality table to arrive at the actuarial valuation till financial year 2014-15 and for the financial year 2015-16, the assessee decided to adopt IALM 2006-08 table and accordingly as per the actuarial valu....
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....f creating the provisions based on the actuarial report. This has necessitated due to the fact that the assessee has moved from the existing LIC 94-96 mortality table to adopt IALM 2006-08 mortality table because of which the contribution to approved superannuation was short to the extent of Rs. 1391.25 crores. Considering the fact on record, we observed that similar issue came up before Co-ordinate Bench of this Tribunal in Glaxo Smithkline Pharmaceuticals (supra) wherein, the Co-ordinate Bench held as under : "++ that the only limitation for quantum of deduction under section 36(1) (iv) is towards initial contribution and for ordinary annual contribution. The amounts paid in excess of the 27% of salaries of the employees, are neither towards the ordinary annual contribution nor towards the initial contribution. It was paid due to shortfall discovered in the course of actuarial valuation of the fund, and is in the nature of a one-time exceptional payment to ensure that the superannuation fund is able to discharge its obligation. Limitations placed under rule 87 relevant for 'ordinary annual contribution', as have been invoked in this case, cannot be pressed into service ....