AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2024 (8) TMI 622
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...., according to which appellant has to show the fund value as per actuarial valuation. Valuation of the assets has nothing to do with taxability of Income. 3. Your Honour's Appellant craves leave to add, amend, alter or withdraw any or more grounds of Appeal before hearing of Appeal." 3. The brief facts of the case are that the Appellant, a Regional Rural Bank engaged in the business of banking filed its Return of Income for A.Y. 2015-16 on 30.09.2015 by declaring the total Income at Rs. 31,52,72,750/-. It has adjusted its books during the year as per AS-15, wherein it had reconciled the fund value as per its books and books of fund houses (SBI and LIC). On such reconciliation it was found that, the fund houses showed excess payment by the assessee, over a period of various years, the assessee had made excess payments towards gratuity and had debited its books from time to time. Now in order to adjust such excess payment, it had credited its books to that extent. However, in the computation of income, it again reduced its taxable profit on the ground that, this is neither its income nor its expenditure and, hence, there is no taxability involved. On the examination of the i....
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.... during the year. Hence, the same is required to back be added back. 3.2 Secondly, as admitted by the assessee, the same does not pertain to the year under consideration only. This can be seen from the submission reproduced supra. The same pertains to various years. Therefore, this claim made is anyway not allowable as it does not pertain to the year under consideration. That the assessee challenged the validity of order dated 22.12.2017 by moving an appeal before Ld.CIT(A). The Ld.CIT(A), had disposed of the appeal on 26.05.2023 with the following findings: "5.3 Having considered the factual matrix of the case, I find that the AO is correct in saying that the amounts deducted do not pertain to the year under consideration as the same pertains to earlier years. Therefore, they can not be deducted in the year under consideration, as each assessment year is separate. Under the circumstances. I do not see any reason to interfere with the well reasoned order of the AO." 3.3. That the assessee is in appeal before us, appeal is related with addition of Rs. 7,09,71,733/- by making allegation on the assessee that assessee has made wrong claim of group gratuity of Rs. 4,47,37,085/- and....
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....tuation, the Ld.AR for the assessee submitted a chart showing the difference of Rs. 5,61,84,048/- in provision for group gratuity, as under: "As on 31-03-2015 Balances are as under in books As per books : LIC 27,19,40,279/- + (paper book at page 13) SBI 2,38,78,013/- (paper book at page 14) Total 29,58,18,292/- (B) As per actual valuation: Total 23,96,34,244/- (Page No. 19-20 of paper-book) Excess Balance in books: (A) 29,58,18,292 - (B) 23,96,34,244 = 5,61,84,048/- Difference of Rs. 1,47,87,684/- in provision for leave encashment As on 31-03-2015 Balances are as under in books: (A) LIC 14,58,93,287/- (Paper book at page 16) SBI 3,08,12,965/- (Paper book at page 17) Total 17,67,06,252/- (B) As per Accrual valuation 16,19,18,568/- (paper book at page no. 21-22) Excess Balance in books Difference: (A)17,67,06,252 - (B)16,19,18,568 = 1,47,87,684/- Net Excess: 5,61,84,048 + 1,47,87,684 = 7,09,71,732/-" 4.1. The ld.AR for the assessee submitted that gross effect is decrease in expenses (Rs. 1,47,87,684.40 + Rs. 5,61,84,048.80 Rs. 7,09,71,733.1....
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....as increased his net book profit. Actually, we are not supposed to pay the tax on this Rs. 7,09,71,732.80 as this is not an income, but adjustment entries to bring our fund balances in accordance with obligation as per AS- 15. Therefore, the effect of Rs. 7,09,71,733/- is nullified in our taxable income. Therefore, the same should not be a part of disallowance. 4.8. The Ld. CIT-DR, on the other hand, submitted that whatever the amount increase in the books of accounts of the assessee should be routed through P&L Account of the assessee and relied upon the provisions of section 36(va) of the Act. The Ld. CIT-D.R. relied upon that according to order, all expenses of income must be routed that the profit & loss account. That, in this case, nothing has been routed from the P&L account. Hence, Ld.CIT-DR strongly relied on the CIT(A)'s order. 5. We have heard both the parties and perused the material available on record. In this case, the addition of Rs. 7,09,71,733/- was made and duly upheld by Ld. CIT(A) being the difference in valuation of group gratuity fund and leave encashment fund. As per books of accounts and actuarial valuation of the fund made by LIC and SBI Life Insurance Co....
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....Insurance Corporation of India (LIC) out of the gratuity fund maintained by the assessee bank. Therefore, this mechanism is like as if the assessee bank is to pay gratuity out of its own fund. 5.3 As we have explained above that the assessee bank makes the provision for gratuity considering the total strength of employees every year and this provision, the bank never treats as expenses in the books of accounts. What the bank is doing is every year, the bank makes the provision for leave encashment and the provision of gratuity and debited to the employee's benefit (employees expenses), which is schedule 16 before us. In the above schedule 16, the real expenses incurred by the assessee bank as well as provision on account of gratuity payment and provision on account of leave encashment etc. are debited. However, at the end of year, the bank claims only actual payment made to the employee on account of gratuity and leave encashment. Therefore, in the above referred schedule 16 which is part of the balance sheet for the assessment year 2015-16 contains the actual expenses incurred by the assessee company on account of gratuity and other employees benefit including the provision for g....
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....pertain to the year under consideration does not match with accounting treatment made by the assessee bank, which we have explained with factual data mentioned above. The AO also noted that the assessee cannot reduce the said amount from the profit and loss account as it does not pertain to the assessment year under consideration. We find that this findings of the A.O. is perverse in nature and does not have any connection with the issue under consideration. As we have explained that the real expenses and provisions mentioned in schedule 16 pertains to the assessment year under consideration i.e. assessment year 2015-16 and do not pertain to earlier year. Hence, there is no question arises to reduce the earlier year provisions from the current profit and loss account. Therefore, the findings given by the A.O. are not acceptable in the light of the facts narrated above. 5.5 Now coming to the provisions for gratuity and leave encashment, we find that these are two provisions made by the assessee bank and assessee bank has to make provision every year because the assessee bank would have an obligation to pay the gratuity to employees at the time of retirement. Had the bank does not m....