TaxTMI 
TaxTMI 
2019 (10) TMI 1629
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....- on account of "provision of Cadre Fund". 3. The Ld. CIT (A) erred in sustaining the addition of Rs. 85,00,000/- on account of provision for gratuity. 4. The Ld. CIT (A) erred in sustaining the addition of Rs. 44,16,854/- on account of disallowance of various expenses. 5. The Ld. CIT (A) erred in sustaining the addition of Rs. 12,07,497/- by not allowing set-off of brought forward business loss, which was rightly claimed by the appellant. The Appellant craves leave to add, amend or modify any of the grounds of appeal. 3. Brief facts of the case as culled out from the records are that assessee is a Bank carrying out banking business. Assessee filed its e-return of income on 12.10.2010 declaring income at Rs. Nil. Notice u/s 142(1) & 143(2) of the I.T. Act duly served upon the assessee. During the year under consideration the assessee had shown gross receipts at Rs. 55,68,36,579/- with net profit (before tax) at Rs. 20,37,175/-. On perusal of the P & L it was observed that a sum of Rs. 47,07,153/- has been debited under the head 'Provision for cadre fund' which is added back to the total income of the bank. It is also noticed that the bank had ....
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.... its employees. The appellant had made an arrangement with LIC of India for maintenance of gratuity fund. 2. The trust deed with LIC is at PB 97-105. 3. Details of premium paid, as confirmed by LIC is at PB 106. 4. The LIC of India applied to the CIT, Bhopal for approval on 29.07.2011 of the said gratuity fund. However, no objection was received from the department. 5. Ld CIT(A) held that since the gratuity fund was not approved, therefore, the deduction was not to be granted. Submissions:- . 1. It is submitted that the appellant, with the held of LIC of India, had formed a gratuity fund, which was an irrevocable trust. Thus, the amount could not be misused by the appellant in any case. 2. Application for approval of such fund was filed. PB 96. Premium was paid. PB 106. Thus, there was no inaction or latches on the part of the appellant. 3. The Id CIT did not grant/ deny approval. As per the Rule 2 of Part C of Schedule IV, the approval cannot be refused unless an opportunity is given to the trustees of that fund. 4. In a direct judgment in Rajasthan Financial Corporation 66 ITO 193 (Jaipur Trib), it w....
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....- on account of disallowance of "provision of cadre fund" made by the assessee it was contended before us that the Department of Co-operatives for deputation of staff called cadre staff to the primary societies. These primary societies work for the co-operative banks. The appellant bank has performed many works through these societies for procurement of grains and distribution of funds to many agriculturists. To pay salary to the cadre staff working for primary societies cadre fund is to be made. The alleged amount of Rs. 47,07,153/- is a provision for cadre fund which is claimed to have been provided as per the directions of the Department of Co-operatives dated 23.1.2003. 8. Ld. CIT(A) confirmed this disallowance by not treating the alleged amount as business expenditure observing as follows; 8.I have carefully considered the submission of the appellant and facts of the case. On perusal of Profit & Loss Account and details furnished by the appellant, it is noticed that the appellant had made a claim of deduction of Rs. 47,07,153/- on account of "Provision for Cadre Fund." The issue involved is whether the expenditure claimed by the appellant on account of contribution....
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.... As per the Notification of Department of Cooperatives dated 23.1.2003 the salary of the employees of PACS is to be paid in the following terms; (i) 75% to be borne by PACS (ii) 20% to be borne by District Central Co-operative Bank (iii) 5% to be borne by Apex Bank. In this decision of the Tribunal the assessee was the Apex Bank and issue in dispute was the 5% of the salary paid to the employees of PACS. The Tribunal held such amount paid as salary paid to the employees of PACS has to be treated as business expenditure allowable/s 37 of the Act. 11. In the instant case before us assessee as District Central Co-Operative Bank and the alleged amount of contribution to the cadre fund relates to 20% of the salary of the employees of PACS. This amount was paid by the assessee as per the direction of the Registrar of Co-operative Societies dated 23.1.2003, as per which it was bound to pay 20% share of the salary of the PACS. 12. We, therefore in the given facts and circumstances of the case and following the decision of Co-ordinate Bench, Indore in the case of M.P. Rajya Sahkari Bank Maryadit (Supra), set aside the finding of Ld. CIT(A) and delete the ....
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....e appellant has made a provision for gratuity of Rs. 85,00,000/-It would be fruitful to reproduce the provision of u/s 40A(7) of the Act as under: - 16."Expenses or payments not deductible in certain circumstances. 17.40A. (7) (a) Subject to the provisions of clause (b), no deduction shall be allowed in respect of any provision (whether called a-t such or by any other name) made by the assessee for the payment of gratuity to his employees on their retirement or on termination of their employment for any reason. 18.(b) Nothing in clause (a) shall apply in relation to any provision made by the assessee for the purpose of payment of a sum by way of any contribution towards an approved gratuity fund, or for the purpose of payment of any gratuity, that has become payable during the previous year. " 14. From the above, it can be seen that Section 40A(7) of the Act clearly provides that no deduction shall be allowed in respect of any provision made by the assessee for payment of gratuity to its employee on retirement. Further, Clause (b) provides that any provision made by the assessee for the purpose of payment of sum by way of any contribution towards an ap....
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....ral reminders by the assessee. We also notice that similar deductions were disallowed for A.Y. 1994-95 against which the assessee preferred first appeal and CIT(A) allowed the appeal of the assessee by directing that the deduction should be allowed. As per the information, the department has not filed any second appeal against the findings of the CIT(A). It means the department has accepted the contention of the assessee. The ratio of the decision in case of Sanghi Oxygen Co. (supra) wherein it was held that the assessee had not paid any sum towards an approved gratuity fund created by him for the exclusive benefit of his employees under irrevocable trust and, therefore, a deduction under section 36(1)(v) or under section 28 could not be allowed. Similar is the ratio of decision in case of Synbiotics Ltd. (supra), wherein the Gujarat High Court has held that "Even if no provision is made by the assessee, section 40A(7) of the Income-tax Act, 1961, will apply and unless the conditions laid down therein are satisfied, the Gratuity amount paid to employees will not be deductible." 12. After going through the ratio of decisions, we feel that the facts of the case are distingui....
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....e submission of the assessee is factually incorrect because in the P&L account appearing in its annual report (copy enclosed), an amount of Rs. 44,16,854/- is debited on account of other expenses. During the remand proceedings, the AR of the assessee, Shri Piyush Agrawal was confronted with the issue and vide order sheet entry dated 27.01.2015, he was required to furnish the bills/vouchers of the said expenditure. Next hearing was fixed on 02.02.2015. However, the assessee failed to produce any bill/voucher for verification. Therefore, the addition made by the AO deserves to be confirmed. " (iii) In the Rejoinder, the Authorised Representative simply stated as under: - "In respect of other expenses of Rs. 44, 16,854/-, the appellant has submitted the list of other expenses which comprises of 9 heads of different types of expenses. The copy of which is also submitted herewith. At the time of assessment proceedings the then counsel has submitted the Annual report which was in printed form in which the group of 9 heads of expenses had shown in the single head as "other expenses". It is submitted herewith the bank has 22 branches and Audited Balance Sheet is made for ....
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....e the issue as per the provisions of law after providing the assessee an opportunity of being heard. Accordingly Ground No.4 of the assessee is allowed for statistical purpose. 19. Apropos Ground No. 5 through which the assessee has challenged the finding of Ld. CIT(A) for not allowing the Brought Forward Business loss of Rs. 12,07,497/-, Ld. CIT(A) has declined the claim observing as follows; 5.1 This ground is that the A.O. was not justified in not allowing setoff of brought forward business loss of Rs. 12,07,497/- as claimed by the appellant. 5.2 The A.O noticed that the appellant had deducted Rs. 12,07,497/- being brought forward business loss from the total income of the assessment year under consideration. However, from the details on record, it was noticed that the income of the' appellant was assessed at Rs. 4,33,02,094/- in the immediate preceding A.Y 2009-10 and, thus, no brought forward loss was allowable to the appellant-bank. Accordingly, the A.O did not allow he set off of brought forward business loss of 12,07,497/- claimed by the appellant., 5.3 In appellate proceedings, it was submitted that in the year preceding the year under con....