ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2, ALWAR vs. THE ALWAR CENTRAL CO-OPERATIVE BANK LTD., ALWAR

PER SHRI KUL BHARAT, JM.

This appeal by the by the revenue is filed against the order of ld. CIT (A),

Alwar dated 24.07.2017 pertaining to assessment year 2014-15. The solitary ground

raised in this appeal reads is as under :

“ On the facts and in the circumstances of the case, ld. CIT (A) erred in deleting the disallowance of Rs. 30,00,000/- made by the AO on account of capital contribution to LIC for future liability of leave encashment at the retirement of employees.”

scrutiny assessment and the assessment under section 143(3) of the Income Tax

Act, 1961 (hereinafter referred to as the Act) was framed vide order dated

20.10.2016. While framing the assessment, the AO made addition on account of

2 ITA No. 686/JP/2017 The Alwar Central Cooperative Bank Ltd., Alwar.

disallowance of investment in LIC for Leave Encashment of Rs. 30,00,000/-. Against

this, the assessee preferred an appeal before ld. CIT (A), who after following the

decision of Coordinate Bench of the Tribunal deleted the disallowance. Now the

revenue is in appeal before this Tribunal.

squarely covered in favour of the assessee by the decision of the Coordinate Bench

rendered in the case of M/s. Bhilwara Urban Cooperative Bank Ltd. vs. DCIT, ITA

No. 268/Jodh/2016 dated 24.04.2017.

through the orders of the authorities below. The ld. CIT (A) has decided the issue by

observing in para 4.3 to 4.7 as under :-

“ 4.3. On the similar issue, for preceding years, my predecessor ld. CIT (A) had adjudicated on the issue and has discussed in details various judicial pronouncements on the issue of allowability of payment of insurance premium for group insurance scheme of the employees and has held that it is an allowable deduction under section 37(1) of the Act. I have also perused the assessment order as well as submissions made by the appellant and find that a disallowance of Rs. 30 lacs was made by the A.O. on account of group leave encashment for employees premium paid by the Bank to LIC. The disallowance was made by the A.O. who has held it as capital expenditure. 4.4. The appellant has stated that Bank has made payment for group leave encashment scheme for the benefit of the employees. The bank has taken this policy from LIC for payment of leave encashment to the employees of the Bank at the time of their retirement. Under the provisions of Income Tax Act any sum paid by the assessee as an

3 ITA No. 686/JP/2017 The Alwar Central Cooperative Bank Ltd., Alwar.

employer by way of contribution for leave encashment for the benefit of employees is an allowable expenditure. Accordingly, during the year this payment of Rs. 30 lacs was made to LIC.

4.5. The appellant has placed reliance on the decision of Hon’ble Kerala High Court in the case of CIT vs. Hindustan Latex Ltd. in IT appeal no. 64 of 2012 dated 07.06.2012 on the issue of payment of premium made by the company to LIC for policy under group leave encashment scheme, wherein, it has been held that amount of contribution towards group leave encashment scheme directly to the LIC for the benefit of the employee of the assessee, is allowable as deduction u/s 37(1) of the IT Act. This has been allowed after considering this expenditure as having been incurred for the purposes of business. The appellant has also placed reliance on the latest judgment of Hon’ble ITAT Jodhpur bench in the case of The Barmer co-operative Society v/s ACIT as reported in ITA No. 378/Jodh/2012 dated 15.07.2013, wherein it has been held that premium paid on insurance policy for leave encashment in an allowable deduction u/s 37 of the IT Act. 4.6. Having considered the submissions made and judicial citations quoted therein, I find that A.O. has disallowed the claim only on the ground that the payment made is capital expenditure and the benefit would accrue only in future. After considering the decision of the Hon’ble Kerala High Court (as stated above), and of the Hon’ble ITAT, Jodhpur Bench which are directly on this issue, there is no justification in the action of the A.O. for making the disallowance. 4.7. In view of the above discussion and the decisions taken in earlier years by my predecessors on similar facts of the case as also on the basis of judicial rulings as stated above, the addition of Rs. 30 lakhs made by theA.O. is deleted and the appellant’s ground of appeal on the issue is allowed.”

4 ITA No. 686/JP/2017 The Alwar Central Cooperative Bank Ltd., Alwar.

From the above, it is clear that the ld. CIT (A) has followed the decision of the

Tribunal and the judgment of the Hon’ble Kerala High Court in the case of CIT vs.

Hindustan Latex Ltd. (supra). The factum that the issue has been decided by the

Coordinate Bench in favour of the assessee and even in assessee’s own case

Coordinate Bench has decided the issue in favour of the assessee in ITA No.

143/JP/2016 pertaining the assessment year 2011-12. The revenue has not brought

to our notice any contrary binding precedent, therefore, taking a consistent view, we

do not see any reason to interfere in the order of the ld. CIT (A), the same is hereby

affirmed.

Order is pronounced in the open court on 10.10.2017.

Sd/- Sd/- ( HkkxpUn ½ ( dqy Hkkjr) ( BHAGCHAND) ( KUL BHARAT ) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Jaipur Dated:- 10/10/2017. Das/

आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू

सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत

5 ITA No. 686/JP/2017 The Alwar Central Cooperative Bank Ltd., Alwar.