DCIT, NAJIBABAD vs. M/S DISTRICT COOPERATIVE BANK LTD.,, BIJNOR

Date of hearing 01.08.2019 Date of pronouncement 06.08.2019 ORDER PER O.P. KANT, A.M.: This appeal by the Revenue is directed against order dated 30/11/2016 passed by the Ld. Commissioner of Income-tax (Appeals)- Moradabad [in short ‘the Ld. CIT(A)’] for assessment year 2013-14 raising following grounds:

1. The learned CIT(A) is erred in law as well as in facts while deleting the addition of Rs.1,15,000/- made by the Assessing Officer u/s 43B of the Income Tax Act, 1961 regarding bonus payable shown by the assessee while the same has not been paid on or before due date of filing return of income.

2. The Ld. CIT(A) is erred in law as well as facts while deleting the addition of Rs.89,69,363/- of closing allowance made by the Assessing Officer while the same is not found to be paid within the year under consideration and order for provision of Closing Allowance was passed on 24.06.2013, much after the end of year under consideration.

3. Any other grounds which may arise at the time of hearing of appeal.

2. Briefly stated facts of the case are that the assessee, a District Cooperative Bank, is operating in the District of Bijnor (Uttar Pradesh). The assessee filed return of income on 28/09/2013 declaring total income of Rs.5,25,63,310/-. The case was selected for scrutiny and notice under section 143(2) of the Income-tax Act, 1961 (in short ‘the Act’) was issued and complied with. In the assessment completed under section 143(3) of the Act on 28/01/2016, the Assessing Officer made various additions to the returned income and assessed the income at Rs.8,85,81,080/-. Aggrieved with the additions made, the assessee filed appeal before the Ld. CIT(A), who partly allowed the appeal. Aggrieved with the relief allowed by the Ld. CIT(A), the Revenue is in appeal before the Tribunal raising the grounds as reproduced above.

3. In ground No. 1, the Revenue has challenged relief allowed by the Ld. CIT(A) in respect of the addition of Rs.1,50,00,000/- made by the Assessing Officer under section 43B of the Act for bonus payable to the employees. The assessee made provision of bonus payable amounting to Rs.1,15,00,000/-in its books of accounts. In the copy of ledger account produced before the Assessing Officer, the amount of bonus payable was shown as transferred from ‘head office’ to the ‘respective branches’ during the month of May, 2013. The Assessing Officer further observed that in the certificate of chartered accountant filed by the assessee, it was not certified whether the amount of bonus was actually paid to the employees before due date of filing of return of income and only there was mention of transfer of bonus amount to respective branches. The assessee also did not filed any evidence with regard to actual payment of bonus to the employees and accordingly, the Ld. Assessing Officer disallowed the sum of Rs.1,15,00,000/- under section 43B of the Act for non-payment of bonus before due date of filing of the return of income. Before the Ld. CIT(A), the assessee filed detailed bank statement of transfer of the bonus amount from bonus fund account of respective branches to bank account of the respective employees. After considering the submission of the assessee and verifying the factual information, the Ld. CIT(A) deleted the addition. 3.1 Before us, the Ld. DR submitted that relevant details were not produced before the Assessing Officer and from the certificate of the chartered accountant, it cannot be discerned whether the bonus was paid to the employees before the due date of the filing of the return of income, and therefore Assessing Officer was justified in making addition. 3.2 On the contrary, the Ld. counsel of the assessee filed a paper-book containing pages 1 to18 and submitted that Ld. CIT(A) has duly verified the transfer of money from bonus fund of respective branches to the bank account of the employees and thus finding of the Ld. CIT(A) might be upheld. 3.3 We have heard the rival submission and perused the relevant material on record. The Ld. Assessing Officer has disallowed payment of bonus of Rs.1,15,00,000/- under section 43B of the Act on account of non-payment before the due date of filing of the return of income. On perusal of the various pages of the paper book, we find that assessee has transferred the amount of bonus payable to bonus fund account of various branches in May 2013 and thereafter, amount of bonus payable to employees has been transferred to their respective bank account in the month of May 2013. All these entries have been duly verified by the Ld. CIT(A) and no discrepancy has been pointed out by the Ld. DR before us, in respect of the amount transferred in the bank account of the various employees, which is appearing in the various pages of the paper-book filed by the assessee. In our opinion, the assessee has complied requirement of section 43B of the Act for payment of the bonus payable before due date of filing of return of income, which was 30/09/2013 in this case and accordingly, we uphold the finding of the Ld. CIT(A) on the issue in dispute. The ground of the appeal of the Revenue is accordingly dismissed.

4. In ground No. 2, the Revenue has challenged relief allowed by the Ld. CIT(A) on the issue of closing allowance of Rs.89,69,363/-disallowed by the Assessing Officer. According to the Assessing Officer, said amount was merely a provision which was created on 24/06/2013 by way of the order of Directors of the working committee and thus, it was an unascertained liability, which is not allowable under the provisions of the Act. The Ld. CIT(A) verified that said amount has been paid to the employees before filing of return of income and accordingly, he deleted addition. 4.1 Before us, the Ld. DR relied on the order of the Assessing Officer, whereas the Ld. counsel of the assessee submitted that closing allowance was being paid to the employees every year and the amount was duly quantifiable. According to him, it is an ascertained liability and therefore, allowable.

4.2 We have heard the rival submission of the parties and perused the relevant material on record. The assessee has claimed before us that the amount of closing allowance has been paid to the employees from year to year in percentage terms of salary and therefore duly quantifiable provision. The Ld. DR also could not controvert this fact that the amount of closing allowance is quantifiable in respect of the each employee. It is also not in dispute that the amount was incurred wholly and exclusively for the purpose of the business. In our opinion, when amount of provision is quantifiable, same cannot be said as an unascertained liability. Accordingly, same is allowable under section 37(1) of the Act as incurred wholly and exclusively for the purpose of the business of the assessee. The ground of the appeal of the Revenue is accordingly dismissed.