ACIT, PATNA vs. CENTRAL CO-OPERATIVE BANK LTD,

Since the issues involved are common in these appeals and the Cross Objections which were heard together so these are being disposed off by this consolidated order for the sake of convenience and brevity.

The facts of the case in brief are that the assessee filed the return of income on 24.09.2010 declaring an income of Rs.2,60,01,300/-. Later on, the case was selected for scrutiny. During the course of assessment proceedings, the AO observed that the assessee had debited a sum of Rs.45,65,546/- under the head ‘Commission on D.D. Agent’, on which the TDS provisions were applicable. The assessee submitted that the TDS was not to be made in respect of such commission in view of the instruction of CBDT and the pronouncement of judgment of the Hon’ble Courts. The AO observed that he was not aware of the instruction of CBDT or pronouncement of any of the Hon’ble Courts and that the assessee had not furnished any documentary evidence. He, therefore, made the addition of Rs.45,65,546/-.

Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted as under: “That the appellant did not make TDS on the advice of the Indian Banks Association, Mumbai. The Indian Banks Association, Mumbai has given advice to the Banks in terms of the opinion given by the Central Board of Direct Taxes by taking into account the judgment of the Hon’ble Supreme Court that the commission paid to the pigmy agents of banks are not subject to TDS u/s 194H of the

The ld. CIT(A) after considering the submissions of the assessee deleted the addition made by the AO by observing as under: “I find that (i) The pigmy deposit collector were held as employees of the establishment for whom they worked, by the Employees Provident Fund Appellate Tribunal, New Delhi (as discussed above).

Now the department is in appeal. The ld. Sr. DR supported the order of the AO and reiterated the observations made in the assessment order.

In his rival submissions, the ld. Counsel for the assessee strongly supported the impugned order passed by the ld. CIT(A) and reiterated the observations made in the impugned order.

We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it appears that the AO disallowed the claim of the assessee since the decision of the Hon’ble Apex Court was not in his knowledge and that he was not aware of any instruction of the CBDT in relation to the expenditure incurred on D.D. Agents. However, the judgment of the Hon’ble Apex Court in the case of Indian Bank Association Vs Workmen of Syndicate Bank (supra) was considered by the ld. CIT(A) who deleted the impugned addition by following the said judgment and the decision of the Employees Provident Fund Appellate Tribunal, New Delhi. Before us no contrary decision was furnished. We, therefore, are of the view that no interference is called for in the order of the ld. CIT(A). Accordingly, we do not see any merit in this appeal of the department.

In ITA No. 29/Pat./2015, identical issue is involved, therefore, our findings given in respect of in ITA No. 28/Pat./2015 (supra) shall apply mutatis mutandis.

The facts related to this issue in brief are that the AO made the said disallowance by observing that Schedule 16 of the audit report revealed that there was the debit of Rs.6,71,813/- under the head “provision for incentive to staff” over and above the actual expenditure of Rs.9,73,328/-. He asked the assessee to explain as to why it should not be added back as it was not an actual expenditure. The AO considered the reply of the assessee as vague and also observed that no evidence could be produced whether any liability had ever been created under this head for the year under consideration. He, therefore, disallowed a sum of Rs.6,71,813/-.

Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted that the assessee had paid the incentive during the year under consideration and had furnished the details of names of the employees, amount of incentive and date of payment before the AO which indicated that the payment of Rs.6,71,813/- was made by 31.03.2011. It was explained that the nomenclature of the head of expenses remained ‘provision for staff incentive’ and thus, the confusion arose during the assessment proceedings.

The ld. CIT(A) after considering the submissions of the assessee deleted the disallowance by observing that the expenses were paid by 31.03.2011.

Now the department is in appeal. The ld. SR. DR supported the assessment order dated 10.02.2014 passed by the AO and submitted that the ld. CIT(A) was not justified in deleting the disallowance made by the AO.

We have considered the submissions of both the parties and perused the material available on the record. In the present case, the ld. CIT(A) categorically stated that the payment of Rs.6,71,813/- was made before 31.03.2011. The said categorical finding of the ld. CIT(A) was not controverted. In the present case, when the expenses for the incentive to staff were incurred and paid by the assessee during the period relevant to the assessment year under consideration than the mere nomenclature of the expenses i.e. ‘provision for staff incentive’ cannot change the nature of the expenses incurred by the assessee for incentive to the staff, so it was not the provision but an actual expenditure. Therefore, the ld. CIT(A) rightly deleted the disallowance made by the AO. We do not see any infirmity in the impugned order on this issue.

As regards to the Cross Objections, the ld. Counsel for the assessee submitted that he has the instruction not to press these Cross Objections. The ld. Sr. DR did not object if the Cross Objections are dismissed as not pressed.

We have considered the submissions of both the parties and perused the material available on record, in the present case, the ld. Counsel for the assessee sought permission to withdraw these Cross Objections and gave in writing as under: “CO Withdrawn” Sd/- (Adv.)

In view of the above, the Cross Objections are dismissed as withdrawn.