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Income Tax Appellate Tribunal, “D” BENCH : KOLKATA
Before: Hon’ble Sri N.V.Vasudevan, JM & Shri Waseem Ahmed, AM]
ORDER Per N.V.Vasudevan, JM
This is an appeal by the Assessee against the order dated 16.05.2016 of C.I.T.(A)-12, Kolkata relating to A.Y.2011-12.
Grounds of appeal
raised by the assessee reads as follows :- “l. THAT on facts of the case, the Ld. Commissioner of Income Tax (Appeals)-12, Kolkata was wrong by not considering the fact of the case and by confirming the addition made by the Ld. Assessing Officer under the head 'Bakshis' of Rs.3,66,554/- and 'Tips & Bakshis" of Rs.63,050/- which are allowable expenses under section 37 of the Income Tax Act, 1961.
2. THAT on facts of the case, the Ld. Commissioner of Income Tax (Appeals)-12, Kolkata was wrong by not considering the fact of the case and explanation given by the appellant that the expenses were in the nature of salary/wages paid as festival bonus during Eid/Durga Puja to casual staffs like peon, lift man, security staff etc. employed by the appellant through another service provider which is also a co-operative society and such expenditures are very much incidental to and for the purpose of carrying on day to day business of the appellant and allowable under section 37 of the Income Tax Act, 1961.
West Bengal Cooperative Bank Ltd. A.Yr.2011-12 3. THAT your petitioner reserves the right to prefer further ground(s) and/or delete/modify ground(s)/arguments, submit documents before the final disposal of this appeal.”
The Assessee is a cooperative society carrying on banking business. In the course of assessment proceedings u/s 143(3) of the Income Tax Act, 1961 (Act) the AO noticed that under the head “ other expenses” the assessee had claimed a sum of Rs.15,29,14,046/-. Schedule-19 in the profit and loss account gives a break-up of other expenses. On perusal of the break up of other expenses the AO noticed that the assessee had claimed as deduction a sum of Rs.3,66,554/- and another sum of Rs.63,050/- under the head “ Tips and bakhsis” respectively. The AO found that the assessee could not produce relevant vouchers and could not also justify the business expediency of these expenses. The AO therefore disallowed the claim of the assessee for deduction of the aforesaid expenses while computing income under the head ‘ income from business’ .
On appeal by the assessee the CIT(A) confirmed the order of the AO. Before CIT(A) the assessee pointed out that the payment of Bakshis and Tips was made to casual workers like water boys, canteen boys, Security staffs etc during Durga Puja in the nature of ex-gratia/bonus and the said payments are in the nature of contractual obligation though unwritten. The assessee pointed out that such expenses were being paid since long and was part of the salary/wages. The assessee submitted that the payments were not voluntary but obligatory. The assessee also pointed out that the service of the daily/ casual workers were necessary for normal and smooth conduct of day to day business of the assessee. By long usage it has become a custom in the business of the assessee. The assessee also pointed out that payments were made from head office, regional office and 44 branches of the assessee located in different parts of West Bengal and vouchers were kept in the concerned branch. The non production of vouchers at the time of the proceedings is because of the fact that sufficient time was West Bengal Cooperative Bank Ltd. A.Yr.2011-12 not allowed by the AO to produce the same. The assessee filed some sample vouchers at the head office level to justify its claim for the deduction of the above.
The CIT(A) however did not agree with the submissions of the assessee. He found that on a similar issue for A.Y.2010-11 he had upheld similar addition made by the AO and found no grounds to interfere with the order of the AO.
Aggrieved by the order of the CIT(A) the assessee has preferred the present appeal before the tribunal.
At the time of hearing the ld. Counsel for the assessee filed before us a copy of the order of ITAT ‘ B “ Bench in assessee’s own case for A.Y. in order dated 30.11.2017. In the aforesaid order this tribunal came to the conclusion that on identical facts that the expenditure was allowable as deduction. The following were the relevant observations of the tribunal.:- “6. Ground no 2 and 3 is against the disallowance of expenditure of an amount paid as Tips & Baksis by the bank to casual workers on festive occasion. The assessee submits that these payments were made to casual workers like water boys, canteen boys, security staffs ete. during annual festivals like Durga Puja and Eid. It was submitted that the payment is in the nature of ex-gratia/bonus. The break-up of these payments, as made by different branches of the bank was given. These payments were authorised by appropriate resolutions of the Board of Director of the bank. The Assessing officer as well as the Ld. CIT (A) did not allow this expenditure on the ground that there was no commercial expediency behind incurring this expenditure and that the explanation is not satisfactory. The Id. Counsel for the assessee the disallowance is bad in law the assessee has produced sufficient evidence in the form of vouchers and receipts in evidence of any payment of Tips & Baksis. Payments were made by the Head Office, Regional Offices as well as 44 branches situated in different parts of West Bengal. Such payments are made after due authorization from the management. The revenue authorities were wrong in coming to a conclusion that there is no commercial expediency in making these payments. The disallowance arbitrarily unjustified. Hence we allow this ground of the assessee.”
The DR pointed out that no evidence whatsoever was filed before the AO. Therefore order of the CIT(A) should be sustained. The ld. DR also placed reliance on West Bengal Cooperative Bank Ltd. A.Yr.2011-12 the decision of the Hon’ble Supreme Court in the case of CIT vs Calcutta Agencies 19 ITR 191 (SC).
We have perused the decision of the Hon’ble Supreme Court and are of the view that the same is not applicable to the facts of the present case. The said decision on the the jurisdiction of the Hon’ble High Court in a reference u/s 66(1) of the I.T.Act, 1962 and was held to be advisory in nature. The court held that on facts the decision of the tribunal is final unless its conclusion are based on no evidence. In the present case the plea of the assessee is based on the existing customs and practice prevalent for a long time. This was accepted by the tribunal in A.Y.2009-10. Moreover, the vouchers were filed before the CIT(A) which were omitted to be considered by the CIT(A). In these circumstance we are of the view that the decision rendered by the tribunal on identical facts should be followed. Respectfully following the decision of the tribunal we direct that the impugned addition made by the AO be deleted.
In the result the appeal of the assessee is allowed. Order pronounced in the Court on 09.02.2018. Sd/- Sd/- [Waseem Ahmed] [ N.V.Vasudevan ] Accountant Member Judicial Member Dated : 09.02.2018. [RG Sr.PS] Copy of the order forwarded to:
1. 1. West Bengal Cooperative Bank Ltd. 24A, Waterloo Street, Kolkata-700069. 2. A.C.I.T., Circle-56, Kolkata. 3. CIT(A)-12, Kolkata 4. C.I.T.-14, Kolkata. 5. CIT(DR), Kolkata Benches, Kolkata.