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Income Tax Appellate Tribunal, DELHI BENCH: ‘C’: NEW DELHI
Before: SHRI S.V. MEHROTRA, & SHRI CHANDRA MOHAN GARG
PER CHANDRA MOHAN GARG, JUDICIAL MEMBER
This appeal filed by the assessee is directed against the order of the CIT(A)-XV, New Delhi, dated 12/12/2013 passed in first appeal No. 173/12-13/CIT(A)-XI for A.Y 2010-11 .
The sole ground raised by the appellant reads as follows:
“1. On the facts and in the circumstances of the case, the CIT(A) has erred in deleting the addition of Rs. 75 crores made by treating the grant received from the Delhi Government as Revenue Receipt.” case records are awaited but from the note sheet it is clear that ample opportunities have been provided to submit records, therefore in our considered opinion, adjournment cannot be granted again and again on the cause for which the A.O is not responding positively.
Thus, the adjournment application filed by the Revenue is dismissed and we proceed to hear the appeal.
We have heard the arguments of both the sides and have carefully perused the relevant material placed on record on the Tribunal inter alia assessment order and order of the CIT(A). The ld. CIT-DR supporting the action of the AO submitted that the grant received by the assessee has been used for purely meeting revenue expenses on voluntary retirement. Therefore, the entire grant received by the assessee is being treated as Revenue receipt in the hands of the assessee. The ld. DR pointed out that the CIT(A) granted relief without any basis. Thus the impugned order may be set aside by restoring that of the AO. The ld. AR supported the impugned order and contended that the action of the A.O was not sustainable.
On careful consideration of the above rival submissions, from the relevant operative part of the order of the CIT(A), we observe that the relief was granted to be by observing as follows:
“6. I have carefully considered the facts of the case, judicial precedence in the case of the appellant and applicable case laws in the matter. On careful consideration of the facts of the case, I find that perhaps the Ld. AO was not able to appreciate the correct nature of the transactions involved. It appears that in passing the order, the relevant excerpts of which are shown in para 4 above, the Ld. AO has mixed up the facts by treating grants in aid of Rs.39.10 crores at par with the long term loan of Rs.35.90 crores furnished by Govt, of NCT of Delhi and has not been able to appreciate the nature of accounting entries. On careful consideration, I find that the appellant had given distinct accounting treatment for the two. While on one hand, the amount of Rs.39.10 croes in respect of grant in aid was reduced from the expenditure booked under the head ’Employees remuneration and Benefit' (Schedule 19) and only after reducing the amount of Rs.39,10,70,611 that the appellant had booked the net amount of Rs.75,45,19,665 in its P&L A/c under this head. The simple accounting interpretation of this is that the appellant had offered an amount of Rs.39.10 crores for taxation. What the AO ought to have examined is whether the appellant had claimed the benefit under VRS strictly in terms of Section DDA or not. However, it appears that the AO has not examined this issue from this perspective. On careful consideration of this issue, I find that the appellant had claimed Rs. 7,22,48,212 in computation of income as first installment towards VRS ex-gratia being 1/5th of such payment in terms of Section DDA. It is accordingly, evident that the addition of Rs.39.10 crores made by the Ld. AO had no sound basis.
6.2 Regarding the balance amount of Rs.35.90 crores, the same was claimed to have been provided by the Govt, of Delhi to the appellant company for enabling the Pension Trust Fund to make the payment for discharge of liabilities towards the employees opting out for the VRS Scheme. The short point is that the Pension Fund Trust of the appellant company, in which contribution from the employer and employees may have been made, was for the purpose of enabling discharge of liability to the employees at the time of superannuation/death. The same did not envisage payment on account of VRS Scheme. Since the Delhi Govt., which is 100% owner of the share capital of the company, decided to close the operations of the company, the employees who had opted out for VRS were to be paid their dues, for which the approved Pension Fund Trust did not have adequate/planned investment. Accordingly, the Delhi Govt, decided to provide long term loan of Rs.35.90 crore to the appellant, which was passed on to the Pension Fund Trust for enabling payment to the employees. The appellant has not claimed the benefit of the same in the P&L A/c nor in the computation of income. The observation of the Ld. AO that such funds were to be refunded by the Pension Fund to the Delhi Govt, and not by the appellant company, does not take into account the accounting entries made by the appellant in its books, which clearly shows that on one hand, the amount of Rs.35.90 crores was shown as payable to the Delhi Govt., on the other hand the identical amount was shown as receivable from the Pension Trust. The only plausible interpretation of this double entry could be that the amount of Rs.35.90 crores is an outstanding liability of the appellant viz-a-viz the Govt, of Delhi and of the Pension Trust viz-a-viz the appellant. The Ld.AO in her wisdom held it as income of the appellant, which has no basis. In view of the above, the addition of Rs.35.90 crore made by the Ld. AO is being deleted. Since the Ld. AO has not correctly appreciated the facts, there is no need to examine the applicability of the case laws cited by her.”
In view of the above, we observe that this fact remained uncontroverted that the assessee has claimed Rs. 7,22,48,212/- in the computation of income as first instalment towards VRS ex gratia being 1/5th of such payment as per terms set out by the Drawing and Disbursing Authority [DDA} and thus first limit of addition of Rs. 39.10 crores has been dismissed. Further, from the order of the CIT(A), we are also in agreement with the conclusion as recorded by the first appellate authority that since the Government of Delhi, which is 100% owner of the assessee company, the employees who opted for VRS [Voluntary Retirement Scheme] were to be paid their dues for which approved provident fund did not have adequate/planned investment thus the government decided to provide long term 5 passed on to the Pension Fund Trust enabling the company to make payments to the employees. In view of the above noted factual matrix of the case on the issue we are unable to see any valid reason to interfere with the conclusion of the CIT(A) thus we uphold the same. Accordingly, the sole ground of the Revenue being devoid of merits is dismissed.
In the result, the appeal of the Revenue is dismissed.
The order is pronounced in the open court on 03.08.2016.