Of Current Securities. The Question Is No More Res Integra Andanswered In Favour Of The Assessee By This Court In The Decision.reported In Commissioner Of Incom v. Itr 545 (Ker.)2(2000) 241 Itr 374 (Ker.)2(2000) 241 Itr 374 (Ker

IN THE HIGH COURT OF KERALA AT ERNAKULAMPRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMASWEDNESDAY, THE 14 DAY OF JULY 2021 / 23RD ASHADHA, 1943 ITA NO. 772 OF 2009 AGAINST THE ORDER IN ITA 72/2001 OF I.T.A.TRIBUNAL,COCHIN BENCH,ERNAKULAM APPELLANT/S: THE COMMISSIONER OF INCOME TAX, TRICHUR BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES)SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/S: THE DHANALAKSHMI BANK LTD.,HEAD OFFICE, NAIKKANAL, TRICHUR. BY ADVS.SRI.P.BALAKRISHNAN ESRI.MOHAN PULIKKALSRI.NARAYANAN P POTTY THIS INCOME TAX APPEAL HAVING COME UP FOR HEARING ON 14.07.2021,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: I.T.A. No. 772/2009 S.V. Bhatti, J. J U D G M E N T Heard learned Standing Counsel Mr.Jose Joseph andlearned Advocate Mr. Mohan Pullikkal for parties. 2.Revenue is the appellant. M/s. Dhanalakshmi Bank, Ltd., Thrissur/assessee is the respondent. The appeal isdirected against the order of Income Tax Appellate Tribunal(for short ‘Tribunal’) Cochin Bench in I.T.A. No.72/Coch/2001dated 11.08.2006. The subject appeal deals with the issuesarising from the return filed by the assessee for the AssessmentYear 1997-98. 2.1The Assessing Officer, through assessment orderunder Section 143(3) of the Income Tax Act, (for short ‘the Act’)dated 23.03.2000, among other heads, made the followingadditions/disallowances. I.T.A. No. 772/2009 (1)Disallowance on the revaluation of current securities, (2)Disallowance of broken period interest in respect ofsecurities purchased, (3)Disallowance of gratuity payable to retiredemployees, and (4)Disallowance of loss on redemption of securities bytreating it as capital loss. 2.2The CIT (Appeals) though order dated 04.12.2000 inAnnexure-B confirmed the additions/disallowances as made by the Assessing Officer. The assessee filed appeal ITANo.72(Coch)/2001 before the Tribunal. The Tribunal allowedthe appeal of assessee in part and dismissed the appeal filed bythe Revenue. Hence ,the instant appeal under Section 260A ofthe Act. The Revenue raises the following substantial questionsof law in the appeal: I.T.A. No. 772/2009 “1. Whether, on the facts and in the circumstances of the case.the Tribunal is right in law: (a) In interfering with the disallowance of depreciationclaimed by the assessee on current securities. (b) In interfering with the disallowance of broken periodinterest in respect of securities purchased. 2. Whether, on the facts and in the circumstances of the caseand also in view of the specific provision of Section 40A(7) ofthe Income tax Act, 1961 the Tribunal is right in law ininterfering with the disallowance of gratuity payable?” 3. Question no.1(a) deals with the claim on revaluation of current securities. The question is no more res integra andanswered in favour of the assessee by this Court in the decision.reported in Commissioner of Income Tax v. Nedungadi Bank Ltd[1]Similarly, question no.1(b) deals with the deduction towardsbroken period interest. The claim of assessee towards brokenperiod interest is considered in Nedungadi Bank Ltd (supra) andCommissioner of Income-tax v. South Indian Bank Ltd[2] and following 1(2003) 264 ITR 545 (Ker.)2(2000) 241 ITR 374 (Ker.)2(2000) 241 ITR 374 (Ker.) I.T.A. No. 772/2009 the above decisions, the questions framed in 1(a) and (b) areanswered in favour of assessee and against the Revenue. 3.1Question No.2 deals with disallowance of gratuitypayable amounting to Rs.1,63,371/-. 4.We have perused the reasoning given by the Tribunal and are satisfied that the finding of fact recorded by theTribunal is with cogent reasons. We are also of the view thatthe question, as framed in the facts and circumstances of thiscase, does not merit as a substantial question for considerationby us. Since we are in complete agreement with the findings offact recorded by the Tribunal in paragraph nos.17 to 19, whichread thus: 1(2003) 264 ITR 545 (Ker.)2(2000) 241 ITR 374 (Ker.)2(2000) 241 ITR 374 (Ker.) I.T.A. No. 772/2009 the above decisions, the questions framed in 1(a) and (b) areanswered in favour of assessee and against the Revenue. 3.1Question No.2 deals with disallowance of gratuitypayable amounting to Rs.1,63,371/-. 4.We have perused the reasoning given by the Tribunal and are satisfied that the finding of fact recorded by theTribunal is with cogent reasons. We are also of the view thatthe question, as framed in the facts and circumstances of thiscase, does not merit as a substantial question for considerationby us. Since we are in complete agreement with the findings offact recorded by the Tribunal in paragraph nos.17 to 19, whichread thus: “17. The next issue is regarding the disallowance of Rs.1,63,371/- being the gratuity payable to the employees retiredduring the relevant previous year. The AO made thedisallowance of Rs.1,63,371/- in respect of the gratuity payable.On appeal, the CIT(Appeals) confirmed the said disallowance. 18. The Id. counsel for the assessee submitted that that theassessee bank has taken group gratuity with LIC of India. As perthe policy, the LIC will pay gratuity on the basis of actuarialvaluation. But in case of some of the employees, the actualamount payable at the time of retirement and as per actuarialvaluation will differ and in such cases the bank has to pay thedifference to the employees. He further submitted that theamount of Rs.1,63,371/- represents the difference betweentheamount received from LIC and that paid by the bank to itsretired employees during the financial year 1996-97. Thus, theamount payable to the employees over and above the amountreceived from LIC is shown as a liability in the balance sheet.The ld. counsel also relied on section 40A(vil)(a) and submittedthat if the provision is made for the purpose of payment of anygratuity which has become payable during the previous year isan allowable expenditure and no disallowance can be madeapplying section 40A(vii)(a) of the Act. On the other hand, theld. DR supported the order of the CIT(Appeals). 19. We have heard the rival submissions of the parties. We havealso carefully considered the facts as per material placed beforeus. The amount of Rs.1,63,371/- represents the differencebetween the amount received by the assessee bank from the LICof India in respect of the approved gratuity fund and theamount actually payable on the retirement of the employees. I.T.A. No. 772/2009 Moreover, this amount is in respect of those employees whohad been retired during the previous year relevant to theassessment year 1997-98. We are, therefore, of the opinion thatno disallowance can be made u/s.40A(vii)(a) of the Act as clause(b) specifically excludes the operation of clause (a) to section40A(vii) where the gratuity has become payable during theprevious year which means, either there is retirement or deathor resignation of the employees. In this case, there is actualliability to pay the gratuity on account of retirement. Hence, inour opinion, the assessee's claim is liable to be allowed. We,therefore, direct the AO to allow the claim of the assessee bankin respect of the ovision of Rs.1,63,371/-.” Infirmity is not pointed out against the finding, or a substantialquestion with substantive grounds has been made out by theRevenue. Hence, the dis-alowance of gratutity by AssessingOfficer is rightly interfered with by the CIT (Appeals) and theTribunal. We see no reason to interfere with the findings of factin the gratuity payment of Rs.1,63,371/-. Question No. 2 isanswered in favour of assessee and against the Revenue. I.T.A. No. 772/2009 For the above reasons the appeal fails and dismissedaccordingly. Sd/- S.V.BHATTIJUDGESd/- BECHU KURIAN THOMASJUDGE PETITIONER ANNEXURE ANNEXURE A ANNEXURE B ANNEXURE C APPENDIX OF ITA 772/2009 TRUE COPY OF THE ORDER OF THE ASSESSING OFFICER U/S.143(3) OF THE INCOME TAX ACT, DATED 23.03.2000. Infirmity is not pointed out against the finding, or a substantialquestion with substantive grounds has been made out by theRevenue. Hence, the dis-alowance of gratutity by AssessingOfficer is rightly interfered with by the CIT (Appeals) and theTribunal. We see no reason to interfere with the findings of factin the gratuity payment of Rs.1,63,371/-. Question No. 2 isanswered in favour of assessee and against the Revenue. I.T.A. No. 772/2009 For the above reasons the appeal fails and dismissedaccordingly. Sd/- S.V.BHATTIJUDGESd/- BECHU KURIAN THOMASJUDGE PETITIONER ANNEXURE ANNEXURE A ANNEXURE B ANNEXURE C APPENDIX OF ITA 772/2009 TRUE COPY OF THE ORDER OF THE ASSESSING OFFICER U/S.143(3) OF THE INCOME TAX ACT, DATED 23.03.2000. TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN ITA-66/JC/C/CIT-II/2000-01 DATED 04.12.2000. TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL IN I.T.APPEAL NO.72/COCH/2001 DATED 11.08.2006.