IN INCOME TAX APPELLATE TRIBUNAL BENCH : CHENNAI, BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G.PAVAN KUMAR, JUDICIAL MEMBER . I.T.A.No.1831 Mds. 2016 Assessment year : 2008-09 Deputy Commissioner of Vs. M s.Tamilnadu Maritime Income Tax, Board, Non-Corporate Circle-2, No.171, South Kesavaperumal Chennai 600 034. Puram, Off. Green Ways Road, R.A.Puram, Chennai 600 028. [PAN AAATT 9514 E ] ( Appellant) ( Respondent) Appellant by : Mr.Shiva Srinivas, JCIT, D.R Respondent by : Mr.G.Baskar,Advocate Date of Hearing : 06-09-2016 Date of Pronouncement : 23-09-2016 ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER This appeal of Revenue is directed against order of Commissioner of Income-tax (Appeals)-1, Chennai dated 11.03.2016 pertaining to assessment year 2008-09. :- 2 -: ITA No. 1831 Mds. 2016 2. first ground in this appeal is that Ld.CIT(A) erred in holding that contribution made towards Superannuation fund has to be treated as business expenditure and to be allowed u s.37 of Act. 3. facts of issue are that during course of assessment proceedings, AO found that superannuation fund was not registered and contribution made by employer is above 27% of employee s salary. According to AO, as per sec.36(1(iv) of Act, employers contribution towards Recognized provident funds or approved superannuation is allowed as deduction subject to limits laid down for purpose of recognizing provident or approving superannuation fund. Hence, AO disallowed contribution to superannuation fund to tune of `2,37,23,572 -. Aggrieved, assessee carried appeal before Ld.CIT(A). 4. On appeal, Ld.CIT(A) observed that this Board formed different funds for welfare of employees and employer as well as employees shall contribute to respective Provident Fund, Pension Fund and Gratuity fund as per respective rules and accordingly contributions made. Further, Ld.CIT(A) observed that funds created are necessarily kept separately so that contributions made for welfare of employees were not utilized for any other purpose for which funds had been created and :- 3 -: ITA No. 1831 Mds. 2016 maintained. Ld.CIT(A) placing reliance on decision of Hon ble Supreme Court decision in case of K.Ravindranathan Nair Vs. CIT 247 ITR 178(SC), directed AO to allow claim of assessee u s 37 of Act. Aggrieved by order of Ld.CIT(A), now Revenue is in appeal before us. 5. After hearing both parties, we are of opinion that similar issue in assessee's own case for assessment year 2010-11 came for consideration before this Tribunal in ITA No.862 Mds. 2015 vide order dated 21.08.2015 wherein held as under:- 5. We have considered rival submissions on either side and also perused material available on record. Admittedly, by virture of operation of sec.20 of Tamilnadu Martitime Board Act, employees of former Tamilnadu Port Department were allotted to Tamilnadu Maritime Board on basis of same service conditions, rights and privileges. Therefore assessee is liable to pay contribution to superannuation fund of respective employees. No doubt, approval of superannuation fund was granted by CIT with effect from 18.5.2011. question arises for consideration is when employees of assessee were allotted by Government of Tamilnadu Port Department on same terms and conditions, rights and privileges, whether contribution made by assessee is allowable u)s 37 of Act or not. identical issue was considered by Madras High Court in CIT vs Kattabomman Transport Corporation Ltd(supra). In case before Madras High Court, Kattabomman Transport Corporation paid to Government in order to enable Government to credit amount so paid to Provident Fund Account of Government employees who were at point of time working in Transport :- 4 -: ITA No. 1831 Mds. 2016 Corporation. Government, after receipt of amount from Transport Corporation, credited to Provident Fund Account of concerned employees. In those circumstances, Madras High Court found that payment is not in any way affected by sec. 36 of Act. payment so made is deductible under sec. 37 of Act, being part of business expenditure. In this case also, by virtue of operation of section 20 of Tamilnadu Maritime Board Act, erstwhile Government employees of Tamilnadu Port Department became employees of Tamilnadu Maritime Board. Government clarified in letter dated 21.11.1996 that employees so allotted to Tamilnadu Maritime Board will have same tenure, remuneration, rights and privileges. In view of statutory provision, this Tribunal is of considered opinion that if claim could not be allowed u s 36 of Act, same has to be allowed u s 37 of Act. In other words, payment made by assessee to extent of 3,69,63,658 - has to be treated as business expenditure in hands of assessee in view of judgment of Madras High Court in Kattabomman Transport Corporation Ltd. (supra). In view of above discussion, we are unable to uphold orders of lower authorities. Assessing Officer is directed to allow claim of assessee u s 37 of Act. In view of above binding decision of Tribunal in assessee's own case, we are inclined to decide case in favour of assessee, This ground of Revenue stands dismissed. 6. next ground in this appeal is that Ld.CIT(A) erred in his failure to disallow excess claim of depreciation that corresponds :- 5 -: ITA No. 1831 Mds. 2016 to fixed assets cost of which is borne by State Government through capital grants. 6.1 facts of issue are that assessee is formed on 18.03.1997 to provide Administration, Management and Control of Minor Ports in State of Tamilnadu. Government had been providing necessary assistance by way of loans grants etc. assets of assessee were devastated by Tsunami on 26.12.2004. In order to rehabilitate, Government of Tamilnadu had provided capital grants amounting to Rs. 59.35 crores under Tsunami Emergency Assistance Programn (TEAP). G.O passed on 18.07.2005 had clearly categorised that money provided as assistance to be Capital Grants . However, in final accounts of assessee, both loans and grants, were grouped together and composite value was exhibited in corresponding schedule of balance sheet. State Unit of C & AG which audited accounts of assessee being State PSU, directed assessee to categorize loans and grants separately since both are different in nature. Accordingly in annual report for F.Y. 2011-12, as suggested by AG, loan and grant were shown separately in revised annual accounts. sum of Rs.59,35,29,237 - was therefore segregated and shown separately as grants. On examination of accounts, consequent to modification undertaken, it was seen that claim of depreciation had :- 6 -: ITA No. 1831 Mds. 2016 to be appropriately reduced applying explanation 10 to Sec 143(1). proposal in this regard for enhancement of income disallowing excess claim of depreciation that corresponds to assets funded by Grants, was submitted on 04.11.2015 by Assessing Officer. As per decision of Kerala High Court in case of Popular Automobiles Vs CIT 187 ITR 86, CIT(A) is duty bound to exercise his power of enhancement on motion by Assessing Officer. On appeal, Ld. CIT(A) did not take cognizance of enhancement proposal submitted by AO . As AO made such request to CIT(A) to make enhancement, and Ld.CIT(A) not even mentioned about such request in his order, hence Revenue is in appeal before Tribunal. 7. Before us, ld.D.R submitted that excess depreciation allowance that corresponds to assets, cost of which is subsidized by State Government through Capital Grants requires to be disallowed. 8. On other hand, ld.A.R argued in support of order of Ld.CIT(A). 9. We have heard both parties and perused material on record. Firstly, this issue has not emanated from order of Ld.CIT(A). Further, as held by Tribunal, in case of M s.A.R.Housing Pvt. Ltd. in ITA No.623 Mds. 15, we are of :- 7 -: ITA No. 1831 Mds. 2016 opinion that AO cannot influence decision making process of Ld.CIT(A) while deciding appeal in term of Sec.251(1)(a) of Act so as to enhance assessment . Ld.CIT(A) is higher authority, independent to take decision in accordance with law and he has power to confirm, reduce, enhance or annul assessment . In that process, AO cannot seek Ld.CIT(A) to enhance assessment as held by above order of Tribunal. Accordingly, we are of opinion that Ld.CIT(A) was justified in not enhancing assessment in terms of request of AO. This ground of Revenue stands dismissed. 10. In result, appeal of Revenue is dismissed. Order pronounced on 23rd September, 2016, at Chennai. Sd - Sd - (G.PAVAN KUMAR) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER Chennai Dated: 23rd September, 2016 K S Sundaram Copy to: 1. Appellant 3. CIT(A) 5. DR 2. Respondent 4. CIT 6. GF Deputy Commissioner of Income-tax, Non-Corporate Circle-2, Chennai v. M/s.Tamilnadu Maritime Board