2007 (3) TMI 221 - HC - Income Tax

Summary

Issues involved:
The issues involved in the judgment are related to the payment of Employees State Insurance (ESI) and Provident Fund, as well as closure compensation and notice fee payable to the workmen of the assessee.

Payment of ESI and Provident Fund:
The assessee made the ESI and provident fund payments after a slight delay but within the grace period of five days allowed by the statute. The Commissioner of Income-tax (Appeals) and the Tribunal both ruled in favor of the assessee, stating that the Assessing Officer was not justified in deleting the allowance claimed by the assessee u/s 43B of the Income-tax Act, 1961. The High Court agreed with this view, emphasizing that since the payments were made within the grace period allowed by the statute, there was no default on the part of the assessee.

Closure Compensation and Notice Fee:
The assessee claimed an amount of Rs. 1.45 crores due to the closure of its unit in Haryana because of the prohibition policy. The Commissioner of Income-tax (Appeals) allowed only Rs. 45,32,012, which was the amount actually paid during the relevant previous year. The remaining amount was disallowed, as the liability, although it may have arisen, was not discharged by the assessee during the relevant previous year. The Tribunal upheld this decision. The High Court concurred, stating that since only Rs. 45.35 lakhs was actually paid, the deduction was available to the assessee as a business expenditure, considering the factory closure was due to the policy adopted by the Government of Haryana prohibiting liquor sale and consumption in the State.

Conclusion:
The High Court found no substantial question of law to consider and dismissed the appeal.