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Issues involved: Whether the CIT(A) was justified in deleting the addition made by the A.O. on account of adhoc provision debited in Profit & Loss Account and interest on P.F. account.
Adhoc provision for Audit fee: The assessee, a cooperative bank, declared additional income during assessment proceedings. The Assessing Officer made various additions, including ad-hoc provision for audit fees. The CIT(A) considered the TDS provisions under section 194J, which require deduction at the time of payment to the payee. The appointment of the auditor was made after the end of the previous year, and details of the auditors were not available to the assessee till the end of the financial year. The CIT(A) concluded that TDS provisions were not applicable in this case, as the details of the payee and exact amount were not known. Therefore, no disallowance under section 40(a)(ia) was warranted, and the addition of Rs. 2,00,000 was deleted. Interest on P.F. Account: The Assessing Officer made an addition for interest on the P.F. account, which was deleted by the CIT(A). The Revenue contended that the CIT(A) erred in deleting this addition, citing sections 36(1)(iv) and 36(1)(va) of the Act. However, it was found that the interest paid was credited to individual employees' accounts, indicating that the assessee had no control over the funds. The interest was paid from Fixed Deposit accounts earmarked for PF contributions, and once credited to employees' PF accounts, the money belonged to the employees. The interest paid on PF accounts was considered akin to a deposit, and as such, it was an allowable deduction. The CIT(A) was deemed justified in deleting the addition of Rs. 19,23,945, and the appeal by the Revenue was dismissed.
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