2010 (4) TMI 1101 - HC - Income Tax

Summary

Issues involved:
The appeal challenges the order regarding employer's contribution to PF & ESI and provision made for foreign exchange fluctuation in technical know-how fee.

Employer's contribution to PF & ESI:
The Assessing Officer disallowed the employer's contribution towards PF and ESI under section 43B of the Income-tax Act as it was remitted belatedly. The Commissioner of Appeals allowed the appeal, but the revenue appealed to the Tribunal. The Tribunal granted relief to the assessee, and the High Court upheld the decision citing a precedent case.

Provision for foreign exchange fluctuation:
The Assessing Officer disallowed a sum provided for foreign exchange fluctuation in technical know-how fee under section 40(a)(i) of the Act. The Commissioner of Appeals allowed the appeal, which was further challenged by the revenue before the Tribunal. The Tribunal rejected the revenue's contention, stating that TDS deduction was not required for the fluctuation amount, as it would be adjusted when the fee is actually paid in the future. The High Court upheld the Tribunal's decision, ruling against the revenue.

This judgment clarifies the treatment of employer's contribution to PF & ESI and provision for foreign exchange fluctuation in technical know-how fee under the Income-tax Act, emphasizing the importance of following the Mercantile System of Accounting and the impact of foreign exchange fluctuations on tax deductions.