2011 (10) TMI 463 - HC - Income Tax

Deduction on payment basis - Bonus paid beyond the extended period determined under 43B - Held That - When the time has been specifically determined under the act remitting the matter to the Assessing Authority will not serve any useful purpose when the dates are admitted. Tribunal had deleted the disallowance made out of rent paid - Revenue unable to controvert the said positon - Held That - Question answered in favour of assessee.

Summary

Issues:
1. Interpretation of Section 43B regarding the deduction of bonus paid to employees.
2. Disallowance under Section 40A(2) concerning rent payments.
3. Proper authority for remand in case of enhancement made during the first appellate stage.

Analysis:

Issue 1:
The first substantial question of law pertains to the payment of bonus by the assessee to its employees for the assessment year 1992-1993. The Commissioner of Income Tax (Appeals) held that the bonus disbursed after the stipulated period was not allowable under Section 43B of the Act. Section 43B(c) mandates deductions only on actual payment, specifically referring to sums under Section 36(1)(ii) of the Act. The Act clarifies that deductions are permissible only when the actual payment is made within the prescribed timeframe. Despite the provision allowing an extended period for payment, the assessee failed to pay the bonus even after the extended deadline. Consequently, the Court ruled in favor of the Department, emphasizing that remitting the matter to the Assessing Authority would not be beneficial given the admitted delay in payment.

Issue 2:
Regarding the second question of law concerning disallowance under Section 40A(2) for rent payments, the Tribunal had previously deleted the disallowance in the assessee's case for the assessment year 1993-1994. The Revenue's counsel could not challenge this decision, leading to a ruling in favor of the assessee based on the precedent set by the Tribunal in a similar context.

Issue 3:
The third substantial question of law revolves around the proper authority for remand in cases of enhancement during the first appellate stage. The Revenue contended that the remand should have been directed to the First Appellate Authority rather than the Assessing Officer. However, the order of the Commissioner of Income Tax (Appeals) clearly indicated that the matter should be reheard by the Assessing Authority after issuing a fresh demand notice following the enhancement. As the Commissioner himself instructed the Assessing Authority to reconsider the matter in light of the enhancement, the Court ruled against the Revenue on this issue, upholding the remand to the Assessing Officer.

In conclusion, the appeal was partly allowed, with costs not awarded. The judgment provides detailed interpretations of relevant sections of the Income Tax Act and clarifies the applicability of deductions based on actual payment timelines, disallowances under specific sections, and the appropriate authority for remand in cases of enhancements during the first appellate stage.