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Issues involved: Appeal by Revenue against CIT(Appeals) order regarding provision for wage arrears in assessment u/s 143(3) r.w.s. 147 for AY 2006-07.
Summary: The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)-V, Chennai for the Assessment Year 2006-07. The assessee, a Public sector Transport Undertaking, initially declared a loss of Rs. 1,02,77,76,051 for the year. The assessment was completed u/s. 143(3) of the Income Tax Act, 1961, determining the income as NIL. Subsequently, the case was re-opened u/s. 147, with a notice issued to the assessee on 07-01-2010, primarily due to a provision for wage arrears of Rs. 5.80 Crores made by the assessee. The Assessing Officer disallowed this provision along with belated payments towards Employees Pension Fund in an order dated 20-12-2010. In response, the assessee appealed before the CIT(Appeals), who noted that the provision for wage arrears was made in accordance with a wage settlement and directed the Assessing Officer to allow it after verification. The Revenue then appealed against this order. During the proceedings, the Revenue's representative reiterated the grounds of appeal, seeking to set aside the CIT(Appeals) order. On the other hand, the assessee's representative argued that the provision for wage arrears was based on a settlement agreement with trade unions and supported the CIT(Appeals) findings. After considering the submissions and reviewing the lower authorities' orders, the ITAT Chennai found that the provision for wage arrears was created against an ascertained liability as per the Wage Settlement Agreement. The CIT(Appeals) decision to remit the issue back to the Assessing Officer for verification was upheld, and the Revenue's appeal was dismissed for lacking merit. The order was pronounced in open court on 7th August 2013 in Chennai.
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