2020 (1) TMI 1566 - AT - Income Tax

Disallowance of Contribution to Environment Relief Fund Liability u/s 43B - HELD THAT - No material has been placed by Revenue to demonstrate that the order of Tribunal in assessee s own case for A.Y. 2006-07 2019 (1) TMI 1332 - ITAT PUNE has been set aside / stayed by higher Judicial Forum. Revenue has also not pointed out any distinguishing feature in the facts of the present case and in the case of assessee s own case in A.Y. 2006-07. We therefore, relying on the decision of the Tribunal in assessee s own case in A.Y. 2006-07 for similar reasons hold that the disallowance made by the AO u/s 43B of the Act is uncalled for and therefore direct its deletion. Thus, the ground of the assessee is allowed.

Summary

Issues: Disallowance of Contribution to Environment Relief Fund Liability under Section 43B of the Income Tax Act

Analysis:
1. Background: The appeal arose from the order of the Commissioner of Income Tax (A), Pune, for the assessment year 2008-09, where the assessee, a company engaged in General Insurance, challenged the disallowance of a contribution to Environment Relief Fund under Section 43B of the Act.

2. Facts: The assessee initially declared its income at ?98,41,65,289/-, later revised to ?98,74,32,790/-. The assessment framed under section 143(3) determined the total income at ?1,75,00,85,820/-. The Commissioner (A) dismissed the appeal, leading to the current appeal before the ITAT Pune.

3. Contentions: The assessee argued that the contribution was collected under the Public Liability Insurance Act, 1991, and should not be disallowed under Section 43B. The Commissioner (A) upheld the disallowance, citing the lack of provision to exclude such cases from Section 43B.

4. Tribunal's Decision: The Tribunal referred to a previous case of the assessee for A.Y. 2006-07, where a similar issue was decided in favor of the assessee. The Tribunal held that the contribution cannot be added under Section 43B as it was not income but a liability to be remitted to the Environment Relief Fund, pending government guidelines.

5. Legal Analysis: The Tribunal emphasized that the assessee acted as a conduit for depositing the amount to the relief fund on behalf of the owner (insured), and the amount collected cannot be considered as income. The Tribunal relied on the principle of diversion of income by overriding title and judicial precedents to support its decision.

6. Conclusion: The Tribunal found no merit in the disallowance made by the AO under Section 43B and directed its deletion, aligning with the decision in the assessee's previous case. The appeal was allowed in favor of the assessee, emphasizing the unique nature of the contribution and the absence of a mechanism for its remittance at the relevant time.

7. Outcome: The Tribunal's decision on the disallowance of the contribution to the Environment Relief Fund under Section 43B of the Income Tax Act favored the assessee, highlighting the specific circumstances and legal principles governing such contributions.