2008 (2) TMI 328 - HC - Income Tax

Question that Whether tribunal was right in holding that addition is required to be made in hands of M.D. of company, not in hands of Company ?, is a question of fact, hence not answered - addition made by AO on account of unutilized contract receipts on ground that assessee had collected the amount fraudulently in the shape of labour welfare fund amount in question which remained unspent at the end of the year was not assessee s own money but a liability hence additions are deleted

Summary

Issues:
1. Appeal challenging ITAT order on addition for perks in the hands of the Company.
2. Appeal challenging ITAT order on unutilized contract receipts collected for labour welfare fund.

Analysis:
1. The first issue involves the challenge to the ITAT order regarding the addition of Rs.66,221 for car expenses, including insurance and depreciation for personal use of the car. The Revenue contended that if any addition was necessary for perks, it should be made in the hands of the Managing Director (M.D.) of the Company, not the Company itself. The ITAT had deleted this addition, leading to the appeal. The Court noted that the ITAT's decision was in line with the principle that the amount in question, paid by the Contractor for labourers' welfare, did not constitute the assessee's income but a liability to be utilized for the welfare fund. The Court cited precedents and upheld the ITAT's decision, emphasizing that the unspent amount was not the assessee's income but a liability, thus dismissing the appeal.

2. The second issue pertains to the ITAT's decision on unutilized contract receipts collected for a labour welfare fund. The Revenue challenged the ITAT's order deleting the addition of Rs.7,00,037 made on account of these receipts. The Commissioner of Income Tax(A) treated this amount as a liability following relevant legal precedents. The Court found that the amount collected was intended for labour welfare activities and was to be utilized for that purpose. The Court observed that a minimal amount was left as balance in the labour welfare fund after considering the expenditure incurred by the assessee. Relying on legal principles and factual analysis, the Court concluded that no interference was warranted in the ITAT's order. Consequently, the appeals were dismissed as no substantial question of law remained for determination.

This detailed analysis highlights the key arguments, legal principles, and factual considerations leading to the Court's decision on each issue raised in the appeal.