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2018 (1) TMI 243 - AT - Income TaxDisallowance on contribution to Staff Welfare Fund - CIT-A allowed the claim - Held that - On identical facts this tribunal has already taken a view in assessee s own case for A.Y.2003-04 and held that the contribution towards staff welfare fund was based on a resolution of the board of directors of the assessee held on 05.12.1979 and by virtue of that resolution an over riding title on the service charges received and consequently there was a diversion of income by over riding title at source on the service charges received by the assessee. The CIT(A) has followed the order of ITAT on identical facts - Decided against revenue CIT(A) directing the A.O. to verify the claim of the assessee in respect of a carry forward of losses as unabsorbed depreciation, Business loss and Dividend income as exempt income u/s 10(34) - plea of the revenue in ground no.2 that the CIT(A) u/s 251 of the Act does not have the power to set aside an issue to the AO and therefore his order is not in accordance with law - Held that - The contention raised on behalf of the revenue is correct but nevertheless we are of the view that the issue requires examination by the AI and in the circumstances we direct the AO to verify the claim of the assessee and if found correct give appropriate relief. Thus ground no.2 is treated as allowed.
Issues involved:
- Disallowance of contribution to Staff Welfare Fund - Delay in filing appeals - Treatment of unabsorbed depreciation, business loss, and dividend income Issue 1: Disallowance of contribution to Staff Welfare Fund In the case, the Revenue appealed against the CIT(A)'s decision to delete the disallowance of a contribution to the Staff Welfare Fund. The Revenue argued that the fund was created without passing it through the Profit & Loss Account, leading to an understatement of service charge income. The AO added the amounts to the total income, contending that the funds should be included due to the direct crediting of cash to the funds. However, the CIT(A) referred to a previous order by ITAT Kolkata Bench in the assessee's case for A.Y. 2003-04, which allowed the contribution to the Staff Welfare Fund. The CIT(A) followed this precedent and deleted the addition to the fund. The tribunal dismissed the Revenue's appeal, noting that the contribution was based on a resolution by the board of directors, resulting in a diversion of income. Therefore, the tribunal upheld the CIT(A)'s decision to delete the addition to the Staff Welfare Fund. Issue 2: Delay in filing appeals The Revenue cited a delay in filing the appeals, explaining administrative and procedural delays as the reason. The tribunal accepted the reasons provided in the affidavit and condoned the delay, allowing the appeals to be heard. The tribunal found a reasonable and sufficient cause for the delay, leading to the condonation of the delays in filing the appeals. Issue 3: Treatment of unabsorbed depreciation, business loss, and dividend income The CIT(A) directed the AO to verify the claim of the assessee regarding carry forward of losses for A.Y. 1995-96, including unabsorbed depreciation, business loss, and dividend income exempt under section 10(34) of the IT Act, 1961. The Revenue contended that the CIT(A) did not have the power to set aside the issue to the AO, arguing that the order was not in accordance with the law. While acknowledging the Revenue's contention, the tribunal directed the AO to verify the claims made by the assessee and grant appropriate relief if found correct. As a result, the tribunal treated the issue as allowed, partly allowing the appeal for statistical purposes. In conclusion, the tribunal partly allowed all the appeals for statistical purposes, addressing issues related to the disallowance of contributions to the Staff Welfare Fund, delay in filing appeals, and the treatment of unabsorbed depreciation, business loss, and dividend income. The tribunal upheld the CIT(A)'s decision to delete the addition to the Staff Welfare Fund based on a previous order and directed the AO to verify the claims made by the assessee regarding losses and dividend income.
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