2010 (2) TMI 17 - HC - Income Tax

Disallowance u/s 43B read with section 143(1)(a) scope of power unde section 143(1)(a) allowability of interest payable on late deposit of provident fund held that - the issue regarding allowability of interest payable on late deposit of provident fund is a debatable issue the decision of ITAT upholding the deletion of addition made by the Assessing Officer of an amount of ₹ 18,02,026/- being interest payable on late deposit of provident fund under Section 43-B of the Income Tax Act is correct - . It is clear that the issue was debatable and, therefore, could not be disallowed while considering the intimation under Section 143(1)(a) of the said Act

Summary

Issues:
1. Allowability of interest payable on late deposit of provident fund under Section 143(1)(a) of the Income Tax Act.
2. Deletion of addition made by the Assessing Officer for interest payable on late deposit of provident fund under Section 43-B of the Income Tax Act.

Analysis:

Issue 1: Allowability of interest payable on late deposit of provident fund under Section 143(1)(a) of the Income Tax Act:
The High Court addressed whether the ITAT was correct in holding that the issue of interest payable on late deposit of provident fund was debatable and could not be disallowed under Section 143(1)(a) of the Income Tax Act. The court noted that the issue was indeed debatable, as seen in various appeals before the Tribunal related to the same assessment year. The court referred to ITA No.958/2007 and other connected appeals, indicating that the issue had been extensively discussed and was pending consideration. Consequently, the court ruled in favor of the assessee, stating that the interest payable on late deposit of provident fund was a debatable issue and could not be disallowed under Section 143(1)(a) of the Income Tax Act.

Issue 2: Deletion of addition made by the Assessing Officer for interest payable on late deposit of provident fund under Section 43-B of the Income Tax Act:
Considering the decision on the first issue, the court concluded that since the interest payable on late deposit of provident fund was deemed debatable and not subject to disallowance under Section 143(1)(a), the second issue regarding the deletion of the addition made by the Assessing Officer for the same amount under Section 43-B of the Income Tax Act did not hold relevance. Therefore, the court held that question (b) did not survive in this case, and the appeal was ultimately dismissed based on the findings related to the first issue.

In summary, the High Court ruled in favor of the assessee, emphasizing the debatable nature of the issue concerning the allowability of interest payable on late deposit of provident fund under the Income Tax Act. The decision rendered in this case had implications on the deletion of the addition made by the Assessing Officer, ultimately leading to the dismissal of the appeal.