2019 (8) TMI 1048 - AT - Income Tax

Addition u/s 43B - bonus payable shown by the assessee - whether the same has not been paid on or before due date of filing return of income - HELD THAT - Assessee has transferred the amount of bonus payable to bonus fund account of various branches in the month of May 2013 and thereafter, amount of bonus payable to employees has been transferred to their respective bank account in the month of May 2013. All these entries have been duly verified by the CIT(A) and no discrepancy has been pointed out by the DR before us, in respect of the amount transferred in the bank account of the various employees, which is appearing in the various pages of the paper-book filed by the assessee. In our opinion, the assessee has complied requirement of section 43B for payment of the bonus payable before due date of filing of return of income, which was 30/09/2013 in this case and accordingly, we uphold the finding of the CIT(A) on the issue in dispute. The ground of the appeal of the Revenue is accordingly dismissed. Addition of closing allowance - uncertain liabilities / expenses - whether the same is not found to be paid within the year under consideration and order for provision of Closing Allowance was passed on 24.06.2013, much after the end of year under consideration? - HELD THAT - The assessee has claimed before us that the amount of closing allowance has been paid to the employees from year to year in percentage terms of salary and therefore duly quantifiable provision. DR also could not controvert this fact that the amount of closing allowance is quantifiable in respect of the each employee. It is also not in dispute that the amount was incurred wholly and exclusively for the purpose of the business. In our opinion, when amount of provision is quantifiable, same cannot be said as an unascertained liability. Accordingly, same is allowable under section 37(1) of the Act as incurred wholly and exclusively for the purpose of the business of the assessee. The ground of the appeal of the Revenue is accordingly dismissed.

Summary

Issues:
1. Addition of bonus payable under section 43B of the Income Tax Act, 1961.
2. Disallowance of closing allowance made by the Assessing Officer.

Issue 1: Addition of Bonus Payable under Section 43B:
The Revenue challenged the relief allowed by the Ld. CIT(A) regarding the addition of ?1,15,00,000 made by the Assessing Officer under section 43B of the Act for bonus payable to employees. The Assessing Officer disallowed the sum for non-payment of bonus before the due date of filing the return of income. The Ld. CIT(A) deleted the addition after the assessee provided detailed bank statements showing transfer of bonus amounts to employees' bank accounts. The Ld. DR argued that relevant details were not produced earlier, while the assessee's counsel presented evidence supporting the payment. The Tribunal found that the bonus payable was transferred to employees' bank accounts before the due date of filing the return of income, meeting the requirements of section 43B. Consequently, the Tribunal upheld the Ld. CIT(A)'s decision, dismissing the Revenue's appeal on this ground.

Issue 2: Disallowance of Closing Allowance:
The Revenue contested the relief allowed by the Ld. CIT(A) on the disallowance of closing allowance of ?89,69,363 made by the Assessing Officer. The Assessing Officer deemed this amount as an unascertained liability created by the order of Directors of the working committee. The Ld. CIT(A) found that the amount had been paid to employees before the income tax return filing, and thus, he deleted the addition. The Ld. DR relied on the Assessing Officer's order, while the assessee's counsel argued that the closing allowance was quantifiable and a regular payment. The Tribunal observed that the provision for closing allowance was quantifiable, incurred for business purposes, and therefore allowable under section 37(1) of the Act. Consequently, the Tribunal dismissed the Revenue's appeal on this ground as well.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the Ld. CIT(A)'s decisions regarding both the addition of bonus payable under section 43B and the disallowance of closing allowance. The Tribunal found that the assessee had complied with the legal requirements and that the closing allowance was a quantifiable liability incurred for business purposes, thus dismissing the Revenue's grounds of appeal.