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2023 (7) TMI 1448 - AT - Income Tax


Issues Involved:
1. Deletion of disallowance under Section 36(1)(viia) of the Income Tax Act.
2. Deletion of addition on account of provision for Bad and Doubtful debts.
3. Disallowance of reimbursement of medical expenses and tea allowance.
4. Disallowance of expenses towards Employees' contribution to provident fund/shortfall.
5. Partial deletion of disallowance of gift expenses.
6. Disallowance for failure to deduct TDS under Section 40(a)(ia) read with Section 194C.
7. Alleged unaccounted interest income.

Issue-wise Detailed Analysis:

1. Deletion of disallowance under Section 36(1)(viia):
The Tribunal addressed the Revenue's contention that the disallowances are not covered by Section 36(1)(viia) and should be sustained. The Assessee argued that the CIT(A) should have allowed the deduction at the rate of 10% instead of 7.5%. The Tribunal referred to its previous decision in the Assessee's case for AY 2017-18, where it was adjudicated that the deduction under Section 36(1)(viia) is allowable for the provision for bad and doubtful debts, including those against standard assets. Following the principle of consistency, the Tribunal upheld the CIT(A)'s decision to delete the disallowance and allowed the deduction at 7.5%.

2. Deletion of addition on account of provision for Bad and Doubtful debts:
The Tribunal noted that the provision for bad and doubtful debts, including those against standard assets, is allowable under Section 36(1)(viia). This was consistent with previous decisions and the statutory provisions. The Tribunal upheld the deletion of the addition made by the AO on this account.

3. Disallowance of reimbursement of medical expenses and tea allowance:
The Tribunal examined the nature of the medical expenses and tea allowance, noting that these were part of the gross salary and office expenses, respectively. It was observed that the medical allowance was paid as per an agreement between the employees' union and the bank, and there was no requirement to deduct TDS on such payments. The tea allowance was considered part of office expenses. The Tribunal found no infirmity in the CIT(A)'s decision to delete the disallowance of Rs.87,57,430/-.

4. Disallowance of expenses towards Employees' contribution to provident fund/shortfall:
The Tribunal reviewed the statutory requirements under the Provident Fund Rules, which mandate the employer to cover any shortfall in maintaining the statutory interest rate. The Assessee had created a fund from post-tax profits for this purpose. The Tribunal upheld the CIT(A)'s decision to allow the expenditure of Rs.29,00,000/- under Section 37(1) of the Act, dismissing the Revenue's ground.

5. Partial deletion of disallowance of gift expenses:
The Tribunal evaluated the gift expenses claimed by the Assessee, which included gifts to staff, directors, customers, and others. The CIT(A) had allowed a portion of these expenses while disallowing the rest on an estimated basis. The Tribunal found the CIT(A)'s approach reasonable, allowing traditional and expected expenses while disallowing gifts to directors and government employees. The Tribunal upheld the partial deletion of Rs.6,98,375/- and dismissed the related grounds raised by both the Revenue and the Assessee.

6. Disallowance for failure to deduct TDS under Section 40(a)(ia) read with Section 194C:
The Tribunal remitted the issue back to the AO for re-examination. The Assessee had failed to provide the ledger account and explain the nature of the expenditure during the assessment proceedings. The Tribunal directed the Assessee to submit the necessary documents to the AO for a proper evaluation of the expenditure of Rs.13,48,049/-.

7. Alleged unaccounted interest income:
The Tribunal noted that the Assessee had not adequately explained the inclusion of interest income of Rs.65,07,102/- in the P&L account. Given the lack of clarity, the Tribunal remitted the issue back to the AO, directing the Assessee to provide sufficient evidence to explain the income. The ground was allowed for statistical purposes.

Conclusion:
The appeal filed by the Assessee was partly allowed for statistical purposes, while the appeal filed by the Revenue was dismissed. The Tribunal emphasized consistency with previous decisions and statutory provisions in its judgment.

 

 

 

 

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