2002 (5) TMI 197 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition made u/s 40A(3) of Rs. 9,57,774.
2. Deletion of addition of Rs. 23,33,154 on account of delayed payment of various funds.

Summary:

Issue 1: Deletion of Addition Made u/s 40A(3) of Rs. 9,57,774
The Revenue contested the deletion of an addition made u/s 40A(3) by the CIT(A). The learned counsel for the assessee argued that the disallowance was made for cash payments exceeding Rs. 10,000 to truck drivers for transportation of goods. The counsel cited Circular No. 220, dt. 31st May, 1977, and various judgments, including Nuchem Plastic Ltd. vs. Dy. CIT and Smt. Ninal Lal vs. Dy. CIT, to support that such payments were made under exceptional and unavoidable circumstances covered by r. 6DD(j). The Tribunal agreed with the CIT(A) that the payments were justified under exceptional circumstances and upheld the deletion of the disallowance.

Issue 2: Deletion of Addition of Rs. 23,33,154 on Account of Delayed Payment of Various Funds
The Revenue also contested the deletion of an addition of Rs. 23,33,154 made by the AO for delayed payments of PF, FPF, and ESI by invoking provisions of s. 43B r/w s. 2(24)(x) and s. 36(1)(va). The learned counsel for the assessee argued that the company was declared a sick industry by BIFR, and thus, the due dates prescribed under the PF Act and other relevant laws were not applicable. The counsel cited Circular No. 523, dt. 5th Oct., 1988, and various judgments to support that the payments were made within 15 days from the date of salary disbursement. The Tribunal examined the legislative history and judicial interpretations of s. 43B, concluding that the delayed payments made during the previous year should be allowed as deductions. The Tribunal restored the matter to the AO to grant deductions in accordance with the directions given.

Conclusion:
The Tribunal upheld the deletion of the addition made u/s 40A(3) and directed the AO to allow deductions for delayed payments of PF, FPF, and ESI as per the provisions of s. 43B. The appeal was partly allowed for statistical purposes.