2012 (8) TMI 240 - HC - Income Tax

Denial of claim of deduction u/s 43B - assessee deposited the bonus amounts payable to the workers into a separate bank account - Held that - The deduction is available only on the sum actually paid by the assessee on or before the due date for furnishing the return of income under Section 139(1) - deemed payment could not be treated as actual payment to qualify for deduction u/s 43B disagreeing with the submission of the assessee that depositing the amount in a bank, even if it be in a separate account, would satisfy the provisions of Section 43 B as actual payment - u/s 43 B only actual payment and not any notional or deemed payment that would be relevant for considering the deduction - against assessee.

Summary

Issues:
1. Interpretation of Section 43B of the Income Tax Act regarding the deduction of bonus payments.
2. Determination of whether depositing bonus amounts into a separate bank account constitutes actual payment for deduction purposes.

Analysis:

Issue 1:
The case involved a dispute between the management and employees regarding the percentage of bonus payable for the assessment year 1997-98. The employees demanded a 20% bonus, while the management declared 15%. After a strike and subsequent conciliation, a settlement was reached for a 19% bonus, with the amount being deposited in a separate bank account by the assessee. The Assessing Authority rejected the deduction claim under Section 43B, stating that actual payment must occur before the due date for filing the return. The Commissioner of Income Tax (Appeals) allowed the appeal, citing the strike as the reason for the delay in payment. However, the Income Tax Appellate Tribunal reversed this decision, emphasizing the need for actual payment. The Tribunal found no evidence of an irrevocable trust for the bonus payment. The assessee argued that the deposit in a separate account should be considered as actual payment based on previous judgments. The court referred to the Supreme Court's interpretation of Section 43B, emphasizing the requirement of actual payment for deduction eligibility.

Issue 2:
The assessee relied on previous cases to argue that depositing the bonus amount in a separate account should be deemed as actual payment for deduction purposes. However, the court rejected this argument, citing the Supreme Court's ruling that only actual payment, not deemed or notional payment, satisfies the requirements of Section 43B. The court concluded that even creating an irrevocable trust would not meet the criteria for actual payment. The court aligned with the Revenue's position, confirming the Tribunal's decision and dismissing the Tax Case (Appeal).

In summary, the court upheld the requirement of actual payment under Section 43B of the Income Tax Act for claiming deductions, emphasizing that depositing bonus amounts into a separate bank account does not fulfill the criteria for deduction eligibility. The judgment clarified the distinction between actual payment and deemed payment, highlighting the importance of compliance with the statutory provisions for claiming deductions.