2017 (5) TMI 218 - AT - Income Tax

Adding leave salary u/s.43B(f) - Held that - The assessee failed to file the necessary evidence in course of the impugned consequential proceedings. It did not provide / file permanent addresses of the concerned employees so as to prove genuineness of the leave salary expenses in question. Both the lower authorities therefore repeat the impugned disallowance. Learned senior counsel/Authorized Representative is very fair in informing the bench that the very factual position continues herein as well. We thus find no reason to interfere in the impugned disallowance. This first substantive ground decided against assessee. Disallowance of interest expenses - non charging of interest on loans given to partner - CIT(Appeals) noted that if no loan or advance is given to Shri R.P.Singh in the assessment year in question, there is no question of any diversion of borrowed funds, thus restore this issue to the file of Assessing Officer with a direction to verify, if any interest is charged, in the earlier assessment year or not - Held that - We sought to know from Shri Shah as to whether the assessee has filed any supportive evidence in furtherance to the above extracted directions or not. His reply is in negative. We therefore affirm the second disallowance as well by following the above extracted detailed discussion. - Decided against assessee. Disallowance to contribution made towards provident funds paid before the due date of filing of the return - Held that - There is no dispute that the assessee did not file the requisite details in light of the above extracted directions that the same had been paid before the due date. The fact remains that the law on this issue is very much against the assessee as of now. The assessee fails in its third substantive ground as well.

Issues Involved:
1. Delay in filing the appeal.
2. Disallowance of leave salary under Section 43B(f).
3. Disallowance of interest expenses due to non-charging of interest on loans given to a partner.
4. Disallowance of contribution towards provident funds paid before the due date of filing the return.

Detailed Analysis:

1. Delay in Filing the Appeal:
The appeal suffered from a delay of 255 days. The assessee’s authorized person filed an affidavit and medical certificates to justify the delay due to serious illness. The Departmental Representative did not dispute these claims. Consequently, the delay was deemed neither intentional nor deliberate and was condoned, allowing the main appeal to be adjudicated.

2. Disallowance of Leave Salary under Section 43B(f):
The first issue revolved around the disallowance of ?25,65,489/- as leave salary under Section 43B(f). In the previous round of litigation, the tribunal had remitted the case back to the Assessing Officer (AO) for reconsideration, directing the assessee to furnish details proving the genuineness of the leave salary expenses and payments made before the due date of filing the return. However, in the subsequent proceedings, the assessee failed to provide the necessary evidence and permanent addresses of the employees. As a result, both lower authorities repeated the disallowance. The tribunal found no reason to interfere with this disallowance, and the first substantive ground was dismissed.

3. Disallowance of Interest Expenses:
The second issue concerned the disallowance of ?90,000/- in interest expenses due to non-charging of interest on a loan given to a partner. In the first round, the tribunal had directed the AO to verify whether any interest was charged in the earlier year and decide accordingly. The assessee did not provide any supportive evidence following these directions. Consequently, the tribunal affirmed the disallowance, dismissing the second substantive ground.

4. Disallowance of Contribution towards Provident Funds:
The final issue pertained to the disallowance of ?79,85,372/- towards provident fund contributions not paid within the specified time limits. The tribunal had previously directed the AO to verify if the payments were made before the due date of filing the return and delete the addition if they were. However, the assessee failed to file the requisite details. The assessee argued that the tribunal should not revisit the issue beyond the first round directions. The tribunal, however, noted that the law on this issue, as per the jurisdictional High Court's decision in CIT vs. Gujarat State Road Transport Corporation, was against the assessee. The tribunal decided to follow the High Court’s decision, affirming the disallowance and dismissing the third substantive ground.

Conclusion:
The appeal was dismissed in its entirety, with the tribunal upholding all the disallowances made by the lower authorities. The decision was pronounced in the open court on April 25, 2017.

← Previous Next →