2018 (3) TMI 669 - HC - Income Tax

Addition on account of Production Incentive Bonus - Held that - Question to be answered against the department in view of the judgment in the case of Commissioner of Income Tax vs. M/s. Kisan Sahkari Chini Mills Ltd. (2017 (8) TMI 131 - ALLAHABAD HIGH COURT) wherein this court has held that where incentive bonus has been paid as a reward of good attendance and efficiency to the workers, it would be deductible under section 37 of the Act and therefore the tribunal has not erred in allowing deduction in respect of the incentive bonus in the present case also. Addition of undervaluation of closing stock - Held that - Order of the tribunal is upheld deleting the addition of the amount made on account of under valuation of closing stock in view of the fact in the case of CIT vs. Bannari Amman Sugars Ltd. (2012 (9) TMI 848 - SUPREME COURT) has held that the stock of incentive sugar has to be valued on the levy price and not on cost price. Contribution to provident fund made by the assessee, it has been recorded as a matter of fact that the contribution was made well within the grace period. Such being the case it was liable to be allowed under section 43B of the Act. Decided in favour of the assessee. Assessee as held to be entitled to the deduction on account of interest on excess levy sugar price. This question is also therefore decided in favour of the assessee Disallowance of guest house expenses - Held that - This court in the case of Commissioner of Income Tax vs. M/s. Kisan Sahkari Chini Mills Ltd. (supra) by which the tribunal has deleted the disallowance of guest house expenses under section 37 as in view of the provisions of sub-section (4) of section 37 which stood at the relevant time all expenses incurred to the assessee on any accommodation of the nature of the guest house after 28.2.1970 were not allowable. The question is answered in favour of the department and against the assessee.

Issues:
1. Production Incentive Bonus
2. Guest House Expenses
3. Contribution to Provident Fund
4. Disallowance of Cane Price and Excess Levy Sugar Price
5. Undervaluation of Closing Stock

Production Incentive Bonus:
The tribunal upheld the deletion of the addition of amounts related to Production Incentive Bonus, citing a previous judgment. The court held that where incentive bonus is paid as a reward for good attendance and efficiency to workers, it is deductible under section 37 of the Income Tax Act. The deduction was allowed based on this reasoning, and the tribunal's decision was upheld.

Guest House Expenses:
The tribunal restricted the disallowance of guest house expenses, reducing it from a higher amount to a lower one. The question revolved around the interpretation of section 37(4) of the Income Tax Act and a judgment of the Hon'ble Apex Court. The court decided in favor of the department, stating that expenses incurred on any accommodation like a guest house after a certain date were not allowable. Thus, the decision was in favor of the department and against the assessee.

Contribution to Provident Fund:
Regarding the contribution to Provident Fund, the court noted that the payment was made within the grace period. As per section 43B of the Act, such contributions are allowed. Therefore, the question was answered against the department and in favor of the assessee.

Disallowance of Cane Price and Excess Levy Sugar Price:
The tribunal upheld the deletion of disallowance made on account of cane price and excess levy sugar price. The decision was based on a previous judgment involving similar circumstances. The court ruled in favor of the assessee, allowing the deduction on account of interest on excess levy sugar price.

Undervaluation of Closing Stock:
The tribunal upheld the deletion of the addition made due to undervaluation of closing stock. The decision was based on a judgment by the Hon'ble Apex Court, which stated that the stock of incentive sugar should be valued on the levy price, not the cost price. The tribunal's decision was upheld, and the addition was deleted.

In conclusion, the court addressed each issue raised in the appeal and provided detailed reasoning for each decision. The judgment disposed of the appeal by answering the questions of law accordingly.

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