2018 (6) TMI 151 - AT - Income Tax

Disallowance of liability on account of worker s retrenchment compensation and other benefits - Held that - The retrenchment compensation is admissible as per Labour Law and has been so debited in the accounts on accrual basis but disbursed to the labours only on receipt of funds on various dates for which necessary documents were produced with the name of labours dates of retrenchment and amounts calculated - following the judgement in case of BHARAT EARTH MOVERS VERSUS COMMISSIONER OF INCOME-TAX 2000 (8) TMI 4 - SUPREME COURT no addition is required on this issue - thus this is an admissible deduction. - Decided against revenue.

Summary

Issues Involved:
Appeal against order of CIT(A) regarding deletion of addition under "retrenchment compensation and other benefits" as outstanding liability for assessment year 2010-2011.

Analysis:

1. Background: The appeal was filed by the Revenue against the CIT(A)'s order for the assessment year 2010-2011. The assessee, a civil contractor, had filed the return of income electronically, which was selected for scrutiny under CASS.

2. Assessment and Appeal: The AO made various additions to the total income, leading to an assessment of ?1,00,98,490. The assessee appealed to the CIT(A), who allowed the appeal. Subsequently, the Revenue filed an appeal before the Tribunal.

3. Disputed Issue: The primary issue raised by the Revenue was the deletion of the addition of ?68,68,370 under "retrenchment compensation and other benefits" as outstanding liability. The CIT(A) considered this issue extensively.

4. CIT(A)'s Observations: The CIT(A) analyzed the grounds raised by the appellant, focusing on the retrenchment compensation issue. The appellant provided detailed submissions explaining the nature of retrenchment benefits and the accounting method adopted. The CIT(A) found no infirmity in the appellant's claim and cited the judgment of the Supreme Court in support.

5. Additional Submissions: The appellant also addressed the order passed under section 144 of the IT Act, arguing that the order was erroneous as books of accounts were produced and test checked during the assessment proceedings. The CIT(A) agreed with this submission as well.

6. Tribunal Decision: The Tribunal, after considering the submissions of the Revenue and the appellant, upheld the order of the CIT(A). The Tribunal found no new material facts presented by the Revenue to challenge the CIT(A)'s findings.

7. Conclusion: Consequently, the Tribunal dismissed the appeal of the Revenue, affirming the decision of the CIT(A). The order was pronounced in the open court on 30/05/2018.

This detailed analysis highlights the legal proceedings, arguments presented, and the ultimate decision reached by the Tribunal regarding the disputed issue of retrenchment compensation and other benefits as outstanding liability for the assessment year in question.