2021 (10) TMI 1057 - AT - Income Tax

Disallowance of deduction u/s.80IA - aggregate losses was more than the claim of deduction u/s.80IA(4) the AO disallowed the deduction - HELD THAT - It is seen that the losses pertaining to the earlier years, referred to by the AO for setting off against the current year s qualifying income from the eligible unit, relate to the years prior to the initial year. Obviously, such losses cannot be set off against the income from the wind mill on or after the initial year. Similar issue came up for consideration before the Tribunal in the case of the assessee for earlier years. Vide order dated 25-06-2019, the Tribunal in for the assessment years 2007-08, 2009-10, 2010-11 2011-12 2019 (6) TMI 1644 - ITAT PUNE has accepted the assessee s claim. The ld. DR fairly accepted the position. In view of the foregoing discussion and respectfully following the precedent, we uphold the impugned order on this score. Liability on account of revised wages - HELD THAT - As seen that Central Govt. set up Wage Board for the working Journalists and other Newspaper employees. The Board submitted its report on 31-12-2010. The Central Govt. issued consequential notification on 11-11-2011 accepting the recommendations, which was challenged in the Courts of law and eventually got nod in a later year. In terms of the notification of the Central Govt., the assessee recomputed the amount of wages pertaining to the year under consideration and claimed deduction for the same by means of the revised return. The assessee is admittedly following the mercantile system of accounting. Since the amount of additional wages pursuant to the Central Govt. notifying the recommendations of the Wags Board pertaining to the year under consideration amounted to ₹ 6.26 crore, in our considered opinion, the same has to be allowed under the mercantile system of account followed by the assessee. The fact that the payment was made in subsequent years cannot mar the deductibility of the amount which pertains to and became payable during the year. We, therefore, uphold the impugned order deleting the liability on account of revised wages for the year under consideration .

Summary

Issues:
1. Disallowance of deduction u/s.80IA for A.Y. 2012-13.
2. Deletion of addition made by AO relating to liability on account of revised wages for A.Y. 2012-13.
3. Disallowance of claim u/s.80IA for A.Y. 2013-14.
4. Deletion of addition on account of liability for payment of wages under Wage Board recommendations for A.Y. 2013-14.

Analysis:

A.Y. 2012-13:
1. The first issue pertains to the disallowance of deduction u/s.80IA. The AO disallowed the deduction as the assessee had suffered losses in the eligible wind mill unit in earlier years, exceeding the claim for the current year. However, the CIT(A) reversed this decision. The Tribunal noted that losses from years prior to the initial year cannot be set off against income from the wind mill after the initial year. Referring to a previous Tribunal order in favor of the assessee, the Tribunal upheld the CIT(A)'s decision on this issue.

2. The second issue concerns the deletion of the addition related to liability on account of revised wages. The assessee claimed a deduction for Wage Board Revision, which the AO disallowed citing no corresponding payment in the relevant year. The Tribunal observed that the assessee revised wages following a Central Government notification and claimed the deduction under the mercantile system of accounting. Despite the payment being made in subsequent years, the Tribunal upheld the deletion of the liability on account of revised wages for the year under consideration.

A.Y. 2013-14:
3. The first issue raised for this assessment year is the disallowance of a claim u/s.80IA. The Tribunal, following the decision for the previous year, upheld the deletion of the claim.

4. The second issue relates to the deletion of an addition on account of liability for payment of wages under Wage Board recommendations. Similar to the previous year, the Tribunal upheld the deletion of the disallowance towards additional liability for payment of wages for the relevant year.

In conclusion, the Tribunal dismissed both appeals for A.Y. 2012-13 and A.Y. 2013-14, maintaining the decisions in favor of the assessee on the issues of deduction u/s.80IA and liability on account of revised wages under the Wage Board recommendations for both assessment years.