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TMI Blog2016 (1) TMI 750X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Ld. CIT(A) was right in deleting the addition made on account interest paid to sales tax on account of delayed payments of tax. (iii) On the facts and circumstances whether the Ld. CIT(A) was right in not considering the facts that the payments/expenses claimed u/s 37(1) of the I.T. Act, 1961 reveals that such amount was penal in nature and it was an obligation on the part of the assessee to pay the taxes within the stipulated time." 3. At the outset, the learned DR in respect of grounds of appeal heavily relied upon the order of Assessing Officer and submitted that the learned CIT(A) has wrongly passed the order and therefore, the order of Assessing Officer should be upheld. 4. The learned AR, on the other hand, heavily relied up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the employers contribution then such employees contribution may not be treated as income of the assessee. Even the issue is covered by the jurisdictional Bench of Hon'ble ITAT, Amritsar in the case of Asst. Commissioner of Income Tax Range-II, Jalandhar vs. M/s Proxima Steel Forge P. Ltd.(Supra). In this case the Hon'ble ITAT has confirmed the action of CIT(A) for having deleted the addition made by the A.O in view of provisions of section 2(24)(x) read with sec. 36(1)(va) of the Income Tax Act, 1961. The Hon'ble ITAT has held that "Since the second proviso to sec. 43B which reads as follows-Provided further that no deduction shall, in respect of any sum referred to in clause (b) shall be allowed unless such sum has actual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot earn interest etc. in his own account and deprive the Govt. of the same. However, later the legislature appear to have realized that whenever such amount is deposited under the Govt. Treasury, in any case it cannot be said to be taxable income of the employer/assessee, and has to be deducted. This might be reason due to which the legislature omitted second proviso to sec. 43B through Finance Act,2003 which came into force w.e.f. 1st April, 2004. Expressly it is not provided in the Finance Act,2003 that the deletion is retrospective or not. The amendment which simply removes the ambiguity, and curative in nature, impliedly has retrospective effect. The deletion to second proviso to sec. 43B is retrospective in nature. That being so, it ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings in this respect in para 5.5 which is reproduced as below. "5.5 In respect of Rs. 30,03,418/- paid on account of Sales Tax interest and penalty the appellant has produced ledger account & evidences in support of its claim that a sum of Rs. 22,63,818/- out of it is on account of interest for delayed payments of Sales Tax. For claiming this deduction, the appellant has relied on the judgments of Hon'ble Apex Court in the case of Mahalakshmi Sugar Mills Co. vs. CIT(1980) 123 ITR 429 & Prakash Cotton Mills Pvt. Vs. CIT(1993) 201 ITR 684. The law is well settled on this issue that if the expenditure is compensatory in nature, the deduction u/s 37(1) of the Income Tax Act, 1961 has to be allowed. The appellant has paid interest for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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