UNIMECH AEROSPACE AND MANUFACTURING LIMITED ,BANGALORE vs. INCOME TAX OFFICER, WARD-7(1)(1), BANGALORE

The Assessee is aggrieved and the solitary issue involved is that the disallowance u/s. 43B of the Act of Rs.15,15,770 is not correct.

Briefly stated that the facts of the case show that assessee is engaged into manufacturing of tooling etc. for aerospace, defence and power generation industries, filed its return of income on 25.10.2023 at a total income of Rs.3,53,26,790. This return was processed u/s. 143(1) of the Act on 15.5.2024. The CPC made an addition of amount payable of Rs.15,15,767 and determined the total income of Rs.3,68,42,560. The fact of disallowance is that assessee has made a provision of Rs.17,91,225 towards bonus payable for FY 2021-22 relevant to AY 2022-23. This was classified s long term provision in the books of account. Thus assessee itself disallowed the above amount of Rs.17,91,225 u/s. 43B of the Act for AY 2022-23. Upto 3.10.2022 the assessee made payment to employees of Rs.15,15,767. Thus assessee claimed such bonus paid as deduction in the return of income for AY 2023-24. The CPC noted that there is inconsistency in the sum payable to employees as bonus claimed in the return of income and as per Audit Report Form 3CD and thus disallowed Rs.15,15,767. In this case, Form 3CD was prepared on 29.9.2023, return of income was filed on 1.10.2022 and bonus was paid by the assessee evidencing the employees wise break-up of bonus payment supported by the bank statement.

The assessee preferred appeal before the ld. CIT(A). The ld. CIT(A) noted that the tax audit report at sl.No.26 does not support the claim of the assessee and therefore same was disallowed.

The assessee is in appeal before us.

The ld. AR furnished a paperbook containing 105 pages wherein the ld. AR referred to the financial statements, details of bonus paid, bank statement evidencing such bonus paid, copy of Form 3CD. It was submitted that merely because Form 3CD did not mention the details of payment of bonus, therefore there is an error. However, when the correct details are produced before the ld. CIT(A), the assessee should have been granted deduction at the correct amount. He submits that the outstanding bonus of the earlier year which was disallowed in the computation of earlier year has been paid to the employees during the current year, such payment is allowable to the assessee in the current year according to the provisions of section 43B of the Act. Omission in mentioning the correct detail in Form 3CD should have resulted into disallowance.

The ld. DR submitted that there is inconsistency in the return filed by the assessee and the tax audit report. In the tax audit report, the assessee did not mention that it is paid bonus outstanding of earlier year during this year. But in the return of income it claimed deduction, therefore there is inconsistency in the return of income and the tax audit report. The assessee was also given a notice prior to making an adjustment, therefore the order of the ld. lower authorities cannot be found fault with.

We have carefully considered the rival contentions and perused the orders of the ld. lower authorities. As on 31.3.2022 in the annual accounts assessee has made a provision of Rs.17,91,225 disclosed in Note No.2.04 under the long term provision. Thus for AY 2022-23 assessee made a provision for meeting payment of bonus to its employees of the above amount. While filing the return of income, assessee made disallowance of above sum under the provisions of section 43B of the Act as it did not pay any sum. The provision of bonus made by the assessee is relating to 41 employees. These employees were paid the above bonus on various dates starting from 3.10.2022 to 12.10.2022. Therefore, the bonus payable as on 31.3.2022 was paid upto 12.10.2022 of Rs.15,15,767. The payment of bonus to the employees is supported by entries of such payment in the bank account as well as in the books of account. For assessment year ended on 31.3.2023, the assessee filed its return of income wherein the assessee claimed deduction of Rs.15,15,767 as bonus payable to the employees for AY 2022-23 paid out in AY 2023-24. However, while filing the tax audit report, assessee was supposed to give this information at sl.No.26 of Form 3CD wherein the details of pre-existed liability paid during the previous year and outstanding during the previous year were shown as Nil. Thus admittedly the assessee in Form 25 did not mention the details of payment of bonus of Rs.15,15,767. Thus only there was inconsistency between the return of income filed by the assessee as well as the tax audit report in Form 3CD prepared by the assessee. The ld. CIT(A) confirmed the above adjustment of CPC. When the ld. CIT(A) was shown the above discrepancy, though he confirmed the action of the CPC, but if found that assessee is entitled to deduction of the bonus paid during the year, he should have allowed the claim of the assessee.

We find that the assessee is entitled to deduction of Rs.15,15,767 in accordance with the provisions of section 43B of the Act. Therefore, we allow the claim of the assessee and direct the ld. AO to delete the above disallowance. Thus, ground No.2 of the appeal of the assessee is allowed.

All other grounds are general or consequential in nature, does not require separate adjudication and therefore dismissed.

In the result, appeal filed by the Assessee is PARTLY ALLOWED.