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Before: SMT BEENA PILLAI & SMT. RENU JAUHRI
सुिवधई की िधरीख / Date of Hearing 01.04.2025 घोर्णध की िधरीख/Date of Pronouncement 07.04.2025 आदेश / O R D E R PER RENU JAUHRI [A.M.] :- This appeal is filed by the assessee against the order of the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] dated 29/10/2024 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year [A.Y.] 2020-21.
A.Y. 2020-21 Sri Devi Tool Engineers Pvt Ld.
The assessee has raised the following grounds of appeal: “Ground No.1: On the facts and in the circumstances of the case and in law, the NFAC has grossly erred in upholding disallowance of expenses amounting to Rs. 86,97,237/- of business u/s 43B of the 1.T. Act. The expenditure of Rs. 86,97,237/- is duly reflected in Form 3CD. Therefore, the appellant prays that the addition may kindly be deleted Ground No.2 On the facts and in the circumstances of the case and in law, the NFAC has grossly erred in upholding disallowance of interest of Rs. 3,09,701/- u/s 23 of MSMED Act. The said expenditure has already bean disallowed by appellant in the return of income under "any other disallowance' u/s 37 of 1.T Act and accordingly the appellant prays that the double addition may please be deleted. The appellant reserves its right to add, alter, amend or delete any of the ground of appeal.”
3. Brief facts of the case are that the assessee had filed its return declaring income of Rs.9,18,59,410/- on 15/02/2021. The return was processed u/s. 143(1) and demand of Rs.4,48,59,080/- was determined vide intimation dated 23/08/2021. Subsequently, on noticing some mistakes apparent from the record a rectification application was filed by the assessee before CPC on 18/11/2021 and rectification order was passed on 05/12/2022 reducing the demand to Rs. 32,32,850/-. However, in this order also erred the CPC in making an addition on account of disallowance of B/f expenditure u/s. 43B of the Act amounting to Rs. 1,60,54,841/- and disallowance of interest u/s. 23 of NDED Act amounting to Rs. 3,09,701/-. Aggrieved with the order, the assessee filed an appeal before Ld. CIT(A). Vide order dated 29/10/2024, Ld. CIT(A) partly A.Y. 2020-21 Sri Devi Tool Engineers Pvt Ld. allowed the assessee’s appeal. Aggrieved with the order of Ld. CIT(A), the assessee has now filed an appeal before the Tribunal. Ground No.1: Disallowance u/s. 43B 4. Before us Ld. AR has made detailed submissions with regard the issues involved i.e. disallowance of B/f expenditure u/s. 43B and of interest under MDED Act. With regard to ground no. 1, it has been submitted that the assessee was having opening as liability on account of bonus/commission of Rs.1,78,60,148/- on 01/04/2019 which included unpaid bonus of Rs.1,05,02,544/-. Out of this amount the assessee paid Rs. 86,97,237/- during the relevant previous year and the same was claimed as deduction u/s. 43B of the Act, the remaining balance on account of unpaid commission of Rs. 73,57,604/- was paid during the previous year before the filing of its return. However, the auditors inadvertently mentioned in Form 3 CD, bonus payment of Rs. 86,97,237/- under clause (b) of section 43B instead of clause (c). Subsequently, auditor’s certificate regarding the inadvertent error was also filed before Ld. CIT(A) stating that the deduction is to be allowed on actual payment basis. Ld. CIT(A) while accepting the assessee’s submissions regarding unpaid commission of Rs.73,57,604/-, directed the Ld. AO to verify the claim and allow accordingly. However, with regard to bonus payment of Rs. 86,97,237/-. Ld. CIT(A) dismissed the assessee’s claim in the absence of proper supporting documentary evidence. On the other hand, Ld. DR has strongly relied on the order of Ld. CIT(A).
A.Y. 2020-21 Sri Devi Tool Engineers Pvt Ld.
We have heard the rival submissions and perused the material available before us. We are of the view that considering the certificate of the auditors filed before us, the assessee would be entitled to deduction u/s. 43B with regard to bonus paid during the year, out of outstanding amount as on 01/04/2019, provided required supporting documentary evidence in this regard is furnished. We, accordingly deem it appropriate to restore this issue to the Jurisdictional Assessment Officer who is ducted to allow the claim after requisite verification of bonus of Rs. 86,97,237/- paid during the year. This ground is therefore, allowed for statistical purposes. Ground No.2:- Double disallowance of Rs. 3,09,701/- of interest paid u/s. 23 of MSMED Act.
6. On this issue, Ld. AR has submitted that CPC had wrongly made disallowance of interest of Rs. 3,09,701/- paid u/s. 23 of the MSMED Act since the same had already been disallowed by the assessee while filing its return. Thus the action of CPC as resulted in double addition of the same amount. The Ld. CIT(A) has dismissed the assessee's appeal on this issue with the observations that it is not evident that disallowance of Rs.3,09,701/- is included in the total disallowance of Rs. 1,74,80,236/- made by the assessee u/s. 37 of the Act at the time of filing of return. In this regard, the Ld.AR has demonstrated during the course of hearing that while computing the business income, disallowance of Rs. 1,74,80,236/- was made u/s. 37 of the Act the break-up of which is as under:
A.Y. 2020-21 Sri Devi Tool Engineers Pvt Ld. “Disallowances of expenditure u/s. 37 Other expenditure Disallowance Penalty or fine for violation of law Interest u/s. 201(1A)/206C(7) 48,782 interest on income tax 31,189 79,971 Capital Expenditure debited to P&L A/c. Loss on sale of fixed assets 67,728 Exchange loss related to PPE 1,61,18,991 1,61,86,719 Expenditure on Corporate Social Responsibility (CSR) CSR Expenditure 2,49,968 Any other disallowance u./s 37 Amount inadmissible us 23 of 3,09,701 MSMED Act Prior Period Expenses 3,63,889 Donation 2,89,988 9,63,578 Total disallowance 1,74,80,236
5. We accordingly, hold that the disallowance made by the CPC u/s. 143(1) in respect of Rs. 3,09,701/- amounts to double disallowance since the same as clearly been made suo moto by the assessee at the time of filing of return.
This ground of appeal is accordingly allowed.
In the result appeal is partly allowed. Order pronounced in the open court on 07.04.2025.