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Income Tax Appellate Tribunal, F BENCH, MUMBAI
order : 25.11.2022 O R D E R Per Rahul Chaudhary, Judicial Member: 1. By way of the present appeal the Appellant has challenged the order, dated 27.06.2019, passed by the Ld. Commissioner of Income Tax (Appeals)-16, Mumbai [hereinafter referred to as ‘the CIT(A)’] for the Assessment Year 2014-15, whereby the Ld. CIT(A) had partly allowed the appeal against the Assessment Order, dated 21.10.2016, passed under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
The Appellant has raised following grounds of appeal:
Assessment Year: 2014-15 “1. The Learned Commissioner of Income Tax (Appeals) has erred both facts and in law in upholding the action of the Assessing Officer in disallowing the expenditure of prior period amounting to Rs. 66,15,000/- allegedly on the ground that the appellant has not brought any records to substantiate its claim.
When the appeal was called for hearing none appeared for the Appellant despite notice. On perusal of the records it was noticed that the appellant had filed written submission. Therefore, we proceeded to hear the Learned Departmental Representative for decide the appeal on merits after taking into consideration the aforesaid written submission.
Learned Departmental Representative submitted that the disallowance of INR 66,15,000/- was made by the Assessing Officer on the basis of tax audit report wherein the aforesaid amount was reflected as prior-period item which was not reduced from the expenses claimed as deduction by the Appellant while computing the total income. The CIT(A) confirmed the addition holding that under mercantile system of accounting deduction could not be allowed for prior-period expenses.
We have considered the submission of the Learned Departmental Representative and perused the material on record including the written submissions. The disallowance of INR 66,15,000/- was made by the Assessing Officer by holding the same to be prior period expenses. In the written submission, the Appellant has stated INR 66,15,000/- disallowed by the Assessing Officer pertained to contribution of Employee State Insurance Corporation (ESIC) and Provident Fund (PF) paid during the relevant previous year and therefore, 2 Assessment Year: 2014-15 it was claimed that deduction for the same be allowed under Section 43B of the Act on payment basis. As per the provisions of Section 43B of the Act deduction for specified expenses is allowed on payment basis even to an assessee following mercantile system of accounting. This aspect has not been considered/examined by the CIT(A). However, recently, the Hon’ble Supreme Court has, in the case of Checkmate Services Pvt. Ltd. vs. CIT-1: 143 Taxmann.com 178 (SC)/ Civil Appeal No. 833 of 2016, held that the provision of Section 43B of the Act shall not apply to employees’ contribution to PF/ESI, and the due date specified under Section 36(1)(va) of the Act shall apply for determination of deductibility of employees’ contribution to PF/ESI. Accordingly, in view of the aforesaid judgment of the Hon’ble Supreme Court, the issue is remanded back to the file of the CIT(A) for fresh adjudication after taking into account the nature of expense and applicability or otherwise of the provisions of Section 43B of the Act. The CIT(A) shall granted a reasonable opportunity of being heard to the Appellant. Since the issue is being remanded back all the rights and contentions are left open. With the aforesaid directions, the present appeal stands disposed off.
In the result, the appeal is allowed for statistical purposes.