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Income Tax Appellate Tribunal, DELHI ‘G’ BENCH,
Before: SHRI H.S. SIDHU, & SHRI N.K. BILLAIYA
PER N.K. BILLAIYA, ACCOUNTANT MEMBER,
With this appeal, the assessee has challenged the correctness of the order of the CIT(A) - X, New Delhi dated 25.07.2013 pertaining to A.Y 2006-07.
The solitary grievance of the assessee is that the ld. CIT(A) has erred in rejecting the application u/s 154 of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] challenging the addition of Rs. 30.97 lakhs on account of disallowance of LTA on due basis.
The roots of the grievance lie in the assessment order dated 29.11.2012 framed u/s 147 r.w.s 143(3) of the Act.
While framing the assessment, the Assessing Officer disallowed the claim of the LTA holding that the assessee has changed the method of accounting from the year under consideration and the basis of the claim is not scientific. The assessee agitated the matter before the ld. CIT(A) but without any success. The relevant finding of the ld. CIT(A) reads as under:
“After going through the facts of the case, observations of the A.O, and submissions of the A.R., this ground is being finalized after making the following observations;
The assessing officer has made the disallowance (a) on account of wrong claim of LTA and depreciation by the appellant during the relevant assessment year. With regard to the claim of LTA, it has been argued by the A.R. that there has been a change in the method of accounting and the LTA has now been claimed on accrual basis by treating it as a provision for LTA. The A.O. had, however, disallowed the provision for LTA and added it to the income of the appellant.
In this regard, it is observed that the A.R, has not claimed this provision for LTA on any scientific basis or on the basis of any actuarial basis and, therefore, this provision for LTA remains to be a provision unsupported by any logic or scientific methodology. It has to be appreciated that provisions cannot be allowed as an expense under the Income Tax Act unless the onus has been established by the A.R. of the appellant that these provisions are clearly ascertained liabilities and are based on a scientific methodology, Accordingly, I do not find any reason to interfere with the stand taken by the A.O.”
The assessee moved an application u/s 154 of the Act and pointed out to the ld. CIT(A) that a mistake has crept in while adjudicating the grievance of the assessee and the same needs to be rectified. The ld. CIT(A) dismissed the rectification application of the assessee by observing as under:
“After considering the submissions of the ld. counsel for the assessee, the claim of the appellant was not found tenable since the facts are different from Apex Court decision of Rotork Controls Ltd 314 ITR [Supreme Court]. Therefore, this application u/s 154 is dismissed.”
Aggrieved by this, the assessee is before us.
The ld. counsel for the assessee drew our attention to the paper book and pointed out that the assessee has given supporting evidences in respect of valuation of LTA. It is the say of the ld. counsel for the assessee that not considering the scientific basis of the valuation of LTA has made the order of the ld. CIT(A) erroneous in as much as the mistake was very much apparent from record and should have been rectified.
Per contra, the ld. DR supported the findings of the first appellate authority.
We have given thoughtful consideration to the orders of the authorities below. We find that the provision for LTA is well supported by logical and scientific methodology which should have been looked into by the ld. CIT(A). The assessee has also given sound reasons for change in the method of accounting and providing LTA on acturial basis which is based on the valuation of perquisites offered to the employees as part of overall packaging and accounted for as a short term provision since LTA has to be availed by the employee in every block of two years and has to be disbursed by the employer as taxable perquisites.
All these factual aspects have been completely ignored by the ld. CIT(A) and when pointed out to him by way of rectification application, the same was also dismissed.
In our considered opinion, there is definitely a mistake which is apparent from record in the findings of the first appellate authority. Considering the facts in totality, we allow this appeal of the assessee and direct the Assessing Officer to delete the addition of Rs. 30.97 lakhs.
In the result, the appeal of the assessee in is allowed.
The order is pronounced in the open court on 05.06.2018.