ACIT, CHENNAI vs. V.S.L.INDIA PRIVATE LIMITED, CHENNAI

आदेश / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER:

Chennai in 65 & 66/11-12, Dated 28.03.2013 for the assessment years 2006-07, 2007-08 & 2008-2009, passed u/s. 143(3) and 250 of the Income Tax Act, 1961 (herein after referred to as ‘the Act’). The issues in these three appeals are common in nature, hence these appeals are combined, heard together, and disposed off by this common order for the sake of convenience.

We take up appeal of assessment year 2006-2007 for 2. adjudication. The assessee company is in the business of Civil contract works and engineering works and Return of income was filed on 27.11.2006 with total loss of �76,15,506/- and the return was processed u/s.143(1) of the Act on 26.03.2008. Subsequently, the case was selected for scrutiny under CASS and notice u/s.143(2) was issued. In compliance to the notice the ld. Authorised Representative appeared from time to time and produced books of accounts for verification. In the assessment proceedings, the Assessing Officer had made disallowance and the same is dealt as under. On perusal of Financial statements the assessee has provided information on management fees, design fees and royalty fees payable to Non residents and no TDS was deducted. But the ld. Assessing Officer by applying provisions of Sec.40(a) added to the returned income. The Assessing Officer dealt on the issue of deduction of TDS on to 1703/2013. :- 3 -: reimbursement on cost of insurance and bank guarantee. The assessee has incurred �82,17,897/- as Insurance premium payable to VSL Switzerland during the current year and claimed as deduction and it was submitted that in cases of reimbursement of expenses, the provisions of Sec.40(a) of the Act are not applicable and in assessee’s own case for the assessment year 2004-05 was allowed by Commissioner of Income Tax (Appeals) vide dated 06.03.2008. But ld. Assessing Officer by applying the decision of Ashok Leyland Ltd, the Co-ordinate Bench of the Tribunal in ITA No.1615/Mds/2006, Dated 3.1.2008 held that reimbursement of expenses come within purview of Sec.195 of the Act and TDS is required to be deducted on expenditure and made an addition of �82,17,897/-. Similarly, the assessee claimed expenditure of �11,33,565/- as Bank guarantee commission payable to Non Resident Company M/s. VSL international Ltd and no TDS was deducted and payment was towards reimbursement of expenses. The ld. Assessing Officer based on decision of Ashok Leyland Ltd (supra) made an addition. Aggrieved by the additions of the Assessing Officer, the assessee filed an appeal before the Commissioner of Income Tax (Appeals). to 1703/2013. :- 4 -:

2.1 The Commissioner of Income Tax (Appeals) in his order at para No.4 gave direction to the Assessing Officer to allow the payments claimed in respect of management fees, design fees and royalty fees to VSL, Singapore where TDS paid in subsequent years.

On the issue of reimbursement of cost of insurance and bank guarantee expenses, the company has contested the issue as it takes the characteristic of reimbursement of cost by M/s.VSL India Ltd to parent company and there is no element of profit or income which attracts the provisions of TDS u/s.40(a)(i) of the Act. The ld. Commissioner of Income Tax (Appeals) deleted the addition.

Aggrieved by the deletion, the Revenue assailed an appeal before the Tribunal.

2.2. Before us the ld. Departmental Representative argued that Commissioner of Income Tax (Appeals) has erred in deleting the disallowance made u/s.40(a)(i) of the Act on reimbursement on cost of insurance and bank guarantee and further alleged that TDS needs to be deducted when payments made to Non Resident and also relied on decision of Co-ordinate Bench.

2.3 The ld. Authorised Representative contra to the submissions of the ld. Departmental Representative argued that this is pure case of reimbursement of expenses incurred on behalf of the company by to 1703/2013. :- 5 -: parent company and was reimbursed on the basis of principle to principle and there is no profit or income included for the application.

2.4 We after hearing the submissions of both the parties are of the opinion that similar issue on re-imbursement of expenses was dealt by the Co-ordinate Bench of Tribunal in assessee’s own case in Dated 24.06.2009 for the assessment year 2004- 05 and allowed in favour of the assessee. Respectfully following the above decision, we upheld the order of Commissioner of Income Tax (Appeals) on this ground.

The second ground raised by the Revenue is that 3.

Commissioner of Income Tax (Appeals) erred in allowing Professional Tax of �51,059/- as deduction. The assessee company submitted that Professional Tax paid is allowable as deduction vide Circular No.16 and 18/1969. But the ld. Authorised Representative could not substantiate payments with any evidence whether expenditure is incurred for the business and therefore, the Assessing Officer disallowed the claim.

3.1 In the appellate proceedings, the Commissioner of Income Tax (Appeals) has allowed the ground based on the applicability of circular and considered that such professional tax is not personal and directed the Assessing Officer to delete the addition. to 1703/2013. :- 6 -:

3.2 Before the Tribunal, the ld. Departmental Representative has contested that the Commissioner of Income Tax (Appeals) has erred in directing the Assessing Officer to delete the addition inspite of assessee has not produced any documentary evidence and not explained the nature of expenditure.

3.3. Contra, the ld. Authorised Representative submitted that professional tax is pertaining to employee is deducted and paid to the Government. Hence it is wholly and exclusively incurred for the purpose of business and Commissioner of Income Tax (Appeals) has rightly allowed the deduction.

3.4 We are of the opinion that the ld. Authorised Representative substantively argued that Professional Tax paid pertains to employees but there is no supporting evidence filed before lower authorities or before us. Considering the facts we are of the opinion that the matter has to be verified by the Assessing Officer subject to assessee producing required documents and proof in hearing proceedings and we remit the issue back to the file of the Assessing Officer for adjudication.

�18,51,471/- was wrongly added back and that should be allowed in view of Supreme Court decision in the case of M/s.Swadeshi Cotton Mills Company Ltd vs. CIT 223 ITR 1989 and M/s. Malwa Vanaspathi and Chemical Company vs. CIT 225 ITR 383 as interest payment takes the character of compensatory nature and be allowed. The ld. Assessing Officer found that no evidence was produced and the interest is penal in nature not compensatory considering the collection of tax from clients and defaulted on payment of taxes to Government not within the specified time is violation and made an addition.

4.1 The ld.CIT(A) based on the decisions relied by the assessee in the assessment proceedings and submissions considered that interest paid on delayed payment of taxes is not penal in nature but only compensatory for the default of the assessee in not remitting the taxes collected in time and directed the Assessing Officer to delete the addition.

4.2 Before the Tribunal, the ld. Departmental Representative has raised ground that the ld.CIT(A) has erred in deleting the interest disallowance as compensatory in nature and also no opportunity was provided to the Assessing Officer to verify the payments and argued further that there is violation of Rule 46A of Income Tax Rules. to 1703/2013. :- 8 -:

4.3 On the other hand, the ld.AR reiterated it is as compensatory in nature and relied on Commissioner of Income Tax (Appeals) order.

4.4 We heard both the parties and perused the material on record. We are of the opinion that Assessing Officer was not provided with opportunity for verification of details filed before Commissioner of Income Tax (Appeals) wherther the payments are of compensatory in nature. Considering the circumstances, of violation of Rule 46A of Income Tax Rules, we set aside this ground to the file of the Assessing Officer for examination and assessee should produce details of sales tax and service tax payments with proofs before Assessing Officer passing the order on merits.

charges and deprecation on the vehicles. The ld. Authorised Representative submitted that Commissioner of Income Tax (Appeals) in assesees own case for the assessment year 2004-05 has deleted the addition. But the Assessing Officer on the ground that the assessee company is not the legal owner of the vehicle and transfer was not been effected and disallowed finance charges and deprecation of �1,00,198/- 5.1 The ld. Commissioner of Income Tax (Appeals) based on the right of the ownership of the vehicles reflected in the fixed asset schedule of the company and the vehicles are used for the purpose of business and maintenance expenditure was debited in the books of accounts of the appellant company and further relied on the decision of Mysore Minerals Ltd 239 ITR 175(SC) and Poddar Cements (1997)

227 ITR 625(SC) and allowed the claim.

5.2 Before the Tribunal, the ld. Departmental Representative agitated his grounds on usage of vehicle though the vehicle is the name of Managing Director, and reflected in Fixed Assets schedule, the assessee is not a legal owner of the asset and no compliance of necessary conditions for claiming depreciation u/s.32 of the Act. to 1703/2013. :- 10 -:

5.3 On the other hand, the ld. Authorised Representative relied on the findings of the Commissioner of Income Tax (Appeals) and submitted that vehicles are used exclusively for the purpose of business and falls within commercial expediency.

5.4 We heard the submissions of both the parties. The assessee company claimed deprecation and fiancés charges on vehicle used for Business, though it was registered in the name of the Managing Director. Similar issue was dealt in assessee’s own case in dated 24.06.2009 for assessment year 2004-05.

But before us no information was filed whether the same vehicle Block was carried forwarded from earlier year or new vehicles was purchased in financial year 2005-06. In the absence of information, we are of the opinion that issue should be examined and we following the decision of Jurisdictional High Court M/s. TamilNadu Diary Development Corporation Ltd vs. CIT 239 ITR 142 remit the issue in dispute to the file of Assessing Officer for verification.

6.1 The assessee made a provision for gratuity of �4,54,497/- in the hearing proceedings, the ld. Authorised Representative submitted that it is an actual payment and not a provision and the Assessing Officer called for the details of name and address to whom the gratuity is paid. In reply the assessee submitted that said amount was paid by cheque. The assessee was asked to submit proof that Group Gratuity scheme was recognized but ld.AR relied on the Sec.36(1)(v) of the Act were contribution towards approved Gratuity Fund is allowed. Considering the facts, the assessee company has not created any trust for Gratuity , the Assessing Officer disallowed the amount.

6.2 The Commissioner of Income Tax (Appeals) considered the residual deduction u/s.37(1) of the Act and allowed the deduction.

Considering that the payment made for the welfare of employees though not contributed to any approved Gratuity Fund. Since gratuity payment is actual, the ld. Commissioner of Income Tax (Appeals) directed the Assessing Officer to delete the addition.

6.3 Before, the Tribunal the ld.DR argued that the Commissioner of Income Tax (Appeals) erred in deleting the disallowance made towards provision of Gratuity treating it as actual payment to the employees but not contribution to approved Gratuity Fund. to 1703/2013. :- 12 -:

6.4 On the other hand, the ld. Authorised Representative submitted that as actual payment made to the employees by Cheque and details are available. Though the fund are not approved, such expenditure is not of personal nature and to be allowed as deduction.

6.5 We are of the opinion that the Gratuity payment has to be considered on actual payment the ld. Authorised Representative emphasized that it is an actual payment but the Assessing Officer has not verified due to non availability of information. We therefore remit the issue back to the file of the Assessing Officer for verification and allow the deduction on actual payment basis.

verification made disallowance to the returned income with other disallowances.

8.1 The first ground raised by the Revenue that the Commissioner of Income Tax (Appeals) erred in deleting the disallowance made towards foreseeable loss of �18,49,199/-.

8.2 The ld. Assessing Officer on perusal of balance sheet and profit and loss account of the assessee company found that the assessee has claimed foreseeable loss of �18,49,199/- and assessee’s Authorised Representative submitted that company is following accounting standard 7 for Accounting on construction contract and as

per Accounting standard each project is evaluated and probable expected losses has to be provided in the books of accounts in respect of incomplete contracts. Similarly applying guideline and Accounting standards the assessee company has shown �18,49,199/- as foreseeable loss. The Authorised Representative relied on decision of Mumbai Bench of the Tribunal in the case of Jacobs Eng. India Pvt. Vs. ACIT (AIT 2009-285-ITAT) which allowed foreseeable loss. The Assessing Officer is of the opinion that foreseeable loss determined in respect of incomplete contract as per the accounting standard 7 is conclusively a provision and same cannot be allowed. Further, the to 1703/2013. :- 14 -:

decision of Mumabi Bench, has not reached finality and distinguishable and made an addition.

8.3 In the appellate proceedings, the Commissioner of Income Tax (Appeals) relied on the submission and decision of Metal Box Co.

India Ltd (73 ITR 83) (SC) and Mazagon Dock Ltd (29 SOT 356)

Mumbai which has considered the case of Jacob Engineering India (P)

Ltd (supra) the method of arriving the deduction was based upon a bonafide method with the consequence of effecting the profit of subsequent years. In assessee’s case foreseeable loss has been arrived after evaluating the work in progress which will reduce automatically in subsequent years. With the findings, the Commissioner of Income Tax (Appeals) has directed the Assessing Officer to delete the disallowance.

8.4 Before the Tribunal, the ld. Departmental Representative reiterated his submissions on the ground that Commissioner of Income Tax (Appeals) erred in deleting the deduction of foreseeable loss without considering uncompleted works contract and the assessee deferred income by claiming notional loss. The ld. Departmental Representative has substantiated his arguments and relied on the decision of Co-Ordinate Bench of the Tribunal in the case of EDAC Engineering Ltd. vs. DCIT (Chennai) 141 ITD 231 and Shivshahi to 1703/2013. :- 15 -:

Punarvsan Prakalp Ltd. Vs. ITO (Mumbai) 135 ITD 51 and vehemently argued that only actual expenditure has to be allowed but not the provisions under Accounting standard 7.

8.5 Contra, the ld. Authorised Representative has substantiated his arguments with the submission on disallowance by giving details of working of the project of the company alongwith work status and also foreseeable losses and relied on the decisions of CIT vs. Triveni Engineering Industries Ltd.: 336 ITR 374 and CIT vs Bilahari Investments P. Ltd. [2008] 299 ITR 1 (SC).

8.6 We have heard the rival submissions of both the parties and perused the material on record and also judicial decisions cited.

The assessee has claimed foreseeable loss of �18,49,199/- based on Accounting Standard 7 applicable to construction contracts and evaluated projects and calculated expected loss provided in the books of Accounts for uncompleted projects. The question arises whether the claim is ascertained liability if so, such liability is determined due to terms of contract or law and claimed in the books of Accounts and if it is a contingent liability such liability shall depend entirely on the outcome of completion of projects in future and also whether such claim was offered as income in subsequent assessment years. In our opinion, If it is ascertained liability, the following conditions shall be to 1703/2013. :- 16 -: fulfilled. The contract work shall have been completed. The assessee shall have received bill for completed work for payment. The assessee must have accepted the bill for payment. The assessee shall have provided for payments in the books of accounts. The assessee shall have deducted TDS and paid the TDS to the Government account. For these reasons we are of the opinion that the issue in dispute needs to be examined and verified in accordance with the terms of contract and conditions laid down as above. We therefore, remit the issue for limited purposes to the file of the Assessing Officer and pass the order after giving adequate opportunity of being heard to the assessee. This ground of the Department is partly allowed for statistical purpose.

9.1 The assessee company claimed deprecation on intangible assets @60% as against 25% and Assessing Officer disallowed the excess claim.

9.2 The ld. Commissioner of Income Tax (Appeals) considering the grounds, the intangible assets consists of software rights and is part of computer and required for utilization of computer and to 1703/2013. :- 17 -: deprecation is allowable @60% and accordingly, allowed the assessee claim.

9.3 Before the Tribunal, the ld. Departmental Representative submitted that the Commissioner of Income Tax (Appeals) erred in allowing deprecation @60% on software rights and such software rights are eligible for deprecation @25% only.

9.4 On the other hand, the ld. Authorised Representative argued that software is integral part of computer and therefore higher deduction is allowable.

9.5 We after considering the usage and rely on the decision of Tribunal of Delhi Bench in the case of Sony India (P) Ltd vs. Addl. CIT 56 DTR 156 where it was held that license for use of computer software is eligible for deprecation @25% only. Hence, we set aside the order of the Commissioner of Income Tax (Appeals) on this issue and confirm the Assessing Officer order. The Revenue ground in this appeal is allowed.

10.1 The assessee company incurred an expense of �94,53,941/- as insurance premium paid to parent company (VSL, Switzerland) during the current year. The Assessing Officer noticed that the amount was not taken into account while computing the disallowance u/s.40(a)(i) of the Act. The ld. Authorised Representative argued that this sum should be allowed as the similar issue for the assessment year 2004-2005 was considered by the Tribunal in assessee own case in Dated 24.06.2009. However, the Assessing Officer disallowed the claim stating that the order of the Tribunal has not reached finality, and added a sum of �94,53,941/-.

10.2 The Commissioner of Income Tax (Appeals) considered the reimbursement of cost of insurance and the company has contested the issue as it takes the characteristic of reimbursement of cost from VSL India to parent company and there is no element of profit or income which attracts the provisions of TDS u/s.40(a)(i) of the Act.

The ld. Commissioner of Income Tax (Appeals) deleted the addition.

Aggrieved by the deletion, the Revenue assailed an appeal before the Tribunal.

10.3 Before us the ld. Departmental Representative argued that Commissioner of Income Tax (Appeals) has erred in deleting the disallowance made u/s.40(a)(i) of the Act on reimbursement on cost of to 1703/2013. :- 19 -: insurance and alleged that TDS needs to be deducted when payments made to Non Resident and Assessing Officer has considered the Co- ordinate Bench decision and distinguished and not followed.

10.4 Before us, ld. Authorised Representative contra to the submissions of the ld. Departmental Representative argued that this is pure case of reimbursement of expenses incurred on behalf of the company by parent company and was reimbursed on the basis of principle to principle and there is no profit or income included for the application.

10.5 We after hearing the submissions of both the parties are of the opinion that similar issue on re-imbursement of expenses was dealt by the Co-ordinate Bench of Tribunal in assessee’s own case in Dated 24.06.2009 for the assessment year 2004- 05 wherein held and allowed in favour of the assessee. Respectfully following the above decision, we upheld the order of Commissioner of Income Tax (Appeals) on this ground.

of income for the assessment year 2008-2009 admitting total income of �4,61,02,690/-. Subsequently, the return was processed u/s.143(1) of the Act and as per scrutiny norms the case was selected and notice u/s.143(2) was issued on 24.08.2009. The ld. Authorised Representative of the assessee appeared from time to time and filed details called for. The Assessing Officer upon submissions of information finalized assessment and found that assessee has recognized income of �1,32,00,44,321/- but as per the TDS certificates the income credit of �1,34,71,22,295/-. When the matter was put to ld. Authorised Representative, it was explained that the difference has arised due to receipt of advance from customers and TDS was deducted by the customers. The contract income has been recognized in subsequent financial years and mismatch of TDS certificate and contract income has arised due to difference of advance. The Assessing Officer on the ground that amount has been credited to assesee’s account and takes the characteristic of professional services.

The assessee could not produce any parties from whom advance was received and there was no reconciliation made with the ledger accounts. The assessee company has claimed TDS credit but not offered the receipts as income and there is a scope of mismatch. The ld. Assessing Officer treated the difference amount in TDS certificate as income and subjected to tax by making an addition. to 1703/2013. :- 21 -:

12.1 In the appellate proceedings, the Commissioner of Income Tax (Appeals) observed that the Assessing Officer erred in stating that TDS certificate has not mentioned the payments as advance and no such categorization would be made in the TDS certificate.

The Assessing Officer should see whether any work has been carried out against these monies received, by submitting a bill or these monies were carried into the balance sheet as advance received. The monies would attain the colour of the income only when any work is carried out. The assessee has shown these monies as ‘’advance’’ in the balance sheet and it is not correct for the ld.AO to add as income merely because the TDS has been deducted in the same year. Even though the receipts are not offered as income in current year, based on these observations, the ld. Commissioner of Income Tax (Appeals) directed the Assessing Officer to delete the addition.

12.2. Before us, the ld. Departmental Representative argued that Commissioner of Income Tax (Appeals) erred in not making a distinction and also payments were made to the assessee company on account of contract and sub-contract and finding of the Commissioner of Income Tax (Appeals) that the assessee has claimed TDS credit though the income is not considered in the books but due to difference to 1703/2013. :- 22 -: in contract receipts, TDS certificate, and profit and loss account, the Assessing Officer considered receipts as unaccounted receipts. The assessee has not reconciled the difference before the Assessing Officer or Commissioner of Income Tax (Appeals) and not produced any evidence, certificate or letter to the extent of advance received during the year and also invoice copy was not produced. On verification of the balance sheet there is huge difference of advance received and also claim made by the assessee needs reconciliation and also TDS credit to be considered proportionately and prayed for allowing the appeal.

12.3 On the other hand, the ld. Authorised Representative reiterated his submissions made before the Assessing Officer and Commissioner of Income Tax (Appeals) and argued that difference is a advance amount, to be adjusted in subsequent assessment years and relied on the decisions of Sadbhav Engineering Ltd. vs. DCIT 161 TTJ 116 Ahd and ACIT vs. Peddu Srinivasa Rao 30 CCH 0651Visakhpatnam Trib.

12.4 We heard the rival submissions of both the parties, perused the material on record and also judicial decisions cited. We are of the opinion that the assessee company having huge turnover and following contract method for completed projects and TDS is deducted to 1703/2013. :- 23 -: on advances received. It is duty of the assessee company to furnish the confirmation letter. The advance received is not accounted as contract receipts though the Commissioner of Income Tax (Appeals) observed and deleted the addition. The fact remains that the assessee has not provided reconciliation of contract accounts in the assessment proceedings or before Commissioner of Income Tax (Appeals). In the appellate proceedings the assessee not provided any bills, supporting except financial statements. Even before us, the assessee could not submit any information as alleged by the Department. We are of the opinion the matter needs to be examined by the Assessing Officer and the assessee should reconcile and provide substantive evidence for advances received in the previous year on which the TDS is deducted and has to establish whether it has offered to taxation in any subsequent assessment year or not and the Assessing Officer shall provide adequate opportunity of hearing to the assessee and allow the TDS credit after due verification of the accounts. Accordingly, the Commissioner of Income Tax (Appeals) order to the extent is set aside and remit the issue back to the file of the Assessing Officer for fresh consideration. to 1703/2013. :- 24 -:

13.2 The ld. Commissioner of Income Tax (Appeals) based on the explanations by the ld. Authorised Representative that the assessee company payments were not routed through profit and loss account but dealt Via Balance sheet. Therefore no allowance or deductions was claimed in the computation of income and relied on the decision in the case of Noble and Hewitt India P. Ltd 305 ITR 324 and disallowance U/Sec.43B consist of service tax, R & D cess and Sales tax payments and observed in his order at page No.11 on each disallowance as under:-

‘’Sec 68 of Finance Act read with Rule 6 of the Service tax rules stipulate that Service provider has to make payment only on the basis of receipt of consideration. Thus service tax liability is regulated with reference to receipt of consideration for the services rendered. So long as the consideration is not 'received, the service provider is not liable to make payment. Accordingly assessee has made mere provision for Service tax payable but it is not actually due as per relevant laws. This has been upheld in ACIT vs Real Image Media Technologies (P) Ltd 306 ITR 106. b) Research and Development Cess: Rs.20,52,737/=. . to 1703/2013. :- 25 -:

The Company had provided ₹53,94,005/- . towards Research & Development Cess during the Assessment year 2007-08 which was disallowed in Asst year 2007-08. Research and Development cess pertains to Technical consultancy fees, and Management fees' payable to parent/group companies. Consequent to waiver of amount payable to Parent/Group companies up to 31.12.2007, the provision for R&D Cess of Rs.53,94,005/- was also written back. R&D cess payable for the Management Fees and Technical fees for the period from 01.01.2008 to 31.03.2008 has been provided at ₹20,52,737/-. This has ₹53,94,005/- been duly adjusted and net figure ₹20,52,737/- is deducted from total income. c) Sales tax payments ₹14,58,203/- Under Sales Tax Act, works contract TDS are being deducted and adjusted against the amount payable to Contractor. In as much as the Contractor has deducted the TDS and deposited on or before the due date specified under relevant law, the sales tax payment needs the requirement of Sec.43B’’. and ld. Commissioner of Income Tax (Appeals) deleted the addition.

Aggrieved by the order of the Commissioner of Income Tax (Appeals), the Revenue has filed an appeal before the Tribunal.

13.3 Before us, the ld. Departmental Representative argued that disallowance u/s.43B of the Act should be allowed only on payment basis and it should be taken as part of the sales and to be routed through Profit and Loss account only. Though the assessee made transactions through balance sheet as discussed by the ld.Commissioner of Income Tax (Appeals) but payment has to be made before due date of filing of return u/s.139(1) of the Act. The assessee company has not submitted any details in the assessment to 1703/2013. :- 26 -: proceedings and also Commissioner of Income Tax (Appeals) has not called for the comments or remand report on this issue and ld. Departmental Representative relied on the decision of Bartronics India Ltd vs.ACIT 2012-TIOL-412-ITAT-Hyd and pleaded for set aside OF the Commissioner of Income Tax (Appeals) order.

13.4 On the other hand, the ld. Authorised Representative vehemently argued and reiterated his submissions made before the lower authorities and the findings of the Commissioner of Income Tax (Appeals) are in accordance of law further submitted that the statutory payments can also be routed through balance sheet though it is not considered in the profit and loss account. When the assessee adopted for this system, the collection of payments are separately considered and taken into balance sheet. In support of arguments relied on the decision of ACIT Vs. Real Image Media Technologies Pvt. Ltd., 306 ITR (AT) 106 and prayed for confirming the order of the Commissioner of Income Tax (Appeals).

13.5 We are of the opinion that considering the circumstances and evidence in respect of statutory liabilities under provisions of Sec.

43B payments made before filing of return of income u/s.139(1) of the Act should be considered on actual payment. From the records, the Assessing Officer could not verify the system of accounting routing to 1703/2013. :- 27 -: through balance sheet and assessee claiming that accepted the Accounting system. But the fact remains that information has to be examined with evidence. Considering the facts and circumstances, we set aside the issue to the file of the Assessing Officer to verify the statutory payments and allow the deduction. Accordingly, the ground of the Department is partly allowed for statistical purpose.

Order pronounced on Monday, the 1st day of February, 2016, at Chennai.