ITAT Bangalore Judgments — October 2022

The Tribunal held that the amendment to Section 36(1)(va) and 43B by the Finance Act, 2021, is not retrospective and does not apply to the relevant assessment years. The assessee is entitled to deduction if payments were made before the due date of filing the return.

The Tribunal held that outstanding receivables constitute an independent international transaction that needs to be benchmarked. It also directed that interest on these receivables should be computed using LIBOR + 2%, considering the foreign currency nature of the transaction.

The Tribunal allowed the grounds related to ESOP expenditure, following the jurisdictional High Court's decision that discount on ESOP is an allowable business expenditure. However, the transfer pricing grounds were not fully adjudicated and the appeal was partly allowed for statistical purposes.

The Tribunal held that the disallowance made by the Assessing Officer was incorrect. Following the jurisdictional High Court's decision, it was held that employees' contribution to PF and ESI paid before the due date of filing the return of income under Section 139(1) is an allowable deduction. The amendment by the Finance Act, 2021, was held to be prospective and not applicable to the assessment year under consideration.

The Tribunal held that the issue of leave encashment is to be remitted to the AO for fresh consideration based on Supreme Court's decision. Other grounds regarding tax credits, depreciation, and interest were also remitted or dismissed.