Tribunal allows deductions for Provident Fund & commission expenses, rejects disallowance.

The Tribunal allowed the appeal of the assessee, directing the Assessing Officer to allow the deductions for employees' contribution to Provident Fund and expenses on commission and brokerage. The Tribunal held that employees' contribution paid before the due date for filing the return is allowable under section 43B, rejecting the disallowance made by the CIT(A) under section 36(1)(va) read with section 2(24)(x). Additionally, the Tribunal accepted the consistent method of the assessee in paying commission when sale proceeds are realized, overturning the disallowance of commission and brokerage expenses as prior period expenses.

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Issues:
1. Disallowance of employees' contribution to Provident Fund.
2. Disallowance of expenses on commission and brokerage.

Issue 1: Disallowance of employees' contribution to Provident Fund:
The appeal concerns the disallowance of Rs.14,02,512 out of the claimed deduction of Rs.15,55,727 for employees' contribution to Provident Fund. The Assessing Officer disallowed the amounts made after the due date but within the grace period and after the grace period but before the due date for filing the return, invoking section 2(24)(x) of the Income Tax Act. The CIT(A) held that employees' contribution is governed by section 36(1)(va) read with section 2(24)(x), not section 43B, and disallowed the deduction. The Tribunal, following previous Mumbai Benches' orders, allowed the deduction, stating that employees' contribution paid before the due date for filing the return is allowable under section 43B, deleting the disallowance.

Issue 2: Disallowance of expenses on commission and brokerage:
The second ground challenges the disallowance of Rs.24,34,266 on commission and brokerage expenses. The Assessing Officer disallowed the amount as prior period expenses, as the commission related to earlier periods. The CIT(A) upheld the disallowance, stating that under the mercantile system of accounting, provision for commission and brokerage should have been made in earlier years when sales occurred. The Tribunal noted the consistent method followed by the assessee, where commission is paid when sale proceeds are realized, and allowed the deduction. It emphasized that the liability to pay commission arises when sale proceeds are realized, following the company's policy, and deleted the disallowance, directing the Assessing Officer to allow it as a deduction.

In conclusion, the Tribunal allowed the appeal of the assessee on both issues, directing the Assessing Officer to allow the deductions.

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