2011 (11) TMI 366 - HC - Income Tax

High Court affirms allowance of additional commission expense under Section 43B

The High Court upheld the decision of the lower forums, dismissing the appeal and affirming the allowance of the additional commission expense of ... Payment of commission of to the employees - section 43B - Additional expense rejected as were not claimed by revised return - CIT(A) held that expenses had accrued in the previous year, but were allowable in the current year, the deduction should have been allowed - Held That:- In view of of National Thermal power Corporation (1996 - TMI - 5626 - SUPREME Court) and Jute Corporation (1990 - TMI - 5320 - SUPREME Court), claim was allowed further held that in Goetze India (2006 - TMI - 5171 - SUPREME Court), the issue raised was limited to power of AO and not of Tribunal. Issues:1. Disallowance of commission expenditure under Section 43B for assessment year 2004-05.2. Claim of additional commission expense for assessment year 2005-06.3. Dispute regarding filing of revised return for additional claim.4. Decision of CIT(Appeals) allowing the additional claim.5. ITAT's agreement with CIT(Appeals) decision.6. Interpretation of powers of appellate forum in allowing additional claims.Analysis:Issue 1:In the assessment year 2004-05, the Assessing Officer disallowed the claimed commission expenditure of Rs.64,89,384/- under Section 43B as it was not actually paid. The assessee acknowledged the error and offered the amount for taxation. This disallowed commission was required to be accounted for and allowed as an expense under Section 43B in the subsequent assessment year 2005-06.Issue 2:For the assessment year 2005-06, the respondent-assessee debited Rs.38,14,019/- as commission expense and later claimed an additional expense of Rs.64,89,384/-. The Assessing Officer rejected the additional claim as no revised return was filed, citing the Goetze (India) Limited case. However, the CIT(Appeals) found the additional claim justifiable under Section 43B and allowed it after detailed examination of vouchers and bank account records.Issue 3:The dispute arose regarding the requirement of filing a revised return for the additional claim made during the assessment proceedings. The Assessing Officer insisted on a revised return, while the CIT(Appeals) contended that the claim could be considered without a revised return if the expenses accrued in the previous year but were allowable in the current year.Issue 4:The CIT(Appeals) decision to allow the additional claim of Rs.64,89,384/- was based on the fact that the expenses had accrued in the previous year and were lawfully allowable as a deduction in the current year under Section 43B. The Assessing Officer did not dispute the factual correctness but emphasized the need for a revised return.Issue 5:The ITAT concurred with the CIT(Appeals) decision, citing the powers of the appellate forum to entertain and decide on such aspects. The decision referenced previous cases and clarified that the tribunal had the authority to consider and allow the additional claim, distinguishing it from the Goetze (India) Limited case.Issue 6:The High Court dismissed the appeal, upholding the decisions of the lower forums. It emphasized that the claim towards the expense was correct and allowable, and there was no reason to entertain the appeal further. The judgment highlighted the distinction between the powers of the assessing authority and the appellate forum in allowing additional claims based on accrued expenses.