2015 (1) TMI 422 - HC - Income Tax

High Court affirms Tribunal decision on bonus payments and excise duty treatment

The Commissioner of Income Tax, Hyderabad - I Versus M/s. Hyderabad Industries Ltd.

The High Court of Andhra Pradesh upheld the Tribunal's decision, ruling in favor of the respondent on both issues. The judgment clarified the application ... Payment of bonus - Disllowance u/s 43B - purview of sec. 143(1)(a) - prima facie adjustments - Held that:- Even where the appropriate Government does not issue any ordinance or notification or in the absence of any agreement, an industry has its own discretion to pay the bonus of its choice, subject to statutory requirements. It is no facet of the power of the assessing officer to tell upon the justification or otherwise as to the percentage of bonus paid by an assessee. The only thing he can verify is as to whether bonus has been paid as a matter of fact. If it is paid, deduction has to be permitted under Section 43B of the Act and otherwise not. Payment of bonus, no doubt, was made after 31st March of the concerned year. However, it was before the due date for submission of returns. The proviso to Section 43B of the Act is to the effect that the amount must be actually paid by the assessee on or before due date applicable in his case for furnishing the return of income. Admittedly, the payment was made before the due date for filing of the return. - Following decision of Commissioner of Income Tax v. Lakshmi Machine Works [2007 (4) TMI 202 - SUPREME Court] - Decided against Revenue. Issues:1. Disallowance of bonus claim under sec. 43B of the Income Tax Act.2. Excise duty inclusion in total turnover for deduction under sec. 80HHC of the Income Tax Act.Issue 1: Disallowance of Bonus Claim under Sec. 43B:The respondent, an industry under the Income Tax Act, claimed a deduction for bonus paid to employees in its return for the assessment year 1995-96. The assessing officer initially accepted the return under Section 143(1)(a) but later initiated rectification under Section 154, citing that the actual bonus paid exceeded the provision made in the books. The respondent argued that the higher bonus was due to a government ordinance and was paid before the filing of the return. The assessing officer excluded the differential amount from Section 43B, leading to an appeal by the respondent. The Tribunal allowed the appeal, emphasizing that the payment was made before the due date for filing the return, thus falling within the proviso of Section 43B. The appellant contended that the Tribunal's interpretation of Section 154 and Section 143(1)(a) was incorrect, but the Court upheld the Tribunal's decision, dismissing the appeal.Issue 2: Excise Duty Inclusion in Total Turnover for Deduction under Sec. 80HHC:The second issue revolved around whether excise duty should be considered part of the total turnover for calculating the deduction under Section 80HHC of the Income Tax Act. The appellant acknowledged that this question was settled in a previous judgment against the Revenue. The Court, after considering the arguments, found no grounds to interfere with the Tribunal's decision and dismissed the appeal, stating there would be no order as to costs.In conclusion, the High Court of Andhra Pradesh upheld the Tribunal's decision, ruling in favor of the respondent on both issues. The judgment clarified the application of Section 43B regarding bonus payments and affirmed the treatment of excise duty for deduction under Section 80HHC. The dismissal of the appeal indicated the Court's satisfaction with the Tribunal's reasoning and decision in the case.