Appellate Tribunal rules in favor of assessee, rejects disallowance under section 43B of IT Act.

The Appellate Tribunal allowed the appeal of the assessee, setting aside the Commissioner of Income-tax(A)'s order. The Tribunal held that since the assessee did not claim statutory dues as business expenditure in the Profit and Loss Account, section 43B of the IT Act was not applicable. Consequently, the disallowance made by the Assessing Officer under section 43B was directed to be deleted. The decision was pronounced on 12th August 2016.

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Issues:
Disallowance under section 43B of the IT Act for non-payment of statutory dues - Whether disallowance was justified - Whether statutory dues were claimed as expenditure - Whether provisions of section 43B applicable.

Analysis:
The appeal was filed by the assessee against the order of the Commissioner of Income-tax(A) for the assessment year 2011-12. The assessee, engaged in software development, filed its return of income declaring a total income. The Assessing Officer (AO) observed non-payment of statutory dues for services tax, Central Sales Tax, and VAT, leading to disallowance under section 43B of the IT Act. The AO disallowed the amount as the dues were paid after the due date for filing the return.

The assessee contended before the CIT(A) that the statutory dues were shown on the liabilities side of the balance sheet but were not claimed as a deduction or charged to the Profit and Loss Account. The CIT(A), relying on various case laws, confirmed the disallowance made by the AO under section 43B of the Act.

The assessee, aggrieved by the CIT(A) order, appealed before the Appellate Tribunal. The Tribunal noted that the assessee consistently treated statutory dues as liabilities in the balance sheet without charging them to the Profit and Loss Account. Referring to relevant case laws, the Tribunal held that section 43B would be applicable only when the assessee claimed the payments of statutory dues as expenditure.

The Tribunal cited judgments such as CIT Vs. Noble and Hewitt (I) P. Ltd. and CIT Vs. Everest Litho Press to support its decision. It concluded that since the assessee did not claim the statutory liability as a business expenditure in the Profit and Loss Account, the provisions of section 43B were not applicable. Therefore, the Tribunal set aside the CIT(A) order and directed the AO to delete the disallowance made under section 43B of the Act.

In the final decision, the appeal of the assessee was allowed, and the order was pronounced in open court on 12th August 2016.

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