Tribunal upholds CIT(A)'s decision on salary expense deletions for A.Y. 2011-2012 and 2012-2013

The Tribunal dismissed both appeals by the Revenue, upholding the decisions of the Ld. CIT(A) regarding the deletion of salary expense additions for both A.Y. 2011-2012 and 2012-2013. The Assessee's consistent adherence to grant accounting policies and the genuine nature of the expenses were key factors in the decisions.

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Issues Involved:
- Challenge of deletion of addition under section 37(1) of the I.T. Act, 1961 for the A.Y. 2011-2012 and 2012-2013.

Analysis:
- Issue 1: Addition of Salary Expenses for A.Y. 2011-2012
- The Department challenged the deletion of an addition of Rs. 1.78 crores under section 37(1) related to salary expenses. The Assessee maintained that the expenses were legitimate and in line with the policy of accounting for grants received. The A.O. contended that the sudden rise in salary expenses was due to diverting grant-related expenditure to regular accounts.
- The Assessee explained that the grants received were used as per government directions, and any excess expenditure over grants was shown as a liability. The Ld. CIT(A) deleted the addition, emphasizing that the Assessee had consistently followed the policy, and the salary expenses were justified for business activities.

- Issue 2: Addition of Salary Expenses for A.Y. 2012-2013
- The Department challenged the addition of Rs. 2,37,60,000 under section 37(1) for salary payment. The Ld. CIT(A) deleted the addition based on the decision for the previous year. The Tribunal dismissed the appeal, following the same reasoning as for the A.Y. 2011-2012.

- Conclusion:
- The Tribunal dismissed both appeals by the Revenue, upholding the decisions of the Ld. CIT(A) regarding the deletion of salary expense additions for both A.Y. 2011-2012 and 2012-2013. The Assessee's consistent adherence to grant accounting policies and the genuine nature of the expenses were key factors in the decisions.

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