TaxTMI 
TaxTMI 
TaxTMI 
2026 (1) TMI 1575
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....x Act, 1961, certain deductions shall be allowed only if such sum is actually paid by the assessee during the previous year. Thus, the Ld. ADDL/JCIT(A) ought not have allowed the deduction claimed u/ s. 43B, as the same was not paid by the assessee. 4. Any other ground that may be urged at the time of hearing." 3. At the outset, there is a delay of 35 days in filing the present appeal by the Revenue before the Tribunal. The Revenue has filed an affidavit of Sri B. Narsing Rao, Deputy Commissioner of Income Tax, Circle-1(1), Hyderabad, explaining the reasons for the delay, wherein it was submitted that, the order passed by the ADDL/JCIT(A)-9, Mumbai, dated 05.02.2025, was received in the office of the Pr. CIT-1, Hyderabad on 07.02.2025, and the time limit for filing the appeal before the Tribunal was to expire on 29.04.2025. It was submitted that, due to heavy work pressure, the matter inadvertently escaped attention and the proposal for filing further appeal was submitted belatedly for obtaining authorization from the Pr. CIT-1, Hyderabad. It was submitted that, in view of the above circumstances, the appeal could not be filed within the prescribed time. It was further ....
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....01.04.2019, which was on or before the due date for filing the return of income under Section 139(1) of the Act. The return of income filed by the assessee was processed and an intimation under Section 143(1)(a) of the Act, dated 18.03.2021 was issued by the A.O./CPC, determining the total income at Rs. 16,91,21,700/- after making an adjustment of Rs. 2,84,07,995/- towards the deduction claimed under Section 43B of the Act in respect of leave encashment and bonus payment. 7. The assessee challenged the order passed by the A.O. under Section 143(1) of the Act, and filed an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee challenged the additions made by the A.O. towards disallowance of liabilities, in respect of leave encashment and bonus payment under Section 43B of the Act, on the ground that, upon transfer of the business undertaking w.e.f. 01.04.2019, the liabilities related to the business undertaking in respect of employees' leave encashment, bonus, and provision for gratuity had been transferred to the transferee entity, and upon such transfer of said liability, the assessee company had discharged the liability due to the employees and thus, it amounte....
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.... Act. However, the law is very clear in as much as, for claiming deduction under Section 43B of the Act, the actual payment of the said liability should be made on or before the due date. Since the assessee has not proved the actual payment of the said employees' liabilities on or before the due date, the question of claiming deduction does not arise. Therefore, he submitted that, the Ld. CIT(A), without appreciating the relevant facts, simply deleted the additions made by the A.O. 10. The learned counsel for the assessee, Shri Rohit Mittal, C.A. and Shri Sandeep Bansal, C.A. on the other hand, supporting the order of the Ld. CIT(A), submitted that, the assessee company has discharged the liability on 01.04.2019, which is before the due date for filing the return of income, and the said liability has been discharged by transferring the liability to the transferee company in terms of the business transfer agreement dated 26.02.2019, from the appointed date i.e. 01.04.2019. Once the assessee has transferred the liability to the transferee company, then it amounts to deemed payment of the said liability, as required under the relevant statutes, and therefore, the assessee can c....
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....rder of the Ld. CIT(A) by filing an application under Rule 27 of the ITAT Rules, 1963 and has taken a ground that, the adjustment made by the A.O. under Section 143(1)(a) of the Act, cannot be made when the issue involved is debatable in nature. He further submitted that, the CPC, erred both on facts and in law in making addition to the income without recording any specific satisfaction in the order passed under Section 143(1)(a) of the Income-tax Act, 1961, either regarding absence of a response or inadequacy of the response submitted by the assessee. The learned counsel for the assessee further, referring to various judicial precedents, including the decision of the Hon'ble Bombay High Court in the case of Peter Vaz Vs. CIT (2021) 128 taxmann.com 180, submitted that, the assessee can file an application under Rule 27 of the ITAT Rules, 1963, even if such ground was not raised before the Ld. CIT(A), and the ITAT should admit the application filed by the assessee and decide the issue challenged in the said application, in case, the said grounds are in support of the order of the Ld. CIT(A). In this regard, he relied upon the decision of the ITAT, Hyderabad Bench in the case of ....
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....e respondent by the first appellate authority, however, there is no scope for the respondent to file an application by raising new legal grounds which were not taken before the Ld. CIT(A). Further, assuming for a moment, the assessee can raise the grounds by filing an application under Rule 27 of the ITAT Rules, 1963, but still the grounds raised by the assessee in the petition/application are not maintainable, because the issue considered by the A.O./CPC for adjustment under Section 43B of the Act, is neither debatable nor there is requirement of satisfaction from the A.O. before making such an adjustment. Therefore, he submitted that, the grounds raised by the assessee should be rejected. 14. We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. We have also carefully considered the relevant written submissions filed by the assessee dated 16.01.2025 after the hearing of appeal on 12.01.2026 and also perused various case laws referred to by the learned counsel for the assessee in support of his submissions on the issue of adjustment made towards employees' dues under section 43B of the Income Tax Act, ....
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.... (supra) and also the decision of Hon'ble Madras High Court in the case of Sri Akhilandeswari Mills Pvt. Ltd. vs. DCIT (supra) and other cases and claimed that, once a liability is transferred to another entity, upon transfer of business undertaking on slump sale basis, then it amounts to deemed payment of said liability on or before the due date and the assessee company is entitled to claim deduction under section 43B of the Income-tax Act, 1961. 15. We have gone through the relevant arguments of the counsel for the assessee in light of various case laws, including the decision of Hon'ble Supreme Court in the case of W.T. Suren and Co. Vs. CIT (supra), and we ourselves do not subscribe to the reasons given by Ld. CIT(A) for the simple reason that, there is no concept of deemed payment of liability referred to under section 43B of the Act for claiming deduction towards said liability while computing the income from business or profession. As per the plain reading of section 43B of the Act, a deduction otherwise allowable under this Act, in respect of certain liabilities, including the liability relating to employees' dues, shall be allowable irrespective of the previ....
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....y has not claimed the deduction, in our considered view, the said argument does not hold good for the simple reason that, whether the transferee entity has paid the employees and claimed deduction towards the said liability while computing income from business or profession is not relevant to decide whether the assessee can claim deduction for the said liability under Section 43B of the Act, but what is required is actual payment of the said liability on or before the due date for filing the return of income under Section 139(1) of the Act in terms of the proviso to Section 43B of the Act. In our considered view, if the arguments of the counsel for the assessee is accepted that, upon transfer of said liability to any other entity or person, the assessee deemed to be discharged the said liability for the purpose of section 43B of the Act, then in all cases, the assessee will claim the benefit of deduction under section 43B of the Act, by incurring the liability and transferring the said liability to a third person either on account of business transfers or on account of any other reason. Therefore, in our considered view, this is not the intent of legislature going by the wording of....
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....onverted into a loan liability upon issuance of equity shares or debentures in lieu of interest, then it amounts to actual payment as contemplated under Section 43B of the Act and the assessee can claim deduction under Section 43B of the Act. In the present case, the issue involved relates to employees' dues, such as leave encashment and bonus payment to employees as required under the law and further on or before the due date prescribed under Section 139(1) of the Act and therefore, in our considered view, the assessee cannot invoke the theory of deemed payment of said liabilities merely by transferring the liabilities to another company and claim deduction under Section 43B of the Act. Therefore, in our considered view, the case laws referred to by the learned counsel for the assessee are not applicable to the facts of the present case and thus, the same are rejected. 19. In this view of the matter and considering the facts and circumstances of the case, we are of the considered view that, the Ld. CIT(A), without appreciating the relevant facts, simply deleted the adjustment made by the A.O. towards liabilities under section 43B of the Act. Thus, we set aside the order of ....
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....turn of income filed by the assessee, because as per the provisions of section 143(1)(a) of the Act, an incorrect claim, if such incorrect claim is apparent from any information in the return, then the same can be adjusted while processing the said return of income. Since the issue related to deduction under section 43B of the Act, towards liabilities referred to therein, including the employees' dues pertaining to leave encashment, bonus payment and gratuity provision, is an incorrect claim which is apparent from the return filed by the assessee, in our considered view, the arguments of the learned counsel for the assessee that, it is a debatable issue and the same cannot be adjusted under section 143(1)(a) of the Act, is incorrect and devoid of merit and cannot be accepted. Thus, we reject ground No. 1 of the assessee's application filed under Rule 27 of ITAT Rules, 1963. 22. The assessee had also taken another ground in light of certain judicial precedents and held that, the A.O. has made adjustment by considering the standard reason that, as there was no response or the response given is not acceptable, the adjustment as mentioned below is being made to the total inc....