Case Law Details
Foseco India Limited Vs DCIT (ITAT Pune)
The issue under consideration is whether the payment made by the company to its employees under the Voluntary Retirement Scheme (VRS) is allowed as deduction?
In the present case, the assessee, a company engaged in the business of manufacture and sale of foundry fluxes, foundry chemicals, and pro fax, they paid some amount towards payment on account of Voluntary Retirement Scheme (VRS) relating to employees and filed the return claiming deduction of the said amount. The Assessing Officer, in the assessment completed u/s.143(3), did not allow deduction incurred on payment of VRS by treating the same as a capital expenditure.
ITAT state that, the instant case is pertains to AY 1998-99. Further, it is seen that section 35DDA has been inserted by the Finance Act, 2001 providing for amortization of expenditure incurred on Voluntary Retirement Scheme. The assessment year under consideration is prior to the insertion of section 35DDA and hence cannot rule the position. The instant year would be governed by the earlier provisions. Hence, by following the same, ITAT reverse the impugned order on this score and direct to allow the deduction in the year under consideration.
Accordingly, the appeal filed by the assessee is allowed.
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