Case Law Details
AB Insurance Brokers Pvt Limited Vs DCIT (ITAT Kolkata)
ITAT Kolkata held that addition on account of lesser amount considered as claw back payment unsustained as in case, a higher amount is to be considered as claw back payment, then a higher amount is to be allowed as a deduction not character of income
Facts- The assessee has preferred the present appeal contested that CIT(A) has erred in confirming the addition of Rs. 15,41,574/-. It is alleged that though the assessee company has filed reconciliation showing total claw back payment of Rs. 1,47,44,486/- from HUFC Standard Life Insurance Co. Ltd., however, the confirmation received from HUFC Standard Life Insurance Co. Ltd. confirming that total claw back payment of Rs. 1,62,86,060/-. The assessee failed to reconcile the differential claw back of Rs. 15,41,574/- (Rs. 1,62,86,060/- less Rs. 1,47,44,486/-). As such the amount of Rs. 15,41,574/- is treated as undisclosed income of the assessee company for the year under consideration and the same is added to the total income of the assessee company.
Conclusion- The meaning of expression “claw back” is that it is a contractual provision that requires an employee to return money already paid by an employer sometimes with a penalty. In other words, whatever incentive HDFC Standard Life Insurance Co. Ltd. has given to the assessee, it was taken back to the extent of Rs.1,62,86,060/- instead of debiting a higher amount for claiming as an expenditure. The assessee has debited Rs. 1,47,44,486/-. Thus the assessee has debited lesser expenditure of Rs.15,41,574/-. The ld. Assessing Officer without understanding the whole contractual obligations of the parties made the addition. In case, a higher amount is to be considered as claw back payment, then a higher amount is to be allowed as a deduction not character of income. Therefore, we allow this ground of appeal and delete the addition of Rs. 15,41,574/-.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
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