Case Law Details
Himatnagar Nagrik Sahakari Bank Ltd. Vs ACIT (ITAT Ahmedabad)
Introduction: The recent case of Himatnagar Nagrik Sahakari Bank Ltd. vs. ACIT, decided by the ITAT Ahmedabad, revolves around the denial of deduction for staff ex-gratia and benefits under section 43B of the Income Tax Act. The Assessee challenged the disallowance made by the Commissioner of Income Tax (Appeals), asserting that the expenses were paid during the year and should be allowed as per section 43B.
Background: The Assessee, a cooperative bank, claimed deductions for staff-related expenses without debiting the same in the profit and loss account for the relevant year. The claimed expenses included staff ex-gratia, leave encashment, staff benefit, and staff gratuity. The Assessee argued that these expenses were appropriated from the profit in earlier years but were not claimed as deductions until actual payment.
AO’s Disallowance: The Assessing Officer (AO) disallowed the deductions, emphasizing that the claimed expenses were not debited in the profit and loss account. The AO also pointed out that the Assessee had not made provisions for these expenses on the date of finalization of books of accounts. The total disallowance amounted to Rs. 1,12,87,989.
CIT(A) and NFAC Decision: The Commissioner of Income Tax (Appeals) confirmed the disallowance, stating that certain amounts were appropriations from the profit and not actual expenditures debited to the profit and loss account. The National Faceless Appeal Center (NFAC) upheld this decision, adding that for any expenditure to be allowable under section 43B, it should be in the nature of expenditure debited to the profit and loss account in the current or preceding years.
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