Clinisys (India) Private Limited Vs DCIT (ITAT Kolkata)
The Income Tax Appellate Tribunal (ITAT) of Kolkata, in the case of Clinisys (India) Private Limited vs. DCIT, has overturned a disallowance of Rs. 3,80,401 made by the tax authorities for the Assessment Year 2022-23. The dispute arose from the tax treatment of leave encashment payments. The assessee, Clinisys (India) Pvt. Ltd., had made a provision for leave encashment of Rs. 32,98,103 during the year and also paid Rs. 3,80,401 towards leave encashment for prior years. In its tax return, the company itself disallowed a portion of the provision, Rs. 29,17,702, under Section 43B of the Income Tax Act, which mandates disallowance of certain expenses unless paid within the stipulated time. However, the Central Processing Centre (CPC) of the Income Tax Department, while processing the return, went further and disallowed the Rs. 3,80,401 that had been actually paid, which the assessee had already adjusted against its prior year’s provisions.
The assessee’s appeal to the Commissioner of Income-tax (Appeals) was unsuccessful. The CIT(A) upheld the disallowance, stating that the assessee had shown a provision of Rs. 32,98,103 in its tax audit report (Form 3CD) that was not paid by the due date. The CIT(A) concluded that the CPC was correct in making the addition, noting that the assessee had not provided sufficient documentation for the payments.
