ACIT Vs Assam Cooperative Apex Bank Ltd (ITAT Guwahati)
Provision for Staff Arrears Allowed – ITAT Guwahati Upholds CIT(A)’s Partial Relief to Assam Cooperative Apex Bank
Revenue challenged CIT(A)’s order granting partial relief on disallowance of ₹8.41 crore made by AO towards provision for arrears of VDA, PFD (bank contribution), & HRA of employees. AO disallowed the entire amount holding that no actual payment was made & liability had not crystallized.
CIT(A) observed that the provision was made pursuant to directions of the Hon’ble High Court, hence the liability was ascertained & legally enforceable. However, since TDS was not deducted or deposited within due date, CIT(A) restricted disallowance to 30% (₹2.52 crore) as per Section 40(a)(ia) and granted relief of ₹5.89 crore.
Before Tribunal, Revenue argued that no deduction was permissible without payment or crystallization, while the Assessee contended that the provision was compulsory under High Court’s order, thus allowable.
ITAT found merit in CIT(A)’s reasoning, noting that the liability arose from judicial direction, and disallowance was correctly confined to the extent of TDS default. There was no infirmity in CIT(A)’s order warranting interference.
Accordingly, the Revenue’s appeal was dismissed.
Held: Provision for arrears made under High Court order is allowable; disallowance rightly restricted to 30% u/s 40(a)(ia) for TDS default; Revenue’s appeal dismissed.
