Case Law Details
CIT Vs M/S D.S.M. Agro Products Ltd. (Allahabad High Court)
Where incentive bonus has been paid as a reward of good attendance and efficiency to the workers, it would be deductible under section 37 of the Act and therefore the tribunal has not erred in allowing deduction in respect of the incentive bonus in the present case also.
FULL TEXT OF THE HIGH COURT JUDGMENT / ORDER IS AS FOLLOWS:-
Heard Sri Gaurav Mahajan learned counsel for the department and Sri Arnab Banerji learned counsel for the assessee.
This is an appeal under section 260A of the Income Tax Act, 1961 filed by the department against the order dated 6.1.2006 passed by the tribunal in I.T.A. no.614/Del/2002 for the assessment year 1997-98.
The questions of law sought to be answered are as under:
“1. Whether on the facts and in the circumstances of the case, the tribunal was legally justified in upholding the order of the Commissioner of Income Tax (Appeal) who deleted the addition of Rs.5,54,037/- and Rs.5,32,238/- which was added on account of Production Incentive Bonus?
2. Whether on the facts and in the circumstances of the case, the tribunal was legally justified in restricting the disallowance of guest house expenses from Rs.3,81,981/- to Rs.50,000/- in view of provisions of section 37(4) of Income Tax Act, 1961 and judgment of Hon’ble Apex Court reported in 278 ITR 546?
3. Whether on the facts and in the circumstances of the case, the tribunal was legally justified in upholding that contribution to Provident Fund if paid within grace period is not disallowable u/s43B?
4. Whether on the facts and in the circumstances of the case, the tribunal was legally justified in upholding the order of Commissioner of Income Tax (Appeal) who deleted the disallowance of Rs.4,45,779/-made on account of cane price and excess levy sugar price?
5. Whether on the facts and in the circumstances of the case, the tribunal was legally justified in upholding the order of Commissioner of Income Tax (Appeal) who deleted the addition of Rs.2,17,91,050/- made on account of undervaluation of closing stock?”
In so far as the question no.1 and 5 are concerned, they are answered against the department in view of the judgment dated 27.7.2017 in the case of Commissioner of Income Tax vs. M/s. Kisan Sahkari Chini Mills Ltd. (Income Tax Appeal no.418 of 2006) wherein this court has held that where incentive bonus has been paid as a reward of good attendance and efficiency to the workers, it would be deductible under section 37 of the Act and therefore the tribunal has not erred in allowing deduction in respect of the incentive bonus in the present case also. Also in so far as the question no.5 is concerned, the order of the tribunal is upheld deleting the addition of the amount made on account of under valuation of closing stock in view of the fact that Hon’ble Apex Court in the case of Commissioner of Income Tax vs. Bannari Amman Sugars Ltd. (2012) 349 ITR 708 (SC), has held that the stock of incentive sugar has to be valued on the levy price and not on cost price.
In so far as the question no.3 is concerned which relates to the contribution to provident fund made by the assessee, it has been recorded as a matter of fact that the contribution was made well within the grace period. Such being the case it was liable to be allowed under section 43B of the Act. Therefore this question is answered against the department and in favour of the assessee.
In so far as the question no.4 is concerned, with regard to the levy price of sugar, the tribunal has relied on a decision dated 16.6.2005 of Allahabad High Court at Lucknow Bench in the case of Commissioner of Income Tax vs. M/s. Dhampur Sugar Mills Ltd. (Income Tax Reference no.122 of 1995) wherein identical circumstances,, the assessee was held to be entitled to the deduction on account of interest on excess levy sugar price. This question is also therefore decided in favour of the assessee and against the department.
In so far as the question no.2 is concerned, the said question is decided in favour of the department and against the assessee in view of the decision dated 27.7.2017 of this court in the case of Commissioner of Income Tax vs. M/s. Kisan Sahkari Chini Mills Ltd. (Income Tax Appeal no.418 of 2006) by which the tribunal has deleted the disallowance of guest house expenses under section 37 of the Act as in view of the provisions of sub-section (4) of section 37 which stood at the relevant time all expenses incurred to the assessee on any accommodation of the nature of the guest house after 28.2.1970 were not allowable. The question is answered in favour of the department and against the assessee.
The appeal shall stand disposed of finally. The questions of law answered accordingly.
Order Date :- 20.2.2018
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