Adani Power Ltd. Vs Assessing Officer (ITAT Ahmedabad)
Introduction: In a recent case, the Income Tax Appellate Tribunal (ITAT) ruled in favor of Adani Power Ltd., allowing a bonus deduction under Section 43B of the Income Tax Act. This decision overturned an earlier order by the Commissioner of Income Tax (Appeals) and has significant implications for the assessment year 2019-20.
Background: Adani Power Ltd. initially filed its income tax return for the assessment year 2019-20, declaring a total income of Rs. 71.64 crores. However, the Income Tax Department issued a notice under Section 143(1) of the Act, making certain adjustments. Upon appeal, most of these adjustments were deleted, except for one specific adjustment made under Section 43B of the Act, amounting to Rs. 1,75,59,741.
ITAT’s Decision: The ITAT reviewed the case and observed that the claim made by Adani Power Ltd. under Section 43B was justified. This section allows for certain deductions when specific conditions are met. In this instance, Adani Power Ltd. claimed a deduction of Rs. 1,75,59,741 under Section 43B. The tax auditor, in the Tax Audit Report, certified that this amount was related to a bonus and pertained to a pre-existing liability. Furthermore, the auditor stated that this bonus amount had been paid during the relevant assessment year.
The ITAT noted that the tax auditor’s certification was explicit, indicating that the bonus was a pre-existing liability and had indeed been paid during the assessment year under consideration. It was also highlighted that the same amount was correctly disclosed by Adani Power Ltd. in its tax return. Notably, the Income Tax Department had not disallowed this amount in any of the preceding assessment years.
The ITAT also considered the Tax Audit Report for the immediately preceding assessment year, where the tax auditor confirmed that the bonus amounting to Rs. 1,75,59,741 had not been paid before the due date and was, therefore, disallowed under Section 43B of the Act.
Conclusion: In summary, the ITAT’s decision to allow the bonus deduction under Section 43B of the Income Tax Act for Adani Power Ltd. is based on the clear certification provided by the tax auditor, the accurate disclosure in the tax return, and the absence of disallowance in prior assessment years. This decision rectifies the earlier disallowance and underscores the importance of adhering to the conditions and certifications required by the law. Companies seeking deductions under Section 43B should ensure that their claims are supported by accurate documentation and adhere to the provisions of the Income Tax Act.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi in DIN & Order No. ITBA/NFAC/S/250/2022-23/1049504333(1) vide order dated 07.02.2023 passed for Assessment Year 2019-20.
2. The assessee has taken the following grounds of appeal:-
“1. In law and in the facts and circumstance of the appellant’s case, the learned CIT(A) erred in confirming adjustment u/s 43B amounting to Rs.1,75,59,741/- when no such adjustment is required to be made.
2. In law and in the facts and circumstances of the appellant’s case, the learned CIT(A) erred in confirming disallowance u/s 43B amounting to Rs. 1,75,59,741/- on mistaken belief and without appreciating the arguments and details submitted by the appellant.
3. In law and in the facts and circumstances of the appellant’s case, the learned CIT(A) ought to have appreciated that claim in current year was made on payment basis and amount was already disallowed in earlier year.
4. The appellant craves leave to add, alter or amend and/pr withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal.”
3. The brief facts of the assessee’s case are that the assessee filed its return of income declaring total income of Rs. 71.64 crores. The Department issued notice under Section 143(1) of the Act, in which certain adjustments were made. In appeal, Ld. CIT(Appeals) deleted all adjustments except adjustment made under Section 43B of the Act amounting to Rs. 1,75,59,741/-. The Ld. CIT(Appeals), made the following observations, while confirming the disallowance:
“6.4 Clause 26 of the Tax Audit Report is reproduced as under:-
26(i)* In respect of any sum referred to in clause (a), (b), (c), (d), (e), (f) or (g) of section 43B, the liability for which:-
26 (i)A Pre-existed on the first day of the previous year but was not allowed in the assessment of any preceding previous year and was:-
26(i)(A)(a) Paid during the previous year
