Case Law Details
Housing And Urban Development Corporation ltd Vs Add. CIT (Delhi High Court)
The pay revision of employees of the appellant, a PSU is due every ten years with the expiry of one wage settlement or agreement. Invariably, there is a time lag between expiry of a wage revision and negotiation of a fresh wage revision. The appellant had made provision of Rs. 1.60 crores on scientific foundation and on the basis of its past experience in its accounts for Financial Year 2006-07. The provision was made for the period 1st January, 2007 to 31st March, 2007 and deduction was claimed on the standpoint that appellant is under an obligation to pay revised pay to its employees with effect from 1st January, 2007, determination whereof, was a matter of time. The appellant, thus had a reasonable basis to make provision for this expenditure.
The position in the current case is that the liability had already arisen with certainty. The committee was constituted for the purpose of wage revision. That the wages would be revised was a foregone conclusion. Merely because the making of the report and implementation thereof took time, it could not be said that there was no basis for making the provision. In view of the above, we hold that the ITAT and CIT (A) have fell in error by disallowing the expenditure of Rs.1.60 crores on account of anticipated pay revision in Assessment Year 2007-08. The first and second questions of law are thus answered in favour of the appellant. Accordingly, it is directed that the revenue shall now pass consequential orders accepting the deduction of Rs. 1.60 crores.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
1. This appeal under Section 260A of the Income Tax Act, 1961 (herein after referred to as the “Act”) filed by the Housing and Urban Development Corporation Ltd – HUDCO (hereinafter referred to as “the appellant”) assails the order dated 21st December, 2018 passed by Income Tax Appellate Tribunal, Delhi Bench „C‟: New Delhi (hereinafter referred to as “ITAT”) in ITA No:- 5705/Del/2014 for the Assessment Year (AY)2007-08(herein after “the impugned order”).
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