Allegation of Non-Payment of Outstanding Liability before due date of filing Income Tax Returns: ITAT allows outstanding Bonus claims u/s 43B [Read Order]

The Income Tax Appellate Tribunal (ITAT), Delhi allowed outstanding bonus claims under Section 43B when there was an Allegation of non-payment of outstanding liability before the due date of filing income returns.

The assessee, Bodycare Creations Limited has challenged the disallowance of bonus payment amounting to Rs.30,66,187/- carried out by revenue by taking resort to Section 43B of the Act alleging non-payment of outstanding liability before the due date of filing of return of income stipulated under Section 139(1) of the Act.

Section 43B of the Income Tax Act provides a list of expenses allowed as deductions under the head ‘Income from business and profession’. It states some expenses that can be claimed as a deduction from the business income only in the year of actual payment and not in the year when the liability to pay such expenses is incurred.

As per the Income Tax Act, 1961 Section 43B states that only certain payments can be claimed as an expense in the year in which they have been paid and not in the year in which the liability to pay such sum was incurred. This means that certain statutory expenses are allowed to be claimed in the year of payment only. This section is with reference to PGBP (profits and gains of business or profession).

The bench consisting of Challa Nagendra Prasad, Judicial Member, and Pradeep Kumar Kedia, Accountant Member held that “we find that the assessee has successfully demonstrated that the return of income filed by it has been subjected to provisions of Section 92E of the Act and consequently the due date available to the assessee is 30th November 2017 relevant to Assessment Year 2017-18 in question in terms of Section 139(1) read with clause (aa) to Explanation-2 thereto.

Consequently, impugned outstanding bonus claims to have been paid before 30^th November 2017, as vouched by tax audit report, cannot be disallowed under Section 43B of the Act. The action of the Revenue for resorting to disallowance under Section 43B thus cannot be countenanced in law. The assessee thus succeeds in its claim for deductibility of impugned bonus expense as claimed.”

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