The Commisioner of Income-tax V. M/s. Hyderabad Industries Ltd.,

ITTA/141/2004

AI Insights

The case revolves around the dispute concerning the deductibility of a bonus amount claimed by M/s. Hyderabad Industries Ltd. in their tax return for the assessment year 1995-96. The company claimed a deduction for a bonus paid to employees, which was higher than the provision made in the books due to an ordinance issued by the government. The assessing officer initially accepted the return but later sought to rectify it under Section 154 of the Act, leading to the exclusion of the differential amount from the purview of Section 43B. The Tribunal found in favor of the respondent, holding that the bonus paid was within the scope of Section 43B as it was paid before the due date for filing the return, despite being after the end of the financial year.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 718665 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 17-12-2014
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax v. Lakshmi Machine Works
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: CH KIRAN
• Assessee Lawyers: KIRANMAYEE
• Keywords: Bonus Deduction; Excise Duty; Income Tax; Section 143(1)(a); Section 154; Section 43B; Total Turnover
• Section: 143(2); 154; 43B; 143(1)(a)

Judgement Text

"* HON’BLE SRI JUSTICE L. NARASIMHA REDDY AND HON’BLE SRI JUSTICE CHALLA KODANDA RAM + I.T.T.A No. 141 OF 2004 % Dated 17-12-2014 # The Commissioner of Income Tax, Hyderabad - I …Appellant VERSUS $ M/s. Hyderabad Industries Ltd., Hyderabad …..Respondent ! Counsel for the Appellant: Smt. Kiranmayee for Sri J.V. Prasad ^Counsel for the Respondent: Sri Ch. Pushyam Kiran HEAD NOTE: ? Cases referred 1. 290 ITR 667 HON’BLE SRI JUSTICE L. NARASIMHA REDDY AND HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A No.141 OF 2004 17-12-2014 BETWEEN The Commissioner of Income Tax, Hyderabad - I …Appellant And M/s. Hyderabad Industries Ltd., Hyderabad …..Respondent HON’BLE SRI JUSTICE L. NARASIMHA REDDY AND HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A No. 141 OF 2004 JUDGMENT: (per the Hon'ble Sri Justice L. Narasimha Reddy) The Revenue filed this appeal by raising the following questions: “1. Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the disallowance of the claim of bonus amounting to Rs.1,14,00,983/- made under sec.43B of the Income Tax Act was outside the purview of sec. 143(1)(a) of the Income Tax Act, 1961? 2. Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that excise duty did not form part of the total turn over for the purpose of computing the deduction under sec.80HHC of the Income Tax Act?” The respondent is an industry and is an assessee under the Income Tax Act, 1961 (for short, ‘the Act’). In the return filed by it for the assessment year 1995-96, it claimed inter alia deduction of a sum of Rs.2,42,83,798/- as bonus paid to the employees. The return was accepted through intimation under Section 143(1)(a) of the Act by the assessing officer. However at a later stage, he initiated steps under Section 154 of the Act for rectification. The reason furnished by him was that in the books of account for the concerned year, provision was made only for a sum of Rs.1,26,95,168/- for bonus, whereas almost double the amount was paid. It was also observed that the remaining amount was paid after the 31st March of the concerned year and at the most, it could have been reflected in the subsequent year. The respondent took the plea that though provision was made only for a limited amount, a higher amount of bonus had to be paid on account of the ordinance issued by the Government and that the amount was paid before the filing of return for the concerned year. Not satisfied with the explanation offered by the respondent, the assessing officer passed an order excluding the differential amount from the purview of Section 43B of the Act. Aggrieved by that, the respondent filed an appeal before the Commissioner of Income Tax (Appeals-IV), Hyderabad. The appeal was dismissed. Thereafter, it filed ITA No. 452/Hyd/1998 before the Hyderabad Bench ‘B’ of the Income Tax Appellate Tribunal (for short, ‘the Tribunal’). The appeal was allowed through a common order dated 29-11-2002 passed in a bunch of eight appeals. Hence, this appeal Smt. Kiranmayee, learned counsel representing Sri J.V.Prasad, learned Standing Counsel for the appellant, submits that the view taken by the Tribunal, be it as regards justification on the part of the assessing officer in taking recourse to Section 154 of the Act or the purport of Section 143 (1) (a) of the Act cannot be sustained in law. She contends that the interpretation placed by the Tribunal on Section 154 of the Act in this behalf is too narrow and for invoking that provision, it does not make any difference whether the subject matter is an order passed under Section 143(3) or intimation under Section 143(1)(a). She further contends that once the differential amount was admittedly paid subsequent to 31st March of the concerned year, there was no way that it could have been brought under the purview of Section 43B of the Act. Sri Ch. Pushyam Kiran, learned counsel for the respondent, on the other hand, submits that the difference between the provision made for payment of bonus and the actual payment is not of much relevance under the Act. He contends that the quantum of bonus paid by an industry would depend upon several factors and at any rate, an authority under the Act cannot pronounce upon the propriety or otherwise as to the quantum of percentage of bonus. He further submits that once the payment was made before the last date for filing of returns of a particular assessment year, Section 43B of the Act would cover such payments and the Tribunal has taken the correct view of the matter. Being an industry covered by the provisions of the Payment of Bonus Act, the respondent is under obligation to pay bonus year after year. As is fairly well known, the percentage of bonus to be paid in a particular year would depend upon several factors. The Act itself stipulates the minimum bonus as 8.33% of the basic pay of an employee. In a given case for a given year, the appropriate Government may issue notification stipulating any other figure as minimum bonus or there may exist agreements between the factory and the workers. In the instant case, both the factors existed. On the one hand, the Government issued ordinance stipulating the percentage of bonus and on the other hand, there existed an agreement between the management and the workers. It is no doubt true that the respondent made provision for Rs.1,26,95,168/- in its books of account towards bonus. That figure hardly has any sanctity or authenticity. It appears that the figure was mentioned, taking into account the liability that was incurred under that head for the previous year. Even where the appropriate Government does not issue any ordinance or notification or in the absence of any agreement, an industry has its own discretion to pay the bonus of its choice, subject to statutory requirements. It is no facet of the power of the assessing officer to tell upon the justification or otherwise as to the percentage of bonus paid by an assessee. The only thing he can verify is as to whether bonus has been paid as a matter of fact. If it is paid, deduction has to be permitted under Section 43B of the Act and otherwise not. It is not even the case of the appellant that the amount of Rs.2,42,83,798/- was not paid as bonus for that year. Another facet of this very aspect is whether an intimation given under Section 143 (1) (a) of the Act could have been the subject matter of exercise under Section 154 of the Act. The facility of rectification of any mistake is created under Section 154 of the Act. A perusal of the same discloses that what can be rectified is an order passed under the provisions of the Act or even an intimation under sub-section (1) of Section 143 of the Act. Though it cannot be said that the assessing officer committed any mistake in taking recourse to Section 154 of the Act vis-à-vis an intimation under Section 143 (1) (a) of the Act, a semblance of contradiction is manifest. If there exists any debatable issue warranting exercise under Section 154 of the Act, that very ground militates against the steps under Section 143 (1) (a) simplicitor. The proper recourse would have been to issue notice under Section 143(2) of the Act, to give an opportunity to the assessee and then pass an order. This however is purely academic in the instant case. The next question is about the applicability or otherwise of Section 43B of the Act to the facts of the case. Payment of bonus, no doubt, was made after 31st March of the concerned year. However, it was before the due date for submission of returns. The proviso to Section 43B of the Act is to the effect that the amount must be actually paid by the assessee “on or before due date applicable in his case for furnishing the return of income”. Admittedly, the payment was made before the due date for filing of the return. The discussion undertaken above is referable to question No.1. So far as question No.2 is concerned, in all fairness, learned counsel for the appellant stated that the question is covered by the judgment in Commissioner of Income Tax v. Lakshmi Machine Works, against the Revenue. Viewed from any angle, we do not find any basis to interfere with the order passed by the Tribunal. The appeal is accordingly dismissed. There shall be no order as to costs. ___________________________ L. NARASIMHA REDDY, J ____________________________ CHALLA KODANDA RAM, J 17-12-2014 ks Note: LR Copy to be marked. B/O ks "