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2020 (10) TMI 1195 - ITAT CUTTACKLiability for payment of arrears of salary - Implementation of the 6th Pay Commission to his employees - Certain liability - HELD THAT:- Assessee company calculated his liability and made provision in his books of accounts and claimed as expenditure, which are placed in the record. The liability calculated by the assessee company was a fixed liability which was to be paid to its employees towards arrear salary which cannot be also taken back from the employees. As a certain liability for the impugned assessment year. The assessee company can make provision for the certain liability which is certainly to be paid, therefore, the assessee company has rightly made provision for the arrears of salary in his books of accounts. This is a necessary expenditure, which is required to be deducted from the profit of the assessee company for the impugned assessment year while calculating the taxable profit because the liability has been imposed by the State Government of Odisha. Assessee has calculated exact figure which has to be paid in different instalments later on as per instructions from the State Government Odisha which actually has been paid to the assessee’s employees. Case laws relied on by the ld. DR are also not applicable in the present facts of the case. In view of this, we are of the opinion that the ld. CIT(A) is not justified in confirming the addition made by the AO in this regard. Accordingly, we set aside the impugned order passed by the CIT(A) and allow the grounds of appeal of the assessee.
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