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2021 (1) TMI 822 - AT - Income TaxDisallowance of wage arrears u/s 40a(ia) - contingent liability or not - non deduction of TDS - assessee created an adhoc provision for wage arrears - HELD THAT:- There is no dispute with regard to the fact that there was negotiations between the assessee bank and employees unions for wage revision on the basis of recommendation of 6th Pay Commission of State Government w.e.f. 01.01.2006. It is also not in dispute that the State Government has constituted a committee to examine the demands of employees union and accordingly, a committee has been constituted under the leadership of Registrar of Co-operative Societies, Government of Tamil Nadu. After negotiations and deliberations with employees union, a settlement had been reached, as per which the assessee bank and employees unions have agreed to revise the wages w.e.f 01.01.2006, but monetary benefit arising out of revision shall be w.e.f 01.01.2007. Based on the above inputs, the assessee has anticipated liability in respect of wage arrears to its employees for the impugned assessment years the said liability is contingent liability. We find that the findings of the AO appears to be misplaced both facts and in law because liability of wage arrears is a real one for the services which have already been rendered and therefore, was definitely in the nature of arrears for such unpaid salary and had definitely arisen and therefore, in fact, it had a present obligation as a result of past events of the works or services already carried out by the employees entailing an outflow of resources to settle such obligation as per contractual agreement between employees and management. Liability has been provided in books of accounts when it was accrued for the impugned assessment years for the services rendered and hence the same cannot be considered as contingent in nature or unascertained liability, merely for the reason that the said liability was quantified and paid in subsequent financial years. The learned CIT(A) after considering the relevant facts has rightly deleted the addition made by the AO towards disallowance of provision for wage arrears. - Decided in favour of assessee.
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