2000 (7) TMI 223 - AT - Income Tax

Summary

Issues:
1. Disallowance of payment to Assam Tribune Sports Club.
2. Disallowance of expenditure on 'Biswakarma Puja'.
3. Disallowance of contributions to provident fund, family pension fund, and E.S.I.

Issue 1: Disallowance of payment to Assam Tribune Sports Club
The AO disallowed Rs. 2,782 paid to the Assam Tribune Sports Club as non-trading expenditure. However, the CIT(A) allowed the claim, stating it was for employee welfare, thus not non-trading. The ITAT upheld the CIT(A)'s decision, emphasizing the expenditure was indeed for the welfare of employees, hence justified.

Issue 2: Disallowance of expenditure on 'Biswakarma Puja'
The AO disallowed Rs. 12,840 spent on 'Biswakarma Puja,' claiming it was not business expenditure. The CIT(A) reversed this, noting it was customary for printing press employees to perform the puja, affecting morale. The ITAT agreed, stating the expenditure was for business progress and employee morale, thus not non-business. The CIT(A)'s decision was upheld.

Issue 3: Disallowance of contributions to provident fund, family pension fund, and E.S.I.
The AO disallowed contributions to these funds due to delayed payments. However, the CIT(A) allowed the deductions under Section 43B, emphasizing legislative intent for actual payments. Citing legal precedents and legislative intentions, the CIT(A) justified the deductions. The ITAT concurred, allowing deductions for provident fund, family pension fund, and E.S.I. contributions. However, the ITAT disagreed on the employees' contribution, stating it should be allowed on a payment basis in the subsequent year. The ITAT upheld the CIT(A)'s decision on provident fund, family pension fund, and E.S.I., but vacated the decision on employees' contribution, allowing it on a payment basis in the following year.

In conclusion, the ITAT dismissed both the appeal by the Revenue and the cross-objection by the assessee, upholding the CIT(A)'s decisions on various disallowances and deductions, with specific directions regarding the treatment of employees' contributions for the subsequent year.