TMI Blog2012 (10) TMI 533X X X X Extracts X X X X X X X X Extracts X X X X ..... ince assessee had received the approval from Central Government on 19.04.05. Admittedly assessee had finalized its account only thereafter. Directors concerned had worked for the assessee and remuneration was indeed payable and it became a crystallized liability. Since such approval clearly mentioned that it had retrospective effect viz. from the date of expiry of the earlier approval, it will relate to back to the date of expiry of the earlier approval. We are of the opinion that claim of assessee was allowable. Issue decides in favour of assessee Disallowance of provision of PF on enhanced remuneration of directors – Held that:- The issue requires a fresh look by the AO, since the date on which the amount was remitted has not been veri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its approval for such enhancement vide letter No.1/452-454/2004- Ct.VII dated 19.04.05. Assessee brought to the notice of Assessing Officer that the difference was the excess remuneration payable to the Directors, and when paid, TDS was also deducted. Assessee also mentioned that a sum of Rs.7,57,500/- was Provident Fund contribution payable on such enhanced remuneration. As per the assessee, the P.F was remitted before the date of filing of return and should be allowed under section.43B of the Income Tax Act, 1961. However, the Assessing Officer was not impressed. According to him, the increased remuneration of the Directors was paid only in Financial Year 2005-06 relevant to Assessment Year 2006-07. Against this, assessee had claimed e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Nonsuch Tea Estate Ltd. Vs. CIT(supra) could not be relied on, since it was on a different set of facts. As per assessee, this was not an original appointment. Original appointment was made earlier and it had approval from the concerned Ministry. What was done during the relevant previous year was to effect an enhancement of remuneration and such enhancement was eventually approved by the Central Government vide its letter dated 19.04.05. Relying on the Accounting Standard AS-4 of Institute of Chartered Accountant of India, assessee submitted that events after the balance sheet date also could be considered, since finalization of the accounts was done after the date of receipt of approval from the Central Government. As per asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration. As against this, Ld. A.R submitted that here business liability had crystalised during the relevant previous year and had to be allowed. Just because quantification was done only on a later date, a crystalised liability ought not have been disallowed. Claim of PF, Ld.A.R. submitted was related to the remuneration and none of the authorities had verified whether remittance of the PF was done before the duedate of filing the return. 5. Per contra Ld. Departmental Representative submitted that here it was not a question of quantification since assessee had already quantified the amount even before crystalisation. On other hand, as per D.R only on 19.04.05, the enhanced remuneration crystalised. Unless and untill Central Government g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,000 S.Sivaramakrishnan 33,00,000 49,84,000 16,84,000 V.G.Janarthanam 13,20,000 28,45,000 15,25,000 Total 65,82,000 PF contribution (included EPF) payable by the company related to increase in remuneration Name of Director Amount shown as payable as PF contribuition incl. EPF R.Sarabeswar 3,81,600 S.Sivaramakrishnan 2,19,300 V.G.Janarthanam 1,56,600 Total 7,57,500 7. That the above claim was for the enhanced part of the remuneration is also clear from para 3.6 of the assessment order which is reproduced hereunder:- 3.6. It is clear from the statements of the assessee and the relevant records that the increase in the remuneration of the Directors wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... level of remuneration payable at the earlier rate, we are of the opinion that enhanced part alone could not have been disallowed. Especially so since assessee had received the approval from Central Government on 19.04.05. Admittedly assessee had finalized its account only thereafter. Directors concerned had worked for the assessee and remuneration was indeed payable and it became a crystallized liability. Before finalization of the accounts, assessee had received approval for the enhanced remuneration. In our opinion, since such approval clearly mentioned that it had retrospective effect viz. from the date of expiry of the earlier approval, it will relate to back to the date of expiry of the earlier approval. We are of the opinion that cla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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