The Commissioner Of Income Tax, Hyderabad - I v. $ M/S. Hyderabad Industries Ltd., Hyderabad…

*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 <GIST: >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 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 theclaim of bonus amounting to Rs.1,14,00,983/- made under sec.43B ofthe Income Tax Act was outside the purview of sec. 143(1)(a) of theIncome Tax Act, 1961? 2. Whether on the facts and in the circumstances of the case, theTribunal was correct in law in holding that excise duty did not form partof the total turn over for the purpose of computing the deduction undersec.80HHC of the Income Tax Act?” The respondent is an industry and is an assessee under the Income TaxAct, 1961 (for short, ‘the Act’). In the return filed by it for the assessment year1995-96, it claimed inter alia deduction of a sum of Rs.2,42,83,798/- as bonuspaid to the employees. The return was accepted through intimation underSection 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 inthe books of account for the concerned year, provision was made only for asum of Rs.1,26,95,168/- for bonus, whereas almost double the amount waspaid. It was also observed that the remaining amount was paid after the 31[st]March of the concerned year and at the most, it could have been reflected inthe subsequent year. The respondent took the plea that though provision wasmade only for a limited amount, a higher amount of bonus had to be paid onaccount of the ordinance issued by the Government and that the amount waspaid before the filing of return for the concerned year. Not satisfied with the explanation offered by the respondent, theassessing officer passed an order excluding the differential amount from thepurview of Section 43B of the Act. Aggrieved by that, the respondent filed an appeal beforethe Commissioner of Income Tax (Appeals-IV), Hyderabad. The appeal wasdismissed. Thereafter, it filed ITA No. 452/Hyd/1998 before the HyderabadBench ‘B’ of the Income Tax Appellate Tribunal (for short, ‘the Tribunal’). Theappeal was allowed through a common order dated 29-11-2002 passed in abunch of eight appeals. Hence, this appeal Smt. Kiranmayee, learned counsel representing Sri J.V.Prasad, learned Standing Counsel for the appellant, submits that theview taken by the Tribunal, be it as regards justification on the part of theassessing 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 theinterpretation placed by the Tribunal on Section 154 of the Act in this behalf istoo narrow and for invoking that provision, it does not make any differencewhether the subject matter is an order passed under Section 143(3) or intimation under Section 143(1)(a). She further contends thatonce the differential amount was admittedly paid subsequent to 31[st] March ofthe concerned year, there was no way that it could have been brought under thepurview of Section 43B of the Act. Sri J.V.Prasad, learned Standing Counsel for the appellant, submits that theview taken by the Tribunal, be it as regards justification on the part of theassessing 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 theinterpretation placed by the Tribunal on Section 154 of the Act in this behalf istoo narrow and for invoking that provision, it does not make any differencewhether the subject matter is an order passed under Section 143(3) or intimation under Section 143(1)(a). She further contends thatonce the differential amount was admittedly paid subsequent to 31[st] March ofthe concerned year, there was no way that it could have been brought under thepurview of Section 43B of the Act. Sri Ch. Pushyam Kiran, learned counsel for the respondent, on the otherhand, submits that the difference between the provision made for payment ofbonus and the actual payment is not of much relevance under the Act. Hecontends that the quantum of bonus paid by an industry would depend uponseveral factors and at any rate, an authority under the Act cannot pronounceupon the propriety or otherwise as to the quantum of percentage of bonus. Hefurther submits that once the payment was made before the last date for filingof returns of a particular assessment year, Section 43B of the Act would coversuch payments and the Tribunal has taken the correct view of the matter. Being an industry covered by the provisions of the Payment of BonusAct, the respondent is under obligation to pay bonus year after year. As is fairlywell known, the percentage of bonus to be paid in a particular year woulddepend upon several factors. The Act itself stipulates the minimum bonus as8.33% of the basic pay of an employee. In a given case for a given year, theappropriate Government may issue notification stipulating any other figure asminimum bonus or there may exist agreements between the factory and theworkers. In the instant case, both the factors existed. On the one hand, theGovernment issued ordinance stipulating the percentage of bonus and on theother hand, there existed an agreement between the management and theworkers. It is no doubt true that the respondent made provision forRs.1,26,95,168/- in its books of account towards bonus. That figure hardly hasany sanctity or authenticity. It appears that the figure was mentioned, takinginto account the liability that was incurred under that head for the previousyear. Even where the appropriate Government does not issue any ordinance ornotification or in the absence of any agreement, an industry has its owndiscretion to pay the bonus of its choice, subject to statutory requirements. It isno facet of the power of the assessing officer to tell upon the justification orotherwise as to the percentage of bonus paid by an assessee. The only thinghe can verify is as to whether bonus has been paid as a matter of fact. If it ispaid, deduction has to be permitted under Section 43B of the Act and otherwisenot. 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 underSection 143 (1) (a) of the Act could have been the subject matter of exerciseunder Section 154 of the Act. The facility of rectification of any mistake iscreated under Section 154 of the Act. A perusal of the same discloses thatwhat can be rectified is an order passed under the provisions of the Act or evenan intimation under sub-section (1) of Section 143 of the Act. Though it cannotbe said that the assessing officer committed any mistake in taking recourse toSection 154 of the Act vis-à-vis an intimation under Section 143 (1) (a) of theAct, a semblance of contradiction is manifest. If there exists any debatableissue warranting exercise under Section 154 of the Act, that very groundmilitates against the steps under Section 143 (1) (a) simplicitor. The properrecourse would have been to issue notice under Section 143(2) of the Act, togive an opportunity to the assessee and then pass an order. This however ispurely academic in the instant case. The next question is about the applicability or otherwise of Section 43Bof the Act to the facts of the case. Payment of bonus, no doubt, was made after31[st] March of the concerned year. However, it was before the due date forsubmission of returns. The proviso to Section 43B of the Act is to the effectthat the amount must be actually paid by the assessee “on or before due dateapplicable in his case for furnishing the return of income”. Admittedly, thepayment was made before the due date for filing of the return. The discussion undertaken above is referable to question No.1. So far asquestion No.2 is concerned, in all fairness, learned counsel for the appellantstated that the question is covered by the judgment in Commissioner ofIncome Tax v. Lakshmi Machine Works, against the Revenue. Viewed from any angle, we do not find any basis to interfere with theorder passed by the Tribunal. The appeal is accordingly dismissed. There shallbe no order as to costs. 17-12-2014 ks Note: LR Copy to be marked. B/O ks ___________________________L. NARASIMHA REDDY, J ____________________________ CHALLA KODANDA RAM, J