Will ex-gratia payment be considered as 'bonus', 'salary' or 'incentive' under the Income Tax Act?

This Income Tax Appellate Tribunal case clarifies the tax treatment of ex-gratia payments and bonuses. The tribunal considered whether these payments should be classified as 'bonus', 'salary', or 'incentive' under the Income Tax Act. The case also addressed issues related to the disallowance of such payments when not credited or paid before the due date of filing the tax return, and the acceptance of additional evidence during appellate proceedings.

INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH “E”: NEW DELHI

BEFORE SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
AND
SHRI K. N. CHARY, JUDICIAL MEMBER
(Through Video Conferencing)

ITA No. 5234/Del/2015
 (Assessment Year: 2012-13)

DCIT,
Circle-1,
Moradabad

Vs. 

Moradabad Zila Sahkari Bank Ltd,
Court Road, Moradabad
PAN: AAABM0292N
(Appellant) (Respondent)

Revenue by : Shri Sohil Malik, Sr. DR
Assessee by: Shri P. S. Kashyap, CA

Date of Hearing 31/03/2021
Date of pronouncement 21/06/2021

O R D E R

PER PRASHANT MAHARISHI, A. M.

1. This appeal is filed by the ld DCIT, Circle-1, Moradabad [ Ld AO] for Assessment Year 2012-13 against the order of the Pr. CIT, OSD (Appeals) [ ld CIT (A)] dated 09/06/2015 wherein the appeal filed by the assessee against the order passed by the ld DCIT, Circle-1, Moradabad dated 12/09/2014 u/s 143 of the Income Tax Act [ The Act] determined total income of the assessee at Rs. 2,20,03,610/- against the return income of Rs. 52,24,880/- was partly allowed.

2. The revenue has raised the following grounds of appeal:-

1. On the facts and the circumstances of the case and in law the Ld. Principal Commissioner of Income Tax (OSD)/(Appeal)), Moradabad erred in deleting the addition of Rs.66.00,000/- made by the Assessing Officer on account of disallowance made u/s 43B of the Income Tax Act, 1961 with respect to Bonus not being credited/paid to the employees before due date of tiling of return of income.

2. On the facts and the circumstances of the case and in law the Ld. Principal Commissioner of Income Tax (OSD)/(Appeal)), Moradabad erred in accepting additional evidence/during the appellate proceedings in respect of addition made on account of the above disallowance u/s 43B of the Income Tax Act, 1961 without allowing a reasonable opportunity to the Assessing Officer to examine the correctness of the additional evidence as provided in Rule 46A(3) of the Income Tax Rule, 1962.

3. On the facts and the circumstances of the case and in law the Ld. Principal Commissioner of Income Tax (OSD)/(Appeal)), Moradabad erred in deleting the addition of Rs.92,070/- made by the Assessing Officer on account of excess provision made for Audit Fees.

4. On the facts and the circumstances of the case and in law the Ld. Principal Commissioner of Income Tax (OSD)/(Appeal)), Moradabad erred in deleting the  addition of Rs.36.640/- made by the Assessing Officer u/s 40(a)(ia) of the Income tax Act, 1961 on account of non deduction of tax at source on Audit Fees of Rs.36,640/-.

5. On the facts and the circumstances, of the case and in law the Ld. Principal Commissioner of Income Tax (OSD)/(Appeal)), Moradabad erred in deleting the  addition of Rs.77,00,000/- made by the Assessing Officer u/s 43B of the

Income tax Act, 1961 with respect to Ex-Gratia/Bonus not being credited/paid before due date of filing of return of income.

6. On the facts and the circumstances of the case and in law the Ld. Principal Commissioner of Income Tax (OSD)/(Appeal)), Moradabad erred in deleting the addition of Rs. 1,90,01.000/- made by the Assessing Office) on account of disallowance of exemption claimed by the assessee u/s 80P(d) of the Income Tax Act, 1961 in respect of Dividend income received from other co-operative societies.

7. On the facts and the circumstances of the case and in law the Ld. Principal Commissioner of Income Tax (OSD)/(Appeal), Moradabad erred in accepting additional evidence during the appellate proceedings in respect of addition made on account of the above disallowance of exemption claimed u/s 80P(d ) of the Income Tax Act, 1961 without allowing a reasonable opportunity to the Assessing Officer to examine the correctness of the additional evidence as provided in Rule 46A(3) of the Income Tax Rule, 1962.

8. On the facts and the circumstances of the case and in law the Ld. Principal Commissioner of Income Tax (OSD)/(Appeal)), Moradabad erred in directing the Assessing Officer to allow deduction to the assessee as provided u/s 36(1 )(viia) of the Income tax Act, 1961 without considering the fact that the issue of deduction u/s 36(1)(viia) of the Income tax Act. 1961 was neither involved in the assessment order nor it was claimed by the assessee in its return of income or during the assessment proceedings before the Assessing Officer.

9. That the order of the Principal Commissioner of Income Tax(OSD)/(Appeal) is being erroneous in law and on facts may be cancelled and the order of the Assessing Officer may be restored.” 

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