The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has while allowing the appeal held that expenditure towards wage settlement is deductible in the tear of actual payment.
The assessee, Gujarat State Fertilisers & Chemicals Ltd, filed an appeal against upholding the disallowance of Rs. 81 lakhs on account of wage settlement, stating that the AO had explicitly followed the directions of the Hon’ble ITAT despite the fact that the appellant had substantiated the claim of wage settlement was finalised during the year and payment had actually been made by the appellant in accordance with the ITAT’s directions.
The CIT(A) was unable to understand that payment in the year for settlement was not necessary and that the ITAT asked AO to confirm that payment was made for such wage settlement. The CIT(A) erred by denying the appellant’s request to allow the deduction of wages that were in fact paid totalling Rs. 81 lakhs in AY 2001-02.
It was noted that the ITAT had given instructions to permit wage settlement claims upon final wage settlement and upon actual payment. It appeared on Upon meeting both requirements, the claim was to be granted to the assessee.
The AO in the second round denied the claim finding that to the extent of Rs.81 lakhs the same was not settled by the assessee in the impugned year.
Yogesh Shah, who appeared on behalf of the assessee, and Pooja Parekh, who appeared on behalf of the revenue, said the assessee was unable to dispute the factual finding that the claim of wages was not settled in the contested year to the tune of Rs. 81 lacs.
The Division Bench of Annapurna Gupta, (Accountant Member) and Siddhartha Nautiyal, (Judicial Member) allowed the appeal observing that,
“We see no reason to interfere in the order of the ld.CIT(A) disallowing the claim of wages to the extent of Rs.81 lakhs. At the same time, we agree with the contentions of the assessee that the said claim be allowed in the year in which it is actually paid by the assessee. With this direction to the AO, grounds of appeal No.3-3.1are allowed in the above terms.”
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