ITAT Orders Re-Examination of Rs.83 Lakh Dispute for Shipping Firm, Cites Contingent Liability Error [Read Order]

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has directed a fresh verification in the case of Howe Robinson Shipping India Pvt. Ltd. regarding an addition of Rs.83,46,490, which had been treated as a disallowable contingent liability by the tax department under Section 143(1) of the Income Tax Act for the Assessment Year 2020–21.

The appellant, Howe Robinson Shipping India Pvt. Ltd., engaged in the business of ship brokering, had filed its return of income at NIL. The return was processed under Section 143(1), where an adjustment was made disallowing an amount of Rs.83,46,490 on account of alleged contingent liability. Additionally, an amount of Rs.1,69,124 was disallowed for delayed deposit of employees’ contribution to the provident fund.

Want a deeper insight into the Income Tax Bill, 2025? Click here

During the hearing, it was noted that no representative appeared on behalf of the assessee, including on the earlier hearing date. However, on examining the records and the grounds raised in the appeal, the Tribunal found it necessary to re-examine the disallowance made on account of the contingent liability.

The case of the appellant was that the amount in question had not been charged or debited to the profit and loss account, and thus, it could not be considered a disallowable expense. The Tribunal observed that the Addl./JCIT(A) had misunderstood the details furnished in the audit report, particularly under clause ‘g’ of the audit schedule, where the figure of Rs.83,46,490 had been mentioned as a contingent liability, and not as an expense charged to the profit and loss account. Further, the records showed that the only amount disallowed under Section 37 of the Act was Rs.6,644 related to capital expenditure. In view of these findings, the Tribunal held that the confirmation of this disallowance required re-verification. Consequently, the matter has been restored to the file of the Commissioner (Appeals) for fresh verification after granting a fair opportunity to the assessee.

Know Practical Aspects of Tax Planning, Click Here

On the issue of EPF contribution, the disallowance of Rs.1,69,124 was confirmed by the Commissioner (Appeals) based on the Supreme Court’s ruling in Checkmate Services Pvt. Ltd. v. CIT (2022). However, the Tribunal noted that the Kolkata Bench in the case of Kanoi Paper & Industries Ltd. and the Delhi Bench in Sentinel Consultants (P) Ltd. had held that the due date for deposit should be reckoned from the actual month of salary disbursement. Based on this, the ITAT restored this issue to the Assessing Officer for re-examination in light of these observations.

The order was pronounced by the bench comprising Challa Nagendra Prasad, Judicial Member, and Brajesh Kumar Singh, Accountant Member. The appeal was allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates