ITAT allows provision made for additional salary which was written back in later year

The brief facts of the case is that the assessee had provided an amount of Rs.10 lakh towards additional salary and as it was only a provision. However, the same was disallowed by the assessing officer and added back to the income of the assessee for assessment year 2009-2010. For the current assessment year the assessee did not make any claim as regards non-taxability of write back of provision of Rs.10 lakh, during the course of assessment proceedings before the A.O. However, the claim was made as an additional ground before the CIT(A). The CIT(A) rejected the claim of the assessee.

Aggrieved, the assessee has raised this issue before the Tribunal. The learned AR has relied on the remand report submitted by the A.O. The learned Departmental Representative supported the order of the CIT(A).

ITAT observed that the assessing officer innthe remand report had clearly stated that the claim of the assessee is correct. The relevant portion of the remand report reads as follows:

“In the return of income for the A.Y. 2010-11, assessee has write back the provision and offered to tax. However, A.Y. 2009-10, then AO has disallowed those expenses as provision on salary and added back to income. Now, Assessee is claiming that as the provisions on salary were added to Total income in previous year assessment proceedings, the relief may be given for A.Y. 2010-11, so as to avoid double taxation. As per assessment records of A.Y.2009-10 & 2010-11, it was observed that assessee claim is correct.”

In view of the remand report, it is clear that for the current assessment the assessee had added back the provision on salary and offered the same as income. In the meanwhile the A.O. for assessment year 2008-2009 had disallowed the said expenses as provision and added back the same to income, which tantamount to double taxation of provision of additional salary. Since the A.O. in the remand report has clearly stated that the assessee’s claim is correct, ITAT directed the A.O. to delete a sum of Rs.10 lakh from the taxable income for the relevant assessment year, since the same had suffered tax in previous assessment year, namely, A.Y. 2009-2010. It is ordered accordingly.

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