Payment due date under section 43B in case of transfer pricing audit

Facts and Issue of the Case

The assessee has challenged the disallowance of bonus payment amounting to Rs.30,66,187/- carried out by revenue by taking resort to Section 43B of the Act alleging non-payment of outstanding liability before due date of filing of return of income stipulated under Section 139(1) of the Act.

Observation by the court

The court had heard the rival submissions on the issue. It is the case of the assessee that the return of income was filed on 30.11.2017 which is extended due date available to the assessee which is subjected to transfer pricing provisions under Section 92E of the Act. The assessee further contends that as per tax audit report, the outstanding payment was made on 18.11.2017, i.e., prior to extended due date available for filing the transfer pricing return which is 30.11.2017 under Section 139(1) of the Act. The transfer pricing report in form no.3CEB required to be furnished under Section 92E of the Act dated 28.11.2017 was adverted in this regard to support the extended due date available to transfer pricing returns under Section 139(1) of the Act.

On appraisal of the facts and circumstances of the case, the court find that the assessee has successfully demonstrated that the return of income filed by it has been subjected to provisions of Section 92E of the Act and consequently the due date available to the assessee is 30th November, 2017 relevant to Assessment Year 2017-18 in question in terms of Section 139(1) read with clause (aa) to Explanation-2 thereto. Consequently, impugned outstanding bonus claims to have been paid before 30th November, 2017, as vouched by tax audit report, cannot be disallowed under Section 43B of the Act. The action of the Revenue for resorting to disallowance under Section 43B thus cannot be countenanced in law. The assessee thus succeeds in its claim for deductibility of impugned bonus expense as claimed. The action of the CIT(A) is thus set aside and the Assessing Officer is directed to admit the bonus expense claimed by the assessee in accordance with law.