Gujarat H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in allowing deduction of Rs. 5,000 to the assessee under s. 80VV of the IT Act, 1961, even though no payment was made by the assessee?

Counsel Appeared

Manish R. Bhatt, for the Petitioner : None, for the Respondent

JUDGMENT

A.R. DAVE, J. :

At the instance of the Revenue, the following question has been referred this Court for its opinion under the provisions of s. 256(1) of the IT Act, 1961 (hereinafter referred to as “the Act”), by the Tribunal, Ahmedabad Bench ‘A’ : “Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in allowing deduction of Rs. 5,000 to the assessee under s. 80VV of the IT Act, 1961, even though no payment was made by the assessee?”

Learned advocate Shri Bharat Naik has appeared for the applicant, whereas nobody has appeared for the respondent-assessee, though the respondent has been served. Looking to the facts of the case it is clear that the assessee had incurred liability to the extent of Rs. 5,000, but the said amount of Rs. 5,000 was not paid during the relevant previous year. The assessee had claimed deduction of the said amount under the provisions of s. 80VV of the Act. The ITO did not allow the deduction because the amount had not been paid by the assessee to the concerned person. The assessee filed an appeal and in the appeal, the CIT(A) set aside the order passed by the AO and allowed the deduction. Being aggrieved by the order passed in appeal, the Revenue had filed an appeal before the Tribunal. The appeal was dismissed.

It is not necessary that the expenditure incurred by the assessee must be actually paid unless, the assessee is following the cash system of accounting. It is not the case here that the assessee was following cash system of accounting and, therefore, expenditure could not have been disallowed simply because actual payment was not made in the previous year. The section provides “any expenditure incurred by him in the previous year”. The concept of “paid” as read by the ITO cannot be substituted for “incurred” as there is no warrant for doing so on a plain construction of the provision. We have perused the impugned order and we are in agreement with the view expressed that CIT(A) that liability to pay Rs. 5,000 had already been incurred by the assessee in the relevant previous year. In our opinion the CIT(A) and the Tribunal were absolutely right in coming to the conclusion that the deduction of the said amount ought to have been allowed.

In the circumstances we answer the question in the affirmative i.e., in favour of the assessee and against the Revenue.

The reference stands disposed of with no order as to costs.

[Citation : 252 ITR 571]