Company’s Income Cannot Be Assessed Under ‘Salary’: ITAT

The Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT) has held that since the assessee is a company, its income cannot be assessed under the heading "salary."

The bench of K. Narasimha Chary (a judicial member) has restored the issue to the file of the Assessing Officer to verify the availability of brought-forward losses for the purpose of setting off the current year's income against losses.

The assessee is a private company that filed a return of income for the assessment year 2020–21. However, the Centralized Processing Centre (CPC) and Income Tax Department raised the demand to Rs. 2,55,650. The CPC failed to consider the brought-forward losses from the assessment year 2013–14 to the assessment year 2019–20, resulting in raising demand to Rs. 2,55,650.

The assessee is not entitled to have the losses set off against the income assessed under the heading "salaries," according to Section 71(2A) of the Income Tax Act of 1961.

The assessee contended that the assessee is a company and there cannot be any salary income. In the case of a company, there is no option in the return of income to show the income under the heading "salary," but looking at the amounts of gratuity and leave encashment expenses, the CIT(A) inferred that the assessee was deriving salary income. Though the expenses were not paid before the filing of the return of income, the fact was disclosed in the tax audit report.

The court held that since the assessee is a company, as established by the 143(1) intimation, the question of assessing its income under the heading "salary" does not arise. The order is, therefore, liable to be set aside.

Case Title: Ducere Technologies Private Limited Versus DCIT

Citation: ITA No. 608/Hyd/2022

Date: 05/12/2022

Counsel For Appellant: AR Mrudulatha Devdas

Counsel For Respondent: DR Vishnu Priya

Click Here To Read The Order