ITAT rules that claim is not sustainable in absence of documentary evidence on PRP

ITAT rules that claim is not sustainable in absence of documentary evidence on PRP

Restores the matter to the Commissioner of Income Tax (Appeals)

The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) has held that the claim of Performance Related Pay (PRP) is not sustainable when no documentary evidence is produced to substantiate the claim.

The revenue department had challenged the February 2020 common order passed under the Income Tax Act, 1961 of the Commissioner of Income Tax (Appeals), Asansol, arising out of a separate assessment order framed under another Section of the Act.

The assessee, Eastern Coalfield Limited, a subsidiary of Coal India Limited deals in raising coal and selling it as per the guidelines issued by the Ministry of Coal.

The assessee stated that the concept of PRP was introduced by the Ministry of Heavy Industries for the first time during the Financial Year 2009-2010, relevant to the Assessment Year 2010-11.

The methodology of the calculation of the PRP was recommended by the Remuneration Committee and the same was debited to the P/L account and a liability/provision was created on a mercantile basis during the Financial Year and relevant to the Assessment Year.

However, it was observed that there was no document showing the methodology recommended by the Remuneration Committee in the meeting held in February 2010. The CIT(A) failed to examine the implication of the November 2011 office memorandum of Coal India and the employees eligible for PRP.

ITAT observed that the assessee did not file any details of the computation of income or calculation of the PRP. Thus, the tribunal could not rely on any specific documents proving the amount was part of a crystallised liability, which the assessee ascertained during the year that could make it eligible to claim as an expenditure.

The Coram of Sonjoy Sarma (judicial member) and Manish Borad (accountant member) restored the matter to the CIT(A) to examine the relevant documents after giving a reasonable opportunity to the assessee.