M/S. THE TINPLATE COMPANY OF INDIA LIMITED.,KOLKATA vs. DCIT, CIR-1(1), KOLKATA., KOLKATA

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ITA 945/KOL/2023Status: DisposedITAT Kolkata29 November 2023AY 2017-185 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal, following the Supreme Court's decision in Exide Industries, held that leave encashment is allowable on a payment basis. The case was restored to the AO for verification of actual payments made.

What were the facts?

The assessee claimed deduction for leave encashment paid during the year. The Assessing Officer disallowed this claim as it was treated as a provision on accrual basis without sufficient proof of payment. The CIT(A) confirmed the disallowance.

What were the issues?

Whether leave encashment paid during the year is allowable as a deduction under Section 43B, and the necessity of verifying actual payments.

Which sections of the Income-tax Act were involved?

Section 43B

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Income Tax Appellate Tribunal, KOLKATA ‘C’ BENCH, KOLKATA

Before: DR. MANISH BORAD & SONJOY SARMA

order : November 29th, 2023 ORDER Per Manish Borad, Accountant Member: Both these appeals filed by the assessee pertaining to the Assessment Years (in short ‘AY’) 2016-17 & 2017-18 are directed against separate orders passed u/s 250 of the Income Tax Act, I.T.A. Nos.: 944 & 945/Kol/2023 AYs: 2016-17 & 2017-18 M/s. The Tinplate Company of India Limited. 1961 (in short the ‘Act’) by ld. Commissioner of Income-tax (Appeals)- NFAC, Delhi [in short ld. ‘CIT(A)’] dated 11.07.2023.

2.

The assessee is in appeal before the Tribunal raising the following grounds: “

1.

1. That on the facts and in circumstances of the case, the NFAC erred in not allowing deduction of Rs. 1,28,28,389 on account of leave encashment actually paid during the year and allowable as per the provisions of section 43B of the Act.

2. That on facts and in circumstances of the case and in law, necessary directions may please be given to the Ld. AO to re-compute the interest under section 234B and 234C of the Act.

3. The Appellant craves leave to add to or alter, by deletion, substitution or otherwise, any or all of the above grounds of objections, at any time before or during the hearing of the Appeal.

4. The Appellant submits that the above grounds are independent and without prejudice to one another.” : “1. That on the facts and in circumstances of the case, the NFAC erred in not allowing deduction of Rs. 1,84,27,013 on account of leave encashment actually paid during the year and allowable as per the provisions of section 43B of the Act.

2. That on facts and in circumstances of the case and in law, necessary directions may please be given to the Ld. AO to re-compute the interest under section 234B and 234C of the Act.

3. The Appellant craves leave to add to or alter, by deletion, substitution or otherwise, any or all of the above grounds of objections, at any time before or during the hearing of the Appeal.

4. The Appellant submits that the above grounds are independent and without prejudice to one another.”

I.T.A. Nos.: 944 & 945/Kol/2023 AYs: 2016-17 & 2017-18 M/s. The Tinplate Company of India Limited.

3.

At the outset, ld. Counsel for the assessee referring to the decision of this Tribunal in assessee’s own case for AY 2010-11 in dated 29.09.2022 submitted that Hon'ble Tribunal considering the ratio laid down by the Hon'ble Supreme Court in the case of Union of India & Ors. Vs. Exide Industries & Ors. reported in [2020] 425 ITR 1 (SC) has held that the provision for leave encashment has to be allowed on payment basis and the Assessing Officer (in short ld. 'AO') is directed to allow the deduction for the payments made after necessary verification. Similar prayer has been made for the years under appeal for AY 2016-17 & AY 2017-18.

4.

On the other hand, ld. D/R vehemently argued supporting the orders of both the lower authorities.

5.

We have heard rival contentions and perused the records placed before us. We observe that the assessee claimed deduction of leave encashment of Rs. 1,28,28,389/- & Rs. 1,84,27,013/- for AY 2016-17 & AY 2017-18 respectively. The said amount was disallowed by the AO on observing that the assessee claimed this deduction by way of provisions for the leave encashment on the accrual basis but no details of payment of such leave encashment were provided by the tax Auditor in the Tax Audit Report in Column no. 26(i)(B)(b) and thus, the disallowance was made u/s 43B of the Act. Thereafter, ld. CIT(A) has also confirmed the view of the AO referring to the judgment of Hon'ble Jurisdictional High Court in the case of Exide Industries Vs. Union of India reported in [292 ITR 470 (Cal)]. Ld. CIT(A) has however, mentioned in the .: 944 & 945/Kol/2023 AYs: 2016-17 & 2017-18 M/s. The Tinplate Company of India Limited. impugned order that the actual amount paid by the assessee towards leave encashment is allowable but since the assessee did not file any documentary evidences for verification on the said claim, the disallowance made by ld. AO is confirmed.

6.

We observe that the assessee claimed the expenditure towards provision for leave encashment at Rs. 3,40,10,000/- & Rs. 4,36,86,000/- for AY 2016-17 & AY 2017-18 respectively. However, it is claimed before us that the actual payment is at Rs. 1,28,28,389/- & 1,84,27,013/- for AY 2016-17 & AY 2017-18 respectively and the deduction should be allowed for the actual payment made during the year. We therefore, considering the ratio laid down by the Hon'ble Apex Court in the case of Exide Industries & Ors. (supra) are inclined to restore the issues raised on merits of the case in ground no. 1 of both the appeals to the file of ld. AO for carrying out necessary verification about the actual payment of leave encashment made by the assessee during the year and the assessee is directed to file all relevant details along with the proof of such payment and place it before the AO. Needless to mention that proper opportunity of being heard should be provided to the assessee to file all these details and if the AO is satisfied about the claim of actual payment of leave encashment for the years under dispute before us then the said claim may be allowed as a deduction in accordance with law. Thus, common ground no. 1 raised for AY 2016-17 & AY 2017-18 are allowed for statistical purposes.

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