M/S MJUNCTION SERVICES LTD,,KOLKATA vs. DCIT, CIRCLE-8(1), KOLKATA

We have heard Mr. Sh. Chetan Mehta & Mr. Vivek Ruia on behalf of the assessee and Mr. Supriyo Paul, ld. Sr. D/R on behalf of the Revenue. On a careful consideration of the facts and circumstances of the case, perusal of the papers on record and the case law cited, we hold as follows.

The contention of the ld. Counsel for the assessee that the AO has not recorded proper satisfaction before invoking Rule 8D of the Income Tax Rules, 1962 and hence the disallowance made u/s 14A of the Act by applying Rule 8D of the Income Tax Rules, 1962 is bad in law cannot be accepted for the reason that the AO in para-2.4 page-4 had 2 & 1559/Kol/2019 Assessment Years: 2013-14 & 2014-15 Mjunction Services Ltd. recorded his satisfaction as required by law. Thus this argument of the assessee stands dismissed. 3.1. On the issue of quantum of disallowance, we restore the issue to the file of the AO for fresh adjudication of in accordance with law, with the direction to apply the propositions of law laid down by Hon’ble Bombay High Court in the case of HDFC Bank Limited vs. DCIT (WP No. 1753 of 2016) dated 5th February, 2016 (Bombay HC), DCIT vs. SPML Infra Limited (ITA No. 1698/Kol/2018) and REI Agro [(2013) GA 3022 of 2013; ITAT 161 of 2013 (Cal HC)] and determine the question of disallowance u/s 14A of the Act. 3.2. The assessee is directed to cooperate with the AO in completion of the assessment in accordance with law. In the result, this ground of the assessee is allowed in part.

The second ground of the assessee is on the disallowance of provisions for leave encashment. The Hon’ble Supreme Court in the case of Exide Industries Ltd. [(2020) 116 taxmann.com 378 (SC)] order dated 24th April, 2020 held that the provisions of Section 43B of the Act to provision made for leave encashment. Thus we dismiss this ground of the assessee. 4.1. The assessee requests the Tribunal that necessary directions be given to the AO to grant deduction of leave encashment on actual payment basis. The AO is directed to consider this claim of the assessee in accordance with law for this year. In the result, this ground of the assessee is allowed in part.

Ground no. 3 is on the issue of TDS credit. This ground is dismissed as not pressed.

In the result, the appeal of the assessee is allowed in part. Kolkata, the 24th March, 2021. Sd/- Sd/- [Aby T. Varkey] [J. Sudhakar Reddy] Judicial Member Accountant Member Dated: 24.03.2021 Bidhan (P.S.)