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Income Tax Appellate Tribunal, DELHI BENCH : A : NEW DELHI
Before: SHRI R.K. PANDA & SHRI K. NARASIMHA CHARY
per section 43B of the IT Act. Since all charitable institutions are running on commercial principles or on business lines, certain limitations are there on them vis-à- vis commercial organization. Therefore, he was of the opinion that the provisions for gratuity and leave encashment should not be allowed to the assessee. He, therefore, confronted the same to the assessee. It was explained by the assessee that it is maintaining books of account in accordance with the mercantile system of accounting consistently for the past several years which has always been accepted by the Revenue. In accordance with the said method, the assessee recognizes all the revenues as well as expenses on the dates of accrual notwithstanding actual receipt or payment thereof subsequently. The decisions of the Hon'ble Supreme Court in the case of Bharat Earth Movers Ltd. vs. CIT (245 ITR 428) and in the case of CIT vs. Garware Synthetics Bristles, 205 ITR 426 were brought to the notice of the Assessing Officer. It was accordingly argued that the provision made by the assessee should be allowed.
However, the Assessing Officer was not satisfied with the explanation given by the assessee. Distinguishing the various decisions relied on by the assessee and holding that principles of res judicata are not applicable to the tax proceedings, the Assessing Officer disallowed the provision for gratuity and leave encashment made by the assessee. In appeal, the ld.CIT(A), following his order for assessment year 2009-10, allowed the claim of the assessee on account of provision for gratuity and leave encashment. Aggrieved with such order of the CIT(A), the Revenue is in appeal before the Tribunal.
We have heard both the sides and perused the relevant material on record.
We find the Tribunal, in assessee’s own case for the immediately preceding assessment year i.e., assessment year 2009-10, in order dated 04.03.2015, has restored the issue to the file of the CIT(A) by observing as under:-
“3. We have heard rival contentions and perused the entire material available on record. A bare perusal of afore-mentioned finding would reveal that ld. CIT(A) has not given any reasoning to defer from the AO’s reasoning as to why, while applying the commercial principle, section 43B should not be applied. Unless the impugned order before us has complete reasoning, it is not possible to appreciate the correct position on this count. We, therefore, set aside the order of ld. CIT(A) and restore the matter back to his file for passing a reasoned order, after giving an opportunity of being heard to the assessee.”
Since the ld.CIT(A) while deciding the issue in favour of the assessee has followed the order of his predecessor for assessment year 2009-10 and since the Tribunal in assessee’s own case for assessment year 2009-10 has restored the issue to the file of the CIT(A) for passing a speaking order on the issue, therefore, respectfully following the order of the Tribunal in assessee’s own case for the preceding assessment year, we restore both these issues i.e., provision for gratuity and leave encashment to the file of the CIT(A) for fresh adjudication in the light of the direction of the Tribunal for assessment year 2009-10. Needless to say, the CIT(A) shall give due opportunity of being heard to the assessee and decide the issue as per fact and law. The grounds raised by the Revenue are accordingly allowed for statistical purposes.